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Author Topic: US Economics, the stock market , and other investment/savings strategies  (Read 77084 times)
ccp
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« Reply #200 on: November 28, 2011, 11:49:54 AM »

Barney out - market up big! wink

Wait till O'bamster loses in '12! cool
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DougMacG
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« Reply #201 on: November 28, 2011, 12:44:15 PM »

Our market analyst CCP nails it again: Barney out - market up big! Wait till O'bamster loses in '12!   smiley

Barney leaving tells us their polling does not indicate Dems will take back the House.  He is not likely leaving a key committee chairmanship.

I can't imaging being invested in this market, no matter where it goes, and I can't imagine a real recovery of confidence and investment until leadership and policy direction shows change coming.  OTOH as CCP points out, unbelievable growth is possible when the policy mistakes across the board begin to look like they will be corrected.

'Our best days are behind us' was a policy choice.  Interest on $15 trillion won't go away, but the rest is repairable.

It wouldn't hurt Europe either if their formerly biggest export market would set an alarm, take a bath and go back to work soon.
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G M
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« Reply #202 on: November 28, 2011, 03:07:14 PM »


http://www.nytimes.com/2003/09/11/business/new-agency-proposed-to-oversee-freddie-mac-and-fannie-mae.html?pagewanted=all&src=pm

''These two entities -- Fannie Mae and Freddie Mac -- are not facing any kind of financial crisis,'' said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee. ''The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.''
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Crafty_Dog
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« Reply #203 on: December 04, 2011, 07:16:41 PM »

Due to the Euro situation I have distinctly expanded my already high percentage in cash.
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Crafty_Dog
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« Reply #204 on: December 06, 2011, 09:02:54 AM »

A post from the TPI forum which caught my attention:
==============

I know this is not a financial board but I hope you will forgive me for posting a slightly off topic economics issue. Ann Barnhardt is closing down her commodity trading firm because the issues with MF Global have left her with no faith in the commodities markets. Not only did MF Global steal clients money but the commodities exchange is not living up to is responsibilities and there is no evidence of a criminal investigation of these two entities.

This is a huge deal because her customers are farmers and cattle producers the real producers. They have been so badly burnt by MF Global they will no longer trade commodities. If the real users of commodities exchange are leaving, then all that will remain at the exchange are the gamblers and fraudsters.

I do not think the MF Global story is getting the coverage it deserves in the news. This issue was caused by the problems in Europe but demonstrates lack of accounting and accountability by the largest commodity trading firm in the US. As a wise man once said "there is never just one cockroach."

Here is her letter about closing her firm down, I can not make a direct link to the sections but search for the title on her page

http://barnhardt.biz/

BCM Has Ceased Operations



Here is an audio interview with her and transcript

http://www.financialsense.com/financ...lobal-collapse
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ccp
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« Reply #205 on: December 06, 2011, 10:36:52 AM »

I am not holding my breath that the MSM will investigate ties between Clinton and MFS.

Remember Chelsea is married to the kid of convicted Wall Streeter.

The Clinton legal military machine is already building their berms, moats, castles and other legal iron curtains around their beloved political saint.

The total corruption is mind boggling. 
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Crafty_Dog
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« Reply #206 on: December 06, 2011, 05:50:50 PM »

We were just discussing water in the CA thread.

Here are 4 water based ETFs which I hold for the long term.

PHO
PIO
CGW
FIW
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G M
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« Reply #207 on: December 07, 2011, 08:03:00 AM »

http://finance.yahoo.com/blogs/breakout/fed-ruining-entire-class-investors-says-jim-rogers-153315477.html

..

Fed Is “Ruining an Entire Class of Investors” Says Jim Rogers


 .By Jeff Macke | Breakout – 14 hours ago.. .
.
No matter what you've heard to the contrary, "there is QE3, the Fed is pumping money into the system," says legendary investor Jim Rogers, disregarding most every Federal Reserve statement over the last six months. In the attached video Rogers explains his lack of trust (read: contempt) for the Federal Reserve and Fed Chairman Ben Bernanke.
 
Rogers has been a critic of the Fed's quantitative easing programs and artificially low interest rates, pointing to the latter as something akin to QE3 in drag.
 
"They're lying to us," he says of the Fed. "One reason the markets are holding up so well is that they are printing money as fast as they can."
 
As asserted on Breakout regularly, the Federal Reserve is operating in an almost complete leadership void due to an unprecedented level of gridlock among the the elected politicians charged with setting fiscal policy. Unless and until the public acts on their many vows to "throw the bums out" of D.C. the Fed will be free, indeed forced, to act alone in regards to doing something to change our economic condition.
 
In a pyrrhic victory for America, Rogers believes things will eventually get so bad that Americans will finally vote for real change and economic progress. Alas, the measures he feels are needed to cure our economy are so harsh that those same officials will also get tossed out when voters realize just how harsh the road back to prosperity is.
 


Regardless of the necessary suffering, spending cuts are needed in order to save the most fiscally responsible citizens, those whose savings are funding this disaster.
 
"What the Federal Reserve is doing now is ruining an entire class of investors," says Rogers. By forcing rates down and keeping the economy on a flatline, he believes the Fed could cause another lost generation of investments. Suffice it to say, vaporizing those who faithfully accumulated savings over the years is no way to restore confidence in our financial markets.
 
Rogers isn't simply a disgruntled American patriot, he's an investor with a legendary record of success. That being the case, and having established what the depths of suffering the world is facing now, the obvious question is where Rogers is putting his money to avoid or even profit from the pain.
 
"I'm long commodities and currencies; I'm short emerging market stocks, U.S. technology stocks, and I'm short European stocks," Rogers tells me after pronouncing himself a terrible market timer (author's note: He's nothing of the sort). His logic behind the portfolio is that he wins if the economy turns up due to commodity scarcity. And if the economy remains weak, Rogers' short positions will more than offset his long positions.
 
As for gold, an investment he's been holding for years, Rogers has a mixed view.
 
"Gold has been up 11 years in a row," he says, adding it's "very unusual for any asset in world history and I'd expect the correction to continue." That said, he's not selling any of his gold and would look to buy weakness, depending on the global situation.
 
He's long select commodities and currencies, short Europe, tech and emerging markets. Is Rogers off base or is he underestimating the ability of the Fed to turn this thing around? Let us know what you think in the comment section below or visit our Facebook page.
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ccp
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« Reply #208 on: December 07, 2011, 11:33:58 AM »

I really like Jim Rogers.  I wish I had listened to his example and sold everything before 2008.
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G M
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« Reply #209 on: December 08, 2011, 09:34:57 PM »

UBS advice for a euro collapse: ‘tinned goods, small calibre weapons’

John Shmuel Dec 7, 2011 – 11:06 AM ET | Last Updated: Dec 7, 2011 3:47 PM ET

 


National Post file

A scene from the 2009 movie, The Road, based on the novel by Cormac McCarthy.
.


.




.

As if there isn’t already enough eurozone doom and gloom floating around these days.
 
A note from UBS economist Larry Hatheway on Wednesday spells out why he and his colleagues at the bank believe a eurozone collapse would result in an “end of the world” scenario. It makes for some grim reading.
 
Back in September, Mr. Hatheway and colleagues Paul Donovan and Stephane Deo released a report that predicted a disastrous outcome if even one nation left the eurozone. The economists envisioned a 20% loss in gross domestic product for creditor countries (e.g. Germany) in a break up, and a 40% loss for debtor countries (e.g. Greece).
 
But Mr. Hatheway now says it could be much worse.
 


“On reflection this author, at least, feels the estimates are probably conservative — the true costs could well be higher,” he said. “That’s because once Europe (and the world economy) finds itself in depression, policy probably couldn’t arrest the decline. Broken financial systems and ruined economies are the stuff of prolonged deflation or worse.”
 
Mr. Hatheway goes on to say that the eurozone was “flawed from the start.” But in his view, the pain that would result from a collapse in the monetary union far outweighs the current volatility that stems from trying to save it.
 
“The preferred outcome is to fix what is broken,” he said.
 
And for those wondering why the eurozone doesn’t just kick out Greece and be done with it, Mr. Hatheway argues against that type of solution.
 
“Once one country leaves the eurozone, residents in other at-risk member countries would plausibly conclude their country might be next to go,” he explains. “Logic dictates they would send their wealth abroad, resulting in a run on their domestic banks, precipitating a collapse of their financial sectors and economies”
 
Mr. Hatheway gives some insight into how bad he thinks the global macro situation could become if the world is faced with a eurozone collapse. He says when people ask him how they should prepare for a eurozone collapse, he gives the following reply:
 
“I suppose there might be some assets worthy of consideration—precious metals, for example,” Mr. Hatheway said. “But other metals would make wise investments, too. Among them tinned goods and small calibre weapons.”
 
• Email: jshmuel@nationalpost.com | Twitter: jshmuel
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DougMacG
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« Reply #210 on: December 09, 2011, 09:48:05 AM »

"UBS advice for a euro collapse: ‘tinned goods, small calibre weapons’ "

Nice catch there GM of another case of famous people caught reading the forum. Swiss banks come here for investment advice.  Who knew?

Besides silver dimes, I wonder what the smallest pieces of gold are that one could buy, because it will be so hard to get change for bullion after the collective collapse of the currencies.
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Crafty_Dog
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« Reply #211 on: December 09, 2011, 10:24:58 AM »

One investment savings strategy over a long amount of time has been to have a Swiss bank account.  Yes this has been used by tax evaders, but there are many legitimate reasons as well.  In the case of Dog Brothers Inc. so that monies earned in Europe could be deposited in the Swiss Franc denominated account.  This allowed us to avoid the transactions costs associated with converting into dollars and sending them back here to the US.  Given the relatively tiny amounts of money involved with each deposit, on a percentage basis these transactions costs would be quite large and destructive to our efforts.

However, thanks to pressures from the US tax authorities, Swiss banks no longer are permitting our type of account and have shut it down.  We are trying to figure out what to do next.
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G M
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« Reply #212 on: December 09, 2011, 11:36:38 AM »

One investment savings strategy over a long amount of time has been to have a Swiss bank account.  Yes this has been used by tax evaders, but there are many legitimate reasons as well.  In the case of Dog Brothers Inc. so that monies earned in Europe could be deposited in the Swiss Franc denominated account.  This allowed us to avoid the transactions costs associated with converting into dollars and sending them back here to the US.  Given the relatively tiny amounts of money involved with each deposit, on a percentage basis these transactions costs would be quite large and destructive to our efforts.

However, thanks to pressures from the US tax authorities, Swiss banks no longer are permitting our type of account and have shut it down.  We are trying to figure out what to do next.

Have you looked at PayPal? Credit card only payments?
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Crafty_Dog
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« Reply #213 on: December 09, 2011, 11:45:24 AM »

Well, we were enjoying the appreciation of the Swiss Franc viz the dollar too smiley
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Crafty_Dog
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« Reply #214 on: December 15, 2011, 02:20:45 PM »


Industrial production fell 0.2% in November To view this article, Click Here
Brian S. Wesbury - Chief Economist
Robert Stein, CFA - Senior Economist
Date: 12/15/2011
Industrial production fell 0.2% in November, falling short of the consensus expected gain of 0.1%. Including revisions to prior months, production increased 0.1%. Output is up 3.7% in the past year.
Manufacturing, which excludes mining/utilities, was down 0.4% in November. The decline was mostly due to auto production, which fell 3.5%.  Non-auto manufacturing dipped 0.1%. Auto production is up 9.1% versus a year ago while non-auto manufacturing is up 3.5%.
 
The production of high-tech equipment declined 0.8% in November and is only up 1.2% versus a year ago.
 
Overall capacity utilization dropped to 77.8% in November from 78.0% in October. Manufacturing capacity use fell to 75.3% in November from 75.6% in October.
 
Implications:  Today’s data on industrial production were mediocre, but don’t expect that to last. Production dipped 0.2% in November, but was up 0.1% including revisions to prior months, matching consensus expectations. The primary reason for the decline in November was the auto sector, which is volatile from month to month and where output fell 3.5%. In addition, high-tech production continued its recent swoon. This is due to major flooding in Thailand, one of the world’s leading producers of hard disk drives and semiconductors. Still, even excluding autos and high-tech, manufacturing production was down 0.1% in November. However, we would not read much into that small decline. During periods of economic expansion, this figure goes down about four months every year and we expect a rebound in overall production in the months ahead. Auto inventories are very thin and problems in Thailand will recede. Timely news on the manufacturing sector already shows a rebound in December. The Empire State index, a measure of activity in New York, increased to +9.5 from +0.6 in November. The Philly Fed index, a measure of activity in that region, increased to +10.3 from +3.6. Both indices easily beat consensus expectations. Corporate profits and cash on the balance sheets of non-financial companies are both at record highs. Meanwhile, capacity utilization is close to long-term norms. As a result, business investment in equipment, which is already at a record high, is likely to continue to trend upward in the year ahead, regardless of whether the federal government maintains full expensing for tax purposes in 2012.
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Crafty_Dog
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« Reply #215 on: December 20, 2011, 05:19:36 PM »


, , , the market has been extremely bearish for some time now. It's absolutely no secret that there are horrible things waiting to happen (e.g., eurozone defaults, Obama wins, QE3 happens, the dollar plunges, gold goes to $3500). You'd have to be brain-dead to not be extremely worried; only the crazies are excited about buying stocks these days. For heaven's sake, the 10-yr Treasury yield is at rock-bottom, historical lows, matched only by what happened during the Depression.

I think it's very difficult to forecast a big recession wipeout with any degree of certainty, when something even worse is already priced into the market.

Because if what happens turns out to be anything short of another depression, then the market is going to rally
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Crafty_Dog
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« Reply #216 on: December 22, 2011, 10:45:59 AM »

Real GDP growth in Q3 was revised down slightly to a 1.8% annual rate To view this article, Click Here
Brian S. Wesbury - Chief Economist
Robert Stein, CFA - Senior Economist
Date: 12/22/2011
Real GDP growth in Q3 was revised down slightly to a 1.8% annual rate from a prior estimate and consensus expected 2.0%.
The largest downward revision versus last month’s estimate of Q3 real GDP growth was for consumer spending. Inventories were revised up slightly.
 
The largest positive contributions to the real GDP growth rate in Q3 were from business investment and consumer spending. The weakest component of real GDP was inventories.
 
The GDP price index was revised to a 2.6% annualized rate of change from a prior estimate of 2.5%. Nominal GDP growth – real GDP plus inflation – was revised to a 4.4% annual rate in Q3 versus a prior estimate of 4.6%. Nominal GDP is up 3.9% versus a year ago.   
 
Implications:  Forget about the GDP report for a moment – it told us nothing new about the economy.  The big news this morning was that initial claims for unemployment benefits fell 4,000 to 364,000, the second week below 370,000 and the lowest level since April 2008, well before the collapse of Lehman Brothers.  Continuing claims for regular state benefits declined 79,000 to 3.55 million, the lowest since September 2008.  Based on these figures, it looks like a strong month for payroll growth in December.  Some analysts have tried to dismiss the big drop in claims, focusing instead on raw data (before seasonal adjustment) which were 418,000 last week.  But unadjusted claims always rise at this time of year.  We find it interesting that the unrelenting pessimists ignored the raw data back in August/September when unadjusted claims fell as low as 329,000.  On GDP, there is not much “news” in today’s report, showing the economy expanded at a 1.8% annual rate in the third quarter, which ended three months ago.  Real GDP growth was very close to what the consensus expected.  Corporate profits were revised down slightly for Q3, but still stood at a record high in Q3, and should increase again in Q4.  Adding up both real growth and inflation, nominal GDP grew 4.4% at an annual rate in Q3, down slightly from the prior estimate of 4.6%.  Nominal GDP is up 3.9% from a year ago, which means that a zero percent federal funds rate is too loose.  The economy does not need a third round of quantitative easing, nor does it need more temporary fiscal “stimulus.”  In fact, the Fed should be raising interest rates while Congress cuts spending.  Using data released so far, our forecast for Q4 real GDP is 3.5-4%, while the consensus stands at 2.8%.
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G M
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« Reply #217 on: December 22, 2011, 10:57:47 AM »

Dec. 21 (Bloomberg) -- The U.S.'s AAA rating will probably be cut by Fitch Ratings by the end of 2013 unless lawmakers are able to formulate a plan to reduce the budget deficit after next year's congressional and presidential elections.
 
"Without such a strategy, the sovereign rating will likely be lowered," New York-based Fitch said in a statement today. "Agreement will also have to be reached on raising the federal debt ceiling, which is expected to become binding in the first half of 2013."
 
Fitch assigned a negative outlook on the U.S. in November after a congressional committee failed to agree on budget cuts. The rating firm forecast federal public-debt will exceed 90 percent of gross-domestic-product by the end of the decade unless the government addresses rising health and social security spending through tax increases or reductions in expenditures.

"The debt situation is a slow moving train wreck," said Jason Brady, a managing director at Thornburg Investment Management Inc., which oversees about $73 billion from Santa Fe, New Mexico. "The risks are apparent, but the benefits or strengths are also apparent. The strength of the U.S economy, the strength of the U.S financial system, is more apparent right now."

 
Downgrade Probability

 
The U.S.'s probability of a downgrade is greater than 50 percent over two years, Fitch said Nov. 28 in a statement. Standard & Poor's and Moody's Investors Service said Nov. 21 that the so-called supercommittee's inability to reach an agreement didn't merit downgrades because the inaction will trigger $1.2 trillion in automatic spending cuts.
 
"The high and rising federal and general government debt burden is not consistent with the U.S. retaining its AAA status even with its other fundamental sovereign credit strengths," Fitch said.


Read more: http://www.sfgate.com/cgi-bin/article.cgi?f=/g/a/2011/12/21/bloomberg_articlesLWKO3Y0D9L35.DTL
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Crafty_Dog
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« Reply #218 on: December 23, 2011, 08:08:25 AM »

A e-conversation between some very smart friends of mine.  As an e-conversation, the posts are in reverse chronological order.
=======================

One huge difference between TALF and the current ECB lending program is the duration of the loans.  $7.7 trillion of loans is meaningless if it merely consists of a bunch of short term TALF loans or short term repo’s conducted over a period of 3-4 years.  In good times, the Fed could reach the same aggregate number over three years by averaging $210 billion per month of overnight repo’s for three years and no one would think twice about the three year total number of dollars loaned out.  Also, if the Fed is buying US government debt and then selling it by a series of POMO’s, it is not inflationary because it does not increase the aggregate supply of money in the system.  What is bad about this strategy is that it is taking capital that could have been used for private investment that would increase real GDP; and, instead is diverting the same dollars to fund the government debt that was mostly created in order to finance “the rescue” of those institutions deemed by the federal government as too big too fail; ie., certain banks, insurers, auto manufacturers and State/local governments.  This is not inflationary.  However, it is a major reason why the US economy cannot escape from its current rut.  In other words, the solution has been a federal fiscal policy that has corrupted the role of the central bank.  This is an inevitable consequence of the Congressional policy decision to add maintaining full employment to the Fed’s mission.  It was a bad policy decision based primarily upon an obsolete theory called the Phillips Curve.

The ECB program lends at a 3 year term.  Now, if in three years, the ECB has loaned $7.7 trillion to European banks, this event would be a significant statistic.

Rick

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

Yes, and consider the Fed has apparently lent $7.77 trillion to banks as part of the various bailouts ... at about zero percent. Some considerable part of that money has likely been "invested" by the banks into Treasury notes at some positive rate of interest. A couple of net percent on a few trillion ... I could live with that.

Here (http://www.acting-man.com/?p=12622) is the latest "Pater" post which discusses this very point in the EU context. 500 billion euros, with all kinds of incentives to put the money right back into sovereign debt: QE through indirect means.

If this kind of leverage has been used to augment the demand for Treasury debt the situation, in my opinion, is very dangerous. All that has to happen, in that case, is for the Fed to withdraw those loans from the banks, or raise the discount rate a bit in response to CPI numbers, and demand for Treasuries could crash.

In any event, we now have a ridiculously dysfunctional capital market in the US, a dysfunctional housing market, and numerous serious distortions inflicted by government spending. The biggest boom time sectors are probably those with military or clandestine services as their only customers. This is not a healthy economy, to say the least.

Tom

===========
On Wed, Dec 21, 2011 at 5:01 PM, A wrote:
>>>>I don't understand how Treasury rates tell us anything in this environment. ....... The Fed, for gawd's sake, has targeted long term interest rates and spent hundreds of billions to modify the market rate. And that result gives you a sense of market opinions?

In my opinion, a true economic recovery is impossible until such time as our central bank and government stop actively distorting so many important markets. I think there are relatively few people who understand that. This is exactly what happened in the 1930s, the government continuously distorted markets ... and nothing good happened for as long as that continued. <<<<

===========
Hi Tom!
I think the issue is precisely as you describe it.  With the Fed being such an aggressive participant, it is hard to imagine how the rates can be indicative of anything.  I suspect people buy bonds because of the corrupt Fed put - expecting the Fed to support the price. 

The Fed is, by now, most likely little more than a slave of circumstances.  The Treasury needs more money than they collect through taxation, a lot more - and the Fed, realistically, has no choice but to make it available.  I can't imagine them raising rates any time soon.  No one, of course, is talking about any serious cuts in the government expenditures.

A.

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

"The market has been extremely bearish for some time now." Not sure where that comes from.

From Hussman (http://www.hussmanfunds.com/wmc/wmc111212.htm):

"On the sentiment front, Investors Intelligence reports that the percentage of advisory bears dropped below 30% last week, which has historically resulted in unrewarding market outcomes when valuations have been elevated even to a lesser extent than they are today. ... Investors have eagerly accepted forward operating earnings as a basis for valuation assessments, without accounting for the fact that those earnings expectations assume profit margins about 50% above their historical norms.

And look at the Navellier report that initiated my post. There are any number of people, beginning with Bernanke, who seem to think that these central bank machinations are exactly what the world needs, and who therefore stand behind the thesis that the governments are going to somehow make everything better.

I don't understand how Treasury rates tell us anything in this environment. Is there anybody buying ten year Treasuries other than central banks and leverage institutional investors -- many of them with apparent guarantees from the central bank that they will never have to take a loss? The Fed, for gawd's sake, has targeted long term interest rates and spent hundreds of billions to modify the market rate. And that result gives you a sense of market opinions?

In my opinion, a true economic recovery is impossible until such time as our central bank and government stop actively distorting so many important markets. I think there are relatively few people who understand that. This is exactly what happened in the 1930s, the government continuously distorted markets ... and nothing good happened for as long as that continued.

As Pater Tenebrarum explained in a recent post, the whole world seems to have bought into this statist/interventionist view of the economic world. Most of the disenchanted analysts, in fact, are upset not because of these interventions, but because they want a really large new QE program -- or some other extravagantly inflationist program from the central banks. It's a form of massive, delusional optimism with respect to the power and effectiveness of government intervention.

JMHO.
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ccp
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« Reply #219 on: December 23, 2011, 10:00:33 AM »

"As Pater Tenebrarum explained in a recent post, the whole world seems to have bought into this statist/interventionist view of the economic world. Most of the disenchanted analysts, in fact, are upset not because of these interventions, but because they want a really large new QE program -- or some other extravagantly inflationist program from the central banks. It's a form of massive, delusional optimism with respect to the power and effectiveness of government intervention."

The concept of "globalization" includes debt and playing card monte.   It is all towards the inevitable one world government.
I guess by the time thw whole thing is pushed to it's worldwide limitations and the whole wolrd economy crashes we will life on another planet and pass the ponzi scheme buck onto the aliens.

Crafty,

There is NO hope of stopping this.
I tend to blame Bush the elder for this globalization thing but I may be wrongly holding him responsible for something that was probably inevitable anyway.  OTOH globalizaition of say markets and say coaperative goals like ending world hunger, protecting the environment could perhaps be done and thus globalization and the role of big government are not inextricably mixed per se.
Certainly smaller countires do not have the private sector that can take on other challenges without the goverment intervening.  The larger ones could.

 

 

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Crafty_Dog
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« Reply #220 on: December 23, 2011, 12:54:07 PM »

Robert Wright, in his second book on evolutionary pyschology, titled "Non-Zero Sum: the logic of human destiny" argues that competitive advantage tends to adhere to increased integration.

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G M
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« Reply #221 on: December 23, 2011, 12:55:30 PM »

Robert Wright, in his second book on evolutionary pyschology, titled "Non-Zero Sum: the logic of human destiny" argues that competitive advantage tends to adhere to increased integration.


Robert "Islam is a religion of peace" Wright?
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Crafty_Dog
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« Reply #222 on: December 27, 2011, 02:27:33 PM »

Was the 2011 Economy a Miracle? To view this article, Click Here
Brian S. Wesbury - Chief Economist
Robert Stein, CFA - Senior Economist
Date: 12/27/2011
The year (2011) started on a high note, and apparently, will end on one, too.  What happened in the middle was frantic, noisy and bothersome.
A year ago, in late 2010, the bears had seemingly gone to sleep.  The Dow Jones Industrial Average (DJIA) finished 2010 at 11,576, up 15.6% in the final four months of the year.  Real GDP grew 3.1% in 2010, its fastest expansion since 2005.  The unemployment rate was still high (9.4%), but private sector job growth had been positive for 10 consecutive months.
 
The stock market continued to roll in early 2011, with the DJIA hitting 12,810 on April 29th.  Our forecast of 14,500 for the end of the year looked reachable.
 
And then, the wheels sort of fell off, or at least it looked like they had.  Real GDP growth slowed sharply, the unemployment rate ticked higher and the stock market had a major (16%) correction.  For August, both retail sales and non-farm payrolls were reported as big fat zeros.
 
Massive tornadoes tore up Tuscaloosa, AL and Joplin, MO.  A tsunami hit Japan and a major nuclear event unfolded.  Washington, DC went to war over the debt ceiling.  Standard & Poor’s downgraded US Treasury debt, while Europe started to fall apart financially.  The Super Committee failed to reach any kind of agreement on deficit reduction.  MF Global filed for bankruptcy.
 
The bears woke up, turned the amplifier volume up all the way to 11, and started screaming about an imminent recession.  They had a lot to scream about and they had a very receptive audience.
 
In August, after the weak data of the summer, Nouriel Roubini said, “The macro data…will come out worse and worse, the market will start to correct again. We’re going to a recession, we are at stall speed and we are running out of policy bullets.” In September, Lakshman Achuthan, co-founder of ECRI said the US is, “indeed tipping into a new recession. And there’s nothing that policy makers can do to head it off.”  He has reiterated this call in recent months.
 
For some reason, bearish calls (about recession or depression) get a massive amount of coverage in the press – headlines, breaking news banners, and continued references in any story about economic data or markets for weeks or months after the call is made.
 
Instead of a 2011 recession, the economy slowed early, but then picked up speed as the year progressed.  Real GDP grew just 0.3% at an annual rate in the first quarter, accelerated to 1.3% annualized growth in Q2, 1.8% in Q3, and the consensus puts Q4 real GDP growth at 3.5% to 4.0%.  And remember those zeros in August? Revisions now show positive retail sales and employment growth in August.  Not only did the economy avoid recession, but we remain confident that economic growth in 2012 will accelerate.
 
We look at the economy like a scale, with good things on one side and bad things on the other.  Our models suggest that the good things outweigh the bad.  This was true in 2009, 2010, 2011 and now 2012.
 
On the good (or growth) side, we place new technology, the Fed and a slightly better fiscal outlook.
 
The US is experiencing a wave of new technologies – the cloud, tablets, smart-phones among the most important.  New oil and natural gas drilling techniques are also part of the mix.  New technologies are increasing productivity and output despite the Super-Committee, S&P downgrades and European financial problems.  The Fed is accommodative and federal spending is declining as a share of GDP.  Combined, these developments all will boost growth.
 
On the bad side, government spending is too high, regulation is burdensome, and the Fed is accommodative.
 
Government spending may be falling as a share of GDP, but it is still very high.  This limits job creation and holds back real GDP growth from its true potential.  Excessive regulation does the same thing.  And while an easy Fed boosts growth, it also creates inflation, which will become more of a problem in the years ahead.
 
Netting all this out, the scale is still tilted toward growth.  New US technologies and the productivity that they create are so powerful and positive that they are overwhelming the drag from bad government policies.  Compared to forecasts of recession, it’s a miracle.  Look for another one in 2012.
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« Reply #223 on: December 27, 2011, 05:04:37 PM »

**If I recall correctly, Wesbury has predicted 3 of the last 0 recoveries.
http://www.reuters.com/article/2011/12/27/us-sears-sales-idUSTRE7BQ0AV20111227

(Reuters) - Sears Holdings Corp will close as many as 120 of its Kmart and Sears discount and department stores after its holiday sales slumped, sending its shares sliding more than 27 percent to their lowest level in three years.

The retailer, which is controlled by its chairman, the hedge fund manager Edward Lampert, has seen sales decline every year since the $11 billion merger of the two chains in 2005, and likely faces further closings to cut expenses, preserve cash and push back against rivals such as Wal-Mart Stores Inc and Amazon.com Inc, analysts said.

Sears also disclosed on Tuesday that it tapped its credit line to borrow cash and forecast that fourth-quarter earnings would fall by more than half.

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« Reply #224 on: December 27, 2011, 08:15:18 PM »

Arguably another case of brick and mortar vs the internet , , ,

The macro numbers are what matter.
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« Reply #225 on: December 27, 2011, 08:28:30 PM »

Arguably another case of brick and mortar vs the internet , , ,

The macro numbers are what matter.

Lucky nobody would ever cook the books to make the numbers look better than they really are.
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« Reply #226 on: December 27, 2011, 08:48:15 PM »

Several points to consider:

1. The real estate bubble is still deflating.

2. The student loan bubble is getting ready to pop. Unlike a foreclosed home, a defaulted student loan cannot be resold to reduce the loss.

3. The euro-crash.

4. The Sino-crash?

5. Iran threatening to shut down the Hormuz Strait.

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« Reply #227 on: December 28, 2011, 08:24:26 AM »

Good points all, although some (e.g. possible Sino crash) arguably not germane to Wesbury's skills as a prognosticator.  Certainly the man put himself on the line against the predictions of recent months that the US was about to fall back into recession.  Also his point about there being some good things on the horizon (e.g. the US becoming the Saudi Arabia of natural gas) seems sound.
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« Reply #228 on: December 28, 2011, 10:49:12 AM »

"some good things on the horizon (e.g. the US becoming the Saudi Arabia of natural gas) seems sound"

All are opposed by the current administration.  Wesbury is arguing about what economic growth will be coming into the election, warning Republicans not to count on bad economic news at election time.  Real recovery however hinges on a change in the policy arrow coming out of the election.

We are arguing essentially about how many tenths of a percent, within the margin of measurement error, we will be above or below 'breakeven growth' this year.  Economic growth coming out of a hole this deep should be twice that, more like 6-8% of sustained growth.

Wesbury is prognosticating what to do in this environment instead of what to do about this environment, which is fine - if you are in charge of deck chairs on the Titanic.

GM's examples of what could go wrong are in addition to the general measurements posted of global stagnation.  What is the US doing or proposing to do to lead the world out of this?  Federalizing police and fire, defunding social security, queuing health care and further debasement of our currency?  That oughtta do it.
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« Reply #229 on: January 03, 2012, 12:19:50 PM »

We Were Too Optimistic To view this article, Click Here
Brian S. Wesbury - Chief Economist
Robert Stein, CFA - Senior Economist
Date: 1/3/2012
A year ago, we predicted 4% real GDP growth in 2011 and a 14,500 Dow by year-end. We were too optimistic.
Real GDP grew just 1.2% annualized during the first three quarters of 2011. This will climb to about 1.75% if the consensus forecast is right about Q4. The Dow finished the year at 12,218, well off its high for the year of 12,928.
 
This isn’t the first time we have missed a forecast, and it won’t be the last. And the good news is that our optimism actually paid off. Back in September, when the stock market had corrected by about 16% and conventional wisdom had completely bought into the idea of a double-dip recession, we held to our convictions. We begged investors to hold the line and maintain positions in stocks.
 
It worked. The economy avoided recession and accelerated, while the stock market had one of its best October’s ever. Those who hung in there did no worse than money market funds. Yes, already over-valued gold was up 10% for the year, while municipal and Treasury bonds had nice returns, but holding a diversified stock portfolio, especially of dividend paying stocks, did not hurt anyone.
 
So here we go again. For 2012, we are forecasting 3% real GDP growth and an 18% rise in broad stock market prices. We expect the Dow Jones Industrial Average to rise to 14,500, with the S&P 500 targeted for 1475.
 
All the reasons for our optimism are still in place. The Fed is accommodative. Government spending has peaked and is declining as a share of GDP. And the most important driver of growth – technology and productivity (Schumpeter’s creative destruction) – is robust and relevant.
 
We do not believe deleveraging is holding back the economy. The private sector is still paying down debt, but doing so more slowly than before. As a result, purchasing power can grow faster than income, not slower.   
 
We do not worry about consumer confidence. We do not subscribe to the view that the US is on the cusp of a collapse in the dollar and hyper-inflation. We don’t believe that there is a fundamental weakness in the economy.
 
The story isn’t complicated. When government tilts toward redistribution, the growth rate of potential GDP slows down. This hurts job creation. Big government always hurts economic performance. We should have more fully accounted for this in our forecast last year.
 
Some will ask: Then how can you forecast 3% growth in 2012? The answer is relatively simple. 1) The Fed is even more accommodative today than it was last year. 2) Government spending will be basically flat in 2012 for the third consecutive year. 3) Technology continues to advance. These developments mean the tailwinds are stronger at the same time the headwinds are diminishing.
 
That’s enough reason for us to maintain our optimism for the year ahead. Let’s try it again in 2012.


============
The ISM manufacturing index increased to 53.9 in December To view this article, Click Here
Brian S. Wesbury - Chief Economist
Robert Stein, CFA - Senior Economist
Date: 1/3/2012
 
The ISM manufacturing index increased to 53.9 in December from 52.7 in November, beating the consensus expected gain to 53.5. (Levels higher than 50 signal expansion; levels below 50 signal contraction.)
 
The major measures of activity were mainly higher in December, and most remain well above 50. The production index gained to 59.9 from 56.6 and the new orders index rose to 57.6 from 56.7. The employment index also increased to 55.1 from 51.8, while the supplier deliveries index remained unchanged at 49.9.
 
The prices paid index increased to 47.5 in December from 45.0 in November.
 
Implications: Great reports again today on manufacturing and construction.  December data was stronger than expected and the manufacturing sector has now grown for 29 straight months.  And just in case you still think a double-dip is possible, the new orders index came in at a very strong 57.6 in December.  This was the third consecutive monthly increase, and suggests more growth in manufacturing ahead. The employment index was also a bright spot rising to 55.1, the highest level in 6 months.  This supports our forecast for a 175,000 gain in December private sector payrolls.  The one sub-index that remains weak is inventories.  The reluctance of manufacturers to accumulate inventories may hold back GDP in the short term, but we view this reluctance to build inventories as temporary.  On the inflation front, the prices paid index rose to 47.5 in December. A reading below 50 is a welcome sign, but we don’t expect it to last.  Monetary policy is very loose and, in effect, getting looser as the economy accelerates.  In other news this morning, construction increased 1.2% in November (1.1% including a slight downward revision for prior months).  The gain easily beat consensus expectations of 0.5% and was led by home building (both new homes and improvements) and government projects (power plants and bridges).  Commercial construction was unchanged in November.  Given favorable weather for much of the country in December, look for more good construction figures a month from now.
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« Reply #230 on: January 03, 2012, 12:55:29 PM »

We Were Too Optimistic To view this article, Click Here
Brian S. Wesbury - Chief Economist
Robert Stein, CFA - Senior Economist
Date: 1/3/2012
A year ago, we predicted 4% real GDP growth in 2011 and a 14,500 Dow by year-end. We were too optimistic.
Real GDP grew just 1.2% annualized during the first three quarters of 2011. This will climb to about 1.75% if the consensus forecast is right about Q4. The Dow finished the year at 12,218, well off its high for the year of 12,928.
 



Stopped clock.
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« Reply #231 on: January 03, 2012, 04:28:40 PM »

"Real GDP grew just 1.2% annualized during the first three quarters of 2011. This will climb to about 1.75% if the consensus forecast is right about Q4."

I did not realize the actual numbers were this bad. 

Forecast of 3% by BW means more of the same, as he sees it.  This is under break-even growth. Why would it turn around now?

Growth under pro-growth policies coming out of depths this deep should be at least 6-8%.  We have done nothing in terms of addressing underlying problems in the economy.  We went from moving like freight train in the wrong direction with new programs, new spending, new taxes and new regulations to gridlock.  I guess that means the problem is about half solved.

The only good news in the numbers is that in 2011 we got one wasted year closer to the possibility of ending the economic policies of decline that we have chosen since Nov. 2006.
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« Reply #232 on: January 05, 2012, 07:49:48 AM »

WSJ

By BURTON G. MALKIEL
Presenting an annual investment outlook is a hazardous task. At the start of 2011, investors were warned to eschew the bond market. Pundits described the low yields of U.S. Treasuries as a "bond market bubble." In fact, if you had bought 30-year U.S. Treasury bonds at the start of the year when they yielded 4.42% and held them through 2011, when the yield had fallen to 2.89%, you would have earned a 34% return.

Meanwhile, U.S. stocks stayed flat, Europe and Japan declined by double digits, and emerging markets suffered even greater losses. Last year again demonstrated that it is virtually impossible to make accurate short-term predictions of asset returns.

But it is possible to make reasonable long-term forecasts. Let's start with the bond market. If an investor buys a 10-year U.S. Treasury bond and holds it to maturity, he will make exactly 2%, the current yield to maturity. Even if the inflation rate is only 2%, the informal target of the Federal Reserve, investors will have earned a zero rate of return after inflation.

With a higher inflation rate, U.S. Treasurys will be a sure loser. Other high-quality U.S. bonds will fare little better. The yield on a total U.S. bond market exchange-traded fund (ticker BND) is only 3%. Bonds, where long-run returns are easy to forecast, are unattractive in the U.S. and Japan, as well as in Europe, where defaults and debt restructurings are likely.

Long-run equity return forecasts are more difficult, but they can be estimated under certain assumptions. If valuation metrics (such as price-earnings ratios) are constant, long-run equity returns can be estimated by adding the anticipated 2012 dividend yield for the stock market to the long-run growth rate of earnings and dividends. The dividend yield of the U.S. market is about 2%. Over the long run, earnings and dividends have grown at 5% per year.

Thus, with no change in valuation, U.S. stocks should produce returns of about 7%, five points higher than the yield on safe bonds. Moreover, price-earnings multiples in the low double digits, based on my estimate of the earning power of U.S. corporations, are unusually attractive today.

Stocks were losers to bonds in 2011. But don't invest with a rear-view mirror. U.S. stocks, available in a broad-based index fund or ETF, are more attractive than bonds today. The same is true for multinational corporations throughout the world.

Investors in retirement, who desire a steady stream of income, can purchase a portfolio through mutual funds or ETFs tilted toward stocks paying growing dividends, with yields of 3% to 4%. And some areas of the bond market are attractive for investors who want some fixed-income investments. Tax-exempt funds that trade on exchanges (so called closed-end investment companies) that take on moderate amounts of short-term debt to increase the size of their portfolios have yields of 6% to 7%, and emerging-market bond funds have generous yields.

Emerging markets offer the best prospects for both equity and bond returns over the next 10 years. A number of fundamental factors favor the emerging economies. While Europe and the U.S. struggle with debt-to-GDP ratios of 100% or more—and Japan's ratio is 250%—the fiscal balances of the emerging economies are generally favorable, and debt ratios are low. Low debt levels encourage economic growth.

Demography also favors the emerging economies. Dependency ratios (nonworking age to working age population) are far more favorable in emerging markets. Soon Japan will have as many nonworkers as workers, and Europe and the U.S. are not far behind. Emerging markets, such as India and Brazil, will continue to have two to three workers for every nonworker. Even China, with its one-child policy, will have favorable demographics and a large potential labor force until at least 2025. Countries with younger populations tend to grow faster.

Natural-resource-rich countries will also benefit over the decade ahead. The world has a finite amount of natural resources and the relative prices of increasingly scarce resources will rise. Countries such as Brazil, with abundant oil and minerals, as well as water and arable land, will benefit from the world's increasing demand.

Emerging stock markets were among the worst performers in 2011 despite their favorable economic performance and future outlook. Hence their stock valuations are unusually attractive relative to developed markets. Historically, emerging-market equities had price-earnings multiples 20% above the multiples for the S&P 500. Today, those multiples are 20% lower. And emerging-market bonds have significantly higher yields than those in developed markets.

Much worry has been expressed about real-estate prices and construction activity in China. "It's Dubai times 1,000," says one hedge-fund manager who predicts an economic collapse. Obviously, an end to China's growth would be a significant blow to the world economy.

But parallels to the U.S. real-estate bust and the resulting damage to the economies and financial institutions of the Western world seem unwarranted. The absorption of vacant space remains extremely high in China, where hundreds of millions more people are expected to move from farms to cities. And unlike the U.S., where people bought new homes with little or nothing down, Chinese buyers make minimum down payments of 40% on a new home (and 60% on a second home).

In the U.S., savings rates fell to zero, and consumer-debt levels tripled relative to income. In China, savings rates as a percentage of income are one-third.

Most important, the government has the wherewithal and the flexibility to stimulate the economy and recapitalize banks if necessary. China has a debt-to-GDP ratio of only 17%. China's growth will slow down from the breakneck pace of the last several years. But it will continue to grow rapidly, and a meltdown of the Chinese economy is highly unlikely.

The U.S. housing bust has made the single-family home an extremely attractive investment. House prices have fallen sharply, and 30-year mortgages are available for people with good credit at rates below 4%. Housing affordability has never been better.

Whatever the specific mix of assets in your portfolio at the start of 2012, you would do well to follow one crucial piece of advice. Control the thing you can control—minimize investment costs. That is especially important in a low-return environment. Make low-cost index mutual funds or ETFs the core of your portfolio and ensure that any actively-managed investment funds you purchase are low-expense as well.

Mr. Malkiel is the author of "A Random Walk Down Wall Street" (10th ed., paper, W.W. Norton, 2012).

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« Reply #233 on: January 06, 2012, 10:47:30 AM »

Non-farm payrolls increased 200,000 in December To view this article, Click Here
Brian S. Wesbury - Chief Economist
Robert Stein, CFA - Senior Economist
Date: 1/6/2012
Non-farm payrolls increased 200,000 in December and were up 192,000 including revisions to October/November.  The consensus expected a gain of 155,000.
Private sector payrolls increased 212,000 in December.  Revisions to October/November subtracted 3,000, bringing the net gain to 209,000.  December gains were led by couriers/messengers (+42,000), retail (+28,000), health care & social work (+29,000), restaurants/bars (+24,000), and manufacturing (+23,000). The largest decline was for temps (-8,000).
The unemployment rate dropped to 8.5% from 8.7% in November.
 
Average weekly earnings – cash earnings, excluding benefits – rose 0.2% in December and are up 2.1% versus a year ago.
 
Implications:  This is the best employment report since the start of the recovery.  The labor market still has a long way to go before it gets back to normal, but the pace of improvement has clearly accelerated.  Private payrolls increased 212,000 in December (209,000 including revisions to prior months).  Every major category of private payrolls increased in December.  Perhaps even more important was an increase in the average workweek to 34.4 hours from 34.3.  That might not seem like a lot, but it translates into 320,000 jobs.  In other words, had employers kept the workweek unchanged, they would have needed to hire more than 500,000 workers for the month instead of just 212,000.  This is an important signal of more job gains to come.  In 2011, nonfarm payrolls were up an average of 137,000 per month.  We anticipate an increase around 180,000 for 2012.  Some pessimists say a “birth/death” model is artificially inflating payroll gains, but December’s birth/death adjustment was -11,000, the first negative adjustment for any December in the last nine years.  The other big headline for today is that the unemployment rate ticked down to 8.5% in December, the lowest since March 2009 and almost a full percentage point lower than a year ago.  The December drop was due to a solid 176,000 increase in civilian employment.  Although the November jobless rate was revised to 8.7% from 8.6%, that change is deceiving.  Unrounded, November’s jobless rate was revised to 8.65% from 8.64%, so there was no significant change.  The bottom line is that hours worked in the private sector are up 2.4% in the past year, while average hourly earnings are up 2.1%.  This translates into a 4.5% gain in cash earnings (excluding fringe benefits, like health insurance).  We all wish it were faster, but incomes are outpacing inflation.  The pessimists banking on a weak economy in 2012 ought to re-check their assumptions.
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« Reply #234 on: January 09, 2012, 04:28:07 PM »

Nonsense Arguments About Jobs To view this article, Click Here
Brian S. Wesbury - Chief Economist
Robert Stein, CFA - Senior Economist
Date: 1/9/2012
The better the employment reports get, the more ridiculous the assertions from those who deny the improvement.
Take Friday’s report, which was the best since the economic recovery started. Private payrolls rose 212,000, while the number of hours per worker and earnings per hour went up as well. As a result, total workers’ earnings are more than keeping pace with inflation. Even the unemployment rate went down again and is now at 8.5%, almost a full point below where it was a year ago.
 
These numbers are pretty good. Nonetheless, anyone who stated the obvious, and pointed out the good news, was berated by media and especially in the blogosphere. Our observation is that most of these arguments against optimism are driven by politics and border on the ridiculous.
 
One claim is the numbers are being manipulated by the government to help President Obama…if President Bush was in office, unemployment would be 12%.
 
But if the numbers are being manipulated, they’re doing a pretty poor job. Why not claim a higher growth rate for civilian employment – which usually happens anyhow in normal recoveries – which would let them show some combination of a lower unemployment rate or higher labor force participation rate? And why would they usually have to revise up their payroll numbers after the initial report each month? Wouldn’t they want the good news out as soon as possible? Of course, we point this out knowing full well that the conspiracy crowd already thinks we are part of the conspiracy.
 
Another argument is that the “real” unemployment rate is 15.2%, not 8.5%.  This is a reference to the Labor Department’s U-6 rate, which includes discouraged workers, marginally attached workers, and those working part-time who say they want full-time jobs.  But as we have explained many times before, since its inception in 1994, the “real” unemployment rate (U-6) is always, in both good times and bad, higher than the regular unemployment rate – by between 65-85%.  Right now it’s 79% higher.  In other words, the so called real unemployment rate tells us nothing we wouldn’t otherwise know by just looking at the regular unemployment rate.
 
Others are saying the unemployment rate is down only because people are leaving the labor force. This has resonated lately, because the labor force has contracted by 170,000 in the last two months. But those monthly numbers are volatile and the jobless rate is down 0.9 points from a year ago, during a period when the labor force expanded 780,000, or 0.5%.
 
One recent claim is that a “real” recovery would have 250,000 jobs per month. This is a made up number which means nothing other than “we aren’t there yet.” We all want more growth, not less. But, just because the number of new jobs has not reached a non-scientifically based threshold means nothing.   Let’s not make up reasons to be disappointed when the numbers are getting a little bit better every month.
 
Some pessimists notice that this past month, a job category for couriers & messengers was up 42,000, so that shows some problems when these jobs disappear next month. But the same temporary pop in couriers & messengers happened last December and job creation accelerated this year. Moreover, don’t let that one category deflect attention from the fact that every major category of jobs increased in December, from construction and manufacturing to retail and leisure.
 
We get it. The job market isn’t perfect. We wish we were back at 5% unemployment right now and there are plenty of reasons to point fingers and argue that things should, and could, be better. We do that plenty. But using each monthly employment report as a pretext to put forward spurious  arguments and vent about our national state of affairs, which we all knew about in the days before each report as well, suggests an attempt to politicize the economic data. And as we all know, facts and politics don’t always mix very well.
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« Reply #235 on: January 12, 2012, 11:12:20 AM »


Retail sales grew 0.1% in December To view this article, Click Here
Brian S. Wesbury - Chief Economist
Robert Stein, CFA - Senior Economist
Date: 1/12/2012
Retail sales grew 0.1% in December (0.3% including upward revisions to October/November). The consensus expected an increase of 0.3%. Retail sales are up 6.5% versus a year ago.
Sales excluding autos fell 0.2% in December (-0.1% including upward revisions to October/November). The consensus expected an increase of 0.3%. Retail sales ex-autos are up 6.0% in the past year.
 
The increase in retail sales in December was led by autos and building materials. The biggest declines were for gas stations and general merchandise stores.
 
Sales excluding autos, building materials, and gas declined 0.2% in December. But, these sales are up at a 5.3% annual rate in Q4 versus the Q3 average. This calculation is important for estimating real GDP.
 
Implications:  Retail sales grew less than the consensus expected in December, but are still consistent with solid economic growth. Surprisingly, autos were the strongest part of sales, which signals less discounting in that sector in December than previous reports suggest, a bullish sign of consumer demand for big-ticket items. The other strong sector for sales in December was building materials, which may have been a function of unusually warm weather in much of the country. The largest drag on December sales was at gas stations, due to lower prices at the pump. Sales were also down at general merchandise stores and for electronics/appliances, which probably reflects steep discounting amid Christmas sales competition. Overall sales are up in 17 of the last 18 months. Sales declined ex-autos, but that’s the first time in 19 months. This kind of consistent and continuous growth is very rare.  Typically, retail sales have three or four negative months every year, even in good years.  “Core” sales, which exclude autos, building materials, and gas, fell for the first time in 17 months, but “core” sales for Q4 were up at a 5.3% annual rate versus the Q3 average.  In other recent retail news, chain store sales continue to look good, up 3.3% versus a year ago according to Redbook Research and up 2.8% according to International Council of Shopping Centers.  Remember, these figures show same-store sales; total sales are up more than that.  In other news this morning, initial claims for unemployment insurance increased 24,000 last week to 399,000. The four-week average is 382,000, which is much closer to the underlying trend.  Continuing claims for regular state benefits rose 33,000 to 3.63 million. The economy is getting better, but it never does so in a straight line.
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« Reply #236 on: January 22, 2012, 08:32:37 AM »

By SIMON CONSTABLE

When it comes to investing, 2012 isn't the year to do nothing and just hope for the best.
 
Yes, there are some mammoth-sized unknowns out there that could hurt your returns. But when the biggest "what ifs" are resolved, you could also profit, if you play it right.
 
Here's how to tackle the five scenarios that are keeping Wall Street investors awake at night:‬
 
1 What if Europe gets worse?
 
No matter how much investors might desire it, Europe's economic mess just won't go away. But the big fear is that it will deteriorate even more before it gets better.



Jon Krause.

"Europe getting worse is a disaster for everything but the safest investments," says Milton Ezrati, market strategist at Jersey City, N.J.-based money-management firm Lord Abbett.
 
You'll know Europe's economy is imploding if you see the value of the euro fall much further. Currently, one euro buys approximately $1.29, down from $1.48 in May.
 
If it does get worse, then all assets will do poorly except U.S. Treasurys, U.S. government agency debt and the highest-quality corporate debt, Mr. Ezrati says.
 
In simpler terms, stay in investments denominated in U.S. dollars and away from those in euros or British pounds. Britain isn't part of the euro zone, but it does more business with Europe than with any other region. So a recession in Europe would hit the pound hard.
 
All European stock markets will likely fare poorly: If you must stay in European stocks, then Germany's stock market would be "the least worst," he says.
 
He adds: European stocks could look really cheap in 12 to 18 months. So savvy investors will be wise to keep some cash on the sidelines.
 
2 What if U.S. housing finally improves?
 
It's now close to five years since the housing bubble burst. When it rebounds isn't only an investment question, but of vital importance to households as well.
 
You'll know real estate is improving when you see rising prices in combination with greater sales volumes of housing units. For that to occur, "lots of other good things need to be happening," says Barry Ritholtz, CEO of FusionIQ, a New York-based research and asset-management company.

Notably, he says, look for a better jobs picture, with an increase in average wages. You'll also need to see people who had been living with their parents for financial reasons finally getting their own home, either buying or renting.

That would lead to an increase in so-called household formation, a vital factor for a housing recovery.
 
If all those things are happening, then, Mr. Ritholtz says, savvy investors will be looking beyond the obvious investment choices of home-building stocks. Instead, he says, look to companies that will prosper from an improved labor market, such as staffing firm Robert Half International (RHI), payroll processor ADP(ADP) and jobs-listing service Monster Worldwide (MWW).
 
3 What if the jobs recovery falters?
 
The long-awaited jobs recovery seems to have arrived. The unemployment rate has dropped steadily, albeit slowly, from 9.1% in August to 8.5% in December.
 
The big question: Can it be sustained?
 
If things start going backward, then "basic support for U.S. stocks will be undermined," says Art Hogan, head of product strategy at New York-based Lazard Capital Markets. "It will do an awful lot of damage to investor confidence."
 
You'll know the jobs recovery is in reverse by watching the unemployment claims data (released Thursdays) and the Department of Labor employment report (the first Friday of each month).
 
Specifically, watch for a higher unemployment rate and climbing first-time claims for unemployment insurance.
 
If the jobs market does falter, then stocks of companies that sell consumer staples, such as soap and food, could benefit, he says. In addition, pharmaceutical companies and electric utilities, also providers of essentials, will tend to do well, he says. You can get a basket of such stocks by purchasing the Consumer Staples Select Sector SPDR (XLP) exchange-traded fund.
 
4 What if there's another budget crisis?
 
Last summer, investors watched in horror as Congress wrestled over the government's finances. They even risked the first-ever default on U.S. debt.
 
Although no one wants it, a repeat performance is possible at year-end. Why? The Bush-era tax cuts are set to expire (again). Unless one party claims a decisive victory across Capitol Hill in November's election, then there will be a wrangle over whether to extend some or all of the tax cuts into 2013.

"It's always a shaky prospect when you put the fate of the U.S. economy in the hands of congressional leaders," says Ellen Zentner, senior U.S. economist at Nomura Securities in New York.
 
The problem: Massive uncertainty over the outcome.The bigger the differences between the two sides, the worse it will be for investors. Ms. Zentner says an impasse could cause wild swings in the stock market and the economy. So if Congress looks like it's headed for another blockbuster fight, stay safe in cash and avoid the potential gyrations of stocks.
 
5 What if China's economy heats up?
 
China's economy matters because it's the second largest in the world. Over the past decade, the communist country has grown fast, but lately it has been cooling off. The question is: What happens when it heats up again?
 
"As China grows so does the use of commodities," says Michael Woolfolk, senior currency strategist at BNY Mellon in New York. Specifically, he points to industrial minerals such as iron ore and copper, which are used in construction and manufacturing.
 
You'll know China's economy is doing better if you see a sustained rise in Chinese output. Look for gross-domestic-product growth to jump back to the double digits, from its "slow rate" of 8.9% at the end of 2011.
 
Many observers doubt the value of Chinese economic data. "Just take it at face value," Mr. Woolfolk says, since the trends in the data are more important.
 
Stocks that would likely do well include industrial miners Vale(VALE), Rio Tinto (RIO), BHP Billiton (BHP) and Freeport-McMoRan Copper & Gold (FCX).
 
Those investors not wanting to pick stocks might consider a specialized mutual fund, such as the $3.9 billion Vanguard Precious Metals and Mining fund (VGPMX).
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« Reply #237 on: January 23, 2012, 10:28:38 PM »

Monday Morning Outlook



Rally Not Built on Complacency To view this article, Click Here

Brian S. Wesbury - Chief Economist
 Robert Stein, CFA - Senior Economist

Date: 1/23/2012






 
There are three types of people involved in the prognostication business these days.
The &ldquo;end of the world&rdquo; types, the &ldquo;it&rsquo;s a slower,
post-apocalypse world&rdquo; types, and the &ldquo;everything is going to be
OK&rdquo; types.
 
For a long time now, we have been saying that the &ldquo;end of the world&rdquo;
types are over-doing it. This is actually a dangerous stance for us to take because
the &ldquo;end of the world&rdquo; types can be very nasty to people who disagree
with them. The &ldquo;it&rsquo;s a slower world&rdquo; types are more cerebral and
less nasty, but equally adamant. We, obviously, fall in the third camp.
 
No matter how we make our argument, and no matter how consistently the economy
grows, the doubt and fear and disbelief just won&rsquo;t go away. We noticed this
recently, when conventional wisdom started to say that investors were being
&ldquo;complacent&rdquo; these days.
 
In other words, when the equity markets go down, investors are &ldquo;living in
reality&rdquo; and &ldquo;accepting&rdquo; that the economy and financial markets
just aren&rsquo;t in great shape. But when the equity markets go up, they are being
schizophrenic, overly optimistic, and now some are saying &ldquo;complacent.&rdquo;
 
We couldn&rsquo;t disagree more. Private sector payrolls have grown 160,000 per
month in the past year. The unemployment rate is down almost a full percentage point
from a year ago, while the size of the labor force is up (just like it was up in
2010, too). Over the past four weeks, unemployment claims have averaged 10% lower
than the same period a year ago.
 
Retail sales are up 6.5% from a year ago; orders for long-lasting durable goods are
up 12.1%, and auto sales are up 8.4%.
 
Perhaps most importantly, the long-awaited recovery in the housing sector has
finally started. Housing starts in the fourth quarter hit the highest level since
late 2008 and were up at a 32% annual rate compared to Q2. This was not all
apartment buildings; single-family housing was up at a 13% annual rate in the second
half of 2011.
 
Meanwhile, even after a recent rally, US equities remain incredibly cheap. Based on
trailing after-tax earnings, the price-to-earnings ratio on stocks in the S&amp;P
500 is roughly 13.5. On future earnings it&rsquo;s even cheaper.
 
Flipping this over, so earnings are on top and price is on bottom, the
&ldquo;earnings yield&rdquo; on stocks is 7.4%, compared to a 10-year Treasury yield
of only 2%. This suggests that stocks are cheap relative to bonds.
 
In other words, rather than being the result of complacency, craziness or stupidity,
the recent rally has a much more straightforward explanation. The economy is
growing, it&rsquo;s very likely to continue to grow, and if that is the case then
stocks are grossly undervalued relative to bonds.
 
And the good news continues. With about 15% of the S&amp;P 500 companies having
reported earnings for the fourth quarter of 2011, 60+% have beaten street estimates.
 
Notice how none of this has anything to do with a third round of quantitative easing
by the Federal Reserve.   The last round of quantitative easing was essentially
useless, with banks boosting their excess reserves from $1 trillion to $1.6
trillion.
 
Nonetheless, bank lending is picking up and accelerated after QE2 ended. This has
helped boost the M2 measure of money (Milton Friedman&rsquo;s favorite gauge), which
has also been growing faster since the end of QE2 than during it.
 
So far in 2012, the S&P 500 has had eleven up days versus only two down days.
That ratio probably won&rsquo;t continue for the full year, but the idea that it is
unwarranted, crazy or complacent is a point of view that is supported by a decidedly
bearish set of assumptions.
 
Rather, it appears that the stock market is finally (or once again) beginning to
realize that the world is not ending and that the recovery is not so fragile that it
cannot last. We remain optimistic. We continue to believe that things are getting
better and we don&rsquo;t feel complacent at all.
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« Reply #238 on: January 24, 2012, 06:18:12 AM »

http://mercatus.org/publication/us-sovereign-debt-crisis-tipping-point-scenarios-and-crash-dynamics

With the economy facing a sluggish recovery and debt and deficits soaring, it's no longer far-fetched to say that a sovereign debt crisis could occur in the United States. Econ Journal Watch and the Mercatus Center at George Mason University have undertaken this symposium to produce and disseminate a better understanding of what a sovereign debt crisis in the United States would look like and what might bring it about.

This symposium was edited by Daniel Klein and Tyler Cowen, and contributors include Garett Jones, Arnold Kling, Jeffrey Rogers Hummel, Joseph Minarik, and Peter Wallison. The authors were invited to speculate on possible tipping points, associated triggers, and on crash dynamics (what happens in the crisis). The authors were encouraged to imagine possible futures, not merely as financial analysts but as political economists.
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« Reply #239 on: January 30, 2012, 04:20:28 PM »



Personal income increased 0.5% in December while personal consumption was unchanged To view this article, Click Here
Brian S. Wesbury - Chief Economist
Robert Stein, CFA - Senior Economist
Date: 1/30/2012
Personal income increased 0.5% in December while personal consumption was unchanged. The consensus expected a gain of 0.4% for income and 0.1% for consumption. In the past year, personal income is up 3.8% while spending is up 3.9%.
Disposable personal income (income after taxes) was up 0.4% in December and is up 2.3% from a year ago. Increases in private wages and salaries along with dividends and social security pushed disposable personal income higher in December.
 
The overall PCE deflator (consumer inflation) was up 0.1% in December. Prices are up 2.4% versus a year ago. The “core” PCE deflator, which excludes food and energy, was up 0.2% in December and is up 1.8% since last year.
 
After adjusting for inflation, “real” consumption was down 0.1% in December, but is up 1.4% from a year ago.
 
Implications:  Despite surveys showing strong consumer spending in December; government data show a temporary lull, but this should not last. Purchasing power is up, even if you exclude government transfer payments. Excluding transfer payments, “real” (inflation–adjusted) personal income was up 0.4% in December and up 2.4% from a year ago. Real spending remains near record highs and will continue to move higher.    Private-sector wages and salaries are up 4.6% from a year ago, which is faster than inflation. There were additional benefits paid to some social security beneficiaries in December which was due to retroactive payments to recent retirees based on a recalculation of the earnings base.  In addition to the gain in wages and salaries, consumer spending is being supported by the large reduction in households’ financial obligations the past few years.  Recurring payments like mortgages, rent, car loans/leases, as well as other debt service, are now the smallest share of after-tax income since 1993. Also, autos are still selling below the pace of scrappage and growth in the driving-age population. This should lead to continued demand in the auto sector in the months ahead. On the inflation front, overall consumption prices are up 2.4% in the past year, above the Fed’s supposed target of 2%.  “Core” prices are up 1.8% from a year ago, the most since 2008.  But, given the loose stance of monetary policy, we expect inflation to accelerate in the year ahead, both overall and for the core.
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« Reply #240 on: January 31, 2012, 08:51:52 AM »

Hi All -
This is a quick but comprehensive summary of the week/week ahead, featuring (with links to great articles by) Jesse's Americain Cafe, Chris Martenson, Russ Winter, Simon Johnson, Bruce Krasting, Zero Hedge and more.  Please feel free to post, link to, share the full newsletter (attached).  Thanks!! ~ Ilene
Entering the Debt Dimension
(Excerpt from Stock World Weekly)
 
We ended last week’s newsletter explaining why we were not betting on an announcement for more quantitative easing by the Fed, although “consensus” economists claimed to be. We argued that additional QE was unlikely, citing our friends (Bruce Krasting, Lee Adler of the Wall Street Examiner, and Jon Hilsenrath - with his direct line to Bernanke). This week, those expecting easing were disappointed; there was no mention of launching any new program for large-scale asset purchases.
But the Fed did extend the period it anticipates keeping interest rates at or near zero percent (ZIRP). (See Wednesday’s press release here) The Fed also plans to continue its program to extend the average maturity of its holdings of securities, Operation Twist, and to maintain its policy of reinvesting principal payments from its existing holdings, including mortgage-backed and Treasury securities. It is currently holding nearly $3Tn in total assets. The returns from those assets are significant, and the Fed’s balance sheet is continuing to grow even after the end of its asset purchase programs.
 
In response, Bill Gross (co-chief investment officer of PIMCO) tweeted that this announcement was the equivalent of “QE 2.5,” while Bruce Krasting wrote, “Well, we got an inflation target from the Fed. Basically, thinking at the Fed has been eliminated. The process has been automated. Bernanke has convinced the Fed board to adopt Core PCE as a determinate of monetary policy. So long as CPCE stays below 2%, Ben is going to have his foot planted on the monetary metal. It’s ‘full speed ahead’ according to the Chairman. He's pushed things off until 2014 - a very long time from now.”Bruce goes on to explain the major flaw in Bernanke’s reasoning, and how this decision has made him “a slave to a single dopey statistic.” (Bernanke Goes All In)
In Jesse's (of Jesse’s Cafe Americain) words:
“This statement shows a longer term commitment to de facto QE at least. The Fed does not need to further expand its balance sheet just yet, but rather deploy those funds strategically while engaging in swaps with other central banks to counter the financial risks globally.
“I suspect that before they formally announce a further expansion of their balance sheet, the Fed will go 'off-balance sheet' in the easing as financial firms are often wont to do when engaging in opaque accounting. The swaps and noncompetitive bidding for balance sheet assets may be a part of this.
“I do not object to stimulus per se, but rather this type of blunt policy that does not address or repair the problems that led to the financial bubble and collapse in the first place.”
In Jesse's view, and we agree, the “yawning gap between productive labor and mere money manipulation” needs to be closed, and hard choices are required to resolve the unsustainable concentration of both power and risk.
“Demagoguery and deception in support of the status quo seems to be the rule of the day in the financial sector and its associated professions and exclusive clubs.
“Therefore self-regulation, restraint, and reform are a thin bet to say the least. The crisis is more like to continue to expand, and the taint of corruption and crime continue to spread.” (FOMC Statement - Targets 2% Inflation - Highly Accommodative Monetary Policy Until ‘Late 2014’)
One problem with large, public programs such as QE2 is that everyone jumps into the same side of the trade, e.g., going long equites in the famous “Tepper Put” that dominated the markets while QE2 was operating (buy stocks, you can’t lose). Using more low-key, less blatant ways of injecting liquidity into the financial system, Bernanke is continuing to provide stimulus while pretending to be an inflation hawk.
 
On Friday, Fitch downgraded Italy, Spain, Belgium, Slovenia and Cyprus. Ireland was affirmed at BBB+, but received a negative outlook. Fitch maintained that the European leaders’ “gradualist” approach in tackling the crisis means that Europe will continue to face periodic episodes of severe financial volatility, and this will erode the governments’ ability to repay their debt obligations. “The eurozone crisis will only be resolved as and when there is broad economic recovery. It is evident that further substantial reforms of the governance of the eurozone will be required to secure economic and financial stability, including greater fiscal integration.” (Fitch downgrades 5 eurozone nations)
Chris Martenson argued that it’s time for hard decisions: “Back in the 1930's, Irving Fisher introduced a concept called the ‘debt supercycle.’ Simply put, it posits that when there is a buildup of too much debt within an economy, there reaches a point where there simply is no other available solution but to let it rewind.
“We are at that point in our economy, as are most other major economies around the world, claims John Maudlin, author of the popular Thoughts from the Frontline newsletter and the recent bestselling book Endgame: The End of the Debt Supercycle and How It Changes Everything.
“For the past several decades, excessive and increasing amounts of credit in the system have allowed us to live above our means as both individuals and nations. We've been able to have our cake and eat it, too. Now that the supercycle has ended and the inevitable de-leveraging cycle is staring us in the face, we will be forced to set priorities in a way that has been foreign to our society for over a generation.” (Chris Martenson Interviews John Mauldin: “Time to Make the Hard Decisions)
Greece has been struggling with hard decisions as it attempts to negotiate a “haircut” with creditors. Russ Winter of Winter Watch at Wall Street Examiner commented,
“I spotted some interesting commentary on the maturing March 2012 Greek bonds. After buying at 40-45 cents, it seems the hedge funds are trying to unload in a bid-less 35-cent market. The ECB has the largest stake, bought at 70 cents. This official holder’s dominance of this market, and refusal so far to participate in haircuts, is making the whole exercise futile and severely subordinating any potential non-official holder or future buyer of European sovereign debt.
“Reuters reports that the ECB is split and confused on this issue. The IMF’s Lagarde says, ‘If the level of Greece’s privately held debt is not sufficiently renegotiated, then public creditors will also have to participate.'Apparently, the IMF was also confused as this was retracted or denied. As I wrote in “Stick it to the Local Issued Bond Holders,” this is one of two serious subordination fiascos, the second being a slew of UK-law non-local issues that restrict collective restructuring actions.” (Pushing Non-Official Holders of Local-Issued European Debt into Subordination) (Zero hedge/Bloomberg chart below).
 
Simon Johnson warned:
“In the event of default (i) any non-official bond holder is junior to all official creditors and (ii) the issuer reserves the right to change law as needed to negate any rights of the nonofficial bond holder.
“We should not underestimate the damage these steps have inflicted on Europe’s €8.4 trillion sovereign bond markets. For example, the Italian government has issued bonds with a face value of over €1.6 trillion. The groups holding these bonds are banks, pension funds, insurance companies, and Italian households. These investors bought them as safe, low-return instruments that could be used to hedge liabilities and provide for future income needs. It was once hard to imagine these could ever be restructured or default.
“Now, however, it is clear they are not safe. They have default risk, and their ultimate value is subject to the political constraint and subjective decisions by a collective of individuals in the Italian government and society, the ECB, the European Union, and the International Monetary Fund (IMF). An investor buying an Italian bond today needs to forecast an immediate, complex process that has been evolving in unpredictable ways.” (The European Crisis Deepens)
People familiar with the story of the MF Global implosion, and the struggles of thousands of people to recover funds from the bankrupt former primary dealer, will have no trouble understanding the problems with recovering assets during bankruptcy proceedings. (MF Global Clients May Lose in $700 Million Bankruptcy Fight) For a recent update, see Zero Hedge's "3 Months After The MF Global Bankruptcy, We Find That $1.2 Billion (Or More) In Client Money Has 'Vaporized.'"
As sovereign nations in the eurozone struggle to acquire funds to service their existing debt obligations and issue new bonds, investors who might be inclined to buy those bonds are finding themselves in an increasingly hostile environment for private bondholders. Non-governmental holders of this debt are likely to find themselves on the wrong side of any negotiated settlement between private creditors and sovereign bond issuers.
Friday saw a stunning development in the Greek drama, with Reuters reporting that Germany “is pushing for Greece to relinquish control over its budget policy to European institutions as part of discussions over a second rescue package” according to a “European source.”
Tyler Durden of Zero Hedge observed, “Sure enough, earlier today Der Spiegel broke the news that the second bailout, which has yet to be re-ratified, and absent Greece meeting demands to cede fiscal sovereignty, is likely a nonstarter, would be increased to €145 billion ‘citing an unidentified official from the so-called troika.’ So whether or not this is true is irrelevant: what matters is that Spiegel released the article in the same series of posts in which it explained just why Germany has full right to demand (via European enforcement mechanisms or however) virtually anything in exchange for the ongoing endless bailout (such as: Merkel macht Wahlkampf für Sarkozy and Griechenland sträubt sich gegen EU-Aufpasser). Which means one thing only: the great propaganda spin machine is now on, and its only purpose is to provide Germany a buffer of ‘having done everything in its power’ to prevent the now inevitable Greek default. Which, incidentally, means that a Greek default is inevitable.” (Cost Of Second Greek Bailout raised To €145 Billion)
Lee Adler of the Wall Street Examiner reviewed last week’s activity by the Fed, and the potential impact on the Dollar.
“Treasury yields reached the top of the recent range and appeared headed for a breakout when along came Ben, with his mighty arms outstretched he lifts up the playing field and tilts it, and back down yields went, in spite of the big week of Treasury auctions and the market facing a big wad of new paper to settle next week. It didn’t matter. Ben gave the all clear on the carry trade for 3 more years, although I don’t know how much carry you can get when 10 year yields are less than 2%. I guess if you use enough leverage…
“We know this is going to blow up sooner or later. All we can do is watch the chart for signs. For now, the trading range that looks like a bottom in yields is intact. And so is the idea that the Fed at least, can make the market do what it wants, when it wants. But I heard that Bill Gross is loading up on Treasuries again, after missing, or being short, through the whole rally. If that’s not a sell signal, what is?...
"Federal withholding taxes, which were going bonkers, are starting to come back to earth but are still way higher than last January. We still don’t know if this is a new uptrend or just a bulge from sources unknown. The timing coincided with the massive ECB Long Term Refinancing Operation equivalent to $600 billion pumped into the world banking system all at once... Whatever the reason, the unexpected windfall for the Federal Gummit has enabled it to significantly cut the size of the debt offerings for the past month. There’s a question as to how long that good fortune will last, but for now, that’s the story."
(Lee Adler, The Mighty Ben)
Looking ahead to next week, Phil remains skeptical of the current rally. “Of course the headline in the WSJ is ‘US Economy Gathers Pace’ because, as you can see from Cramer's bullish rant last night – they're still herding all the lambs in for the slaughter at the top of the market.”
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« Reply #241 on: February 02, 2012, 11:08:41 AM »

Nonfarm productivity (output per hour) increased at a 0.7% annual rate in the fourth quarter To view this article, Click Here
Brian S. Wesbury - Chief Economist
Robert Stein, CFA - Senior Economist
Date: 2/2/2012
Nonfarm productivity (output per hour) increased at a 0.7% annual rate in the fourth quarter, narrowly missing the consensus expected gain of 0.8%. Non-farm productivity is up 0.5% versus last year.
Real (inflation-adjusted) compensation per hour in the non-farm sector rose at a 1.0% annual rate in Q4, but is down 1.5% versus last year.  Unit labor costs also rose at a 1.2% rate in Q4 and are up 1.3% versus a year ago.
 
In the manufacturing sector, productivity fell 0.4% at an annual rate in the fourth quarter. The decline in productivity growth was due to hours rising more rapidly than output.  Real compensation per hour was up in the manufacturing sector (0.3%), and due to the fall in productivity growth, unit labor costs rose at a 1.6% annual rate.
 
Implications:  Forget about productivity for a moment.  Automakers reported January sales yesterday and they blew away consensus expectations.  Autos and light trucks were sold at a 14.2 million annual rate, versus a consensus expected pace of 13.5 million.  Sales were 4.6% higher than December and up 11.7% from a year ago.  In fact, sales were the strongest since early 2008, even beating the temporary surge in sales in August 2009 due to cash for clunkers.  Consumers don’t buy big ticket items like this when they see the economy getting worse. Also, in other news today, initial claims for unemployment insurance fell 12,000 last week to 367,000.  Continuing claims for regular state benefits declined 130,000 to 3.44 million, the lowest level since late 2008. The employment picture is definitely improving and can also be seen in the report on productivity for Q4. It is not unusual for productivity growth to slow temporarily after the initial stages of an economic recovery, as firms start to hire more workers and give their workers more hours. Nonfarm productivity increased at a 0.7% annual rate in the fourth quarter. Output continues to accelerate, but the number of hours worked is catching up.  On the manufacturing side, productivity fell 0.4% at an annual rate as the number of hours worked rose faster than output.  Over the past few years, manufacturers have gotten very lean, being able to produce more with fewer workers.  Now hours are starting to come back and output will continue to move higher as more workers are hired.  Unit labor costs (how much companies have to pay workers per unit of production) rose at a 1.6% annual rate in the manufacturing sector.  We believe the long-term trend in productivity growth will remain strong, part of the technological revolution since the early-1980s.  The result will be higher living standards.
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« Reply #242 on: February 03, 2012, 10:29:26 AM »

A lot fo these people can work.
This definitely is one factor that skews the unemployment rate.   Federal disability people have probably been advised to be lenient when assessing any given person for disability.
So many of these same people smoke some drink yet and expect a job that will pay a lot.  They are only half heartedly seeking work if at all or just give lip service.  They will vote Democrat.

***Disabled, but Looking for WorkBy MOTOKO RICH
Published: April 6, 2011
 
BATESVILLE, Ark. — Christopher Howard suffers from herniated discs in his back, knee problems and hepatitis C. As a result, Social Security sends him $574 every month and will until he reaches retirement age — unless he can find a job.


 Jacob Slaton for The New York Times
Christopher Howard, 36, with his wife, Darlene. “I would feel better if I worked and made my own money,” he said.
Economix
Moving From Disability Benefits to Jobs
A study finds the earnings ceiling for those receiving disability checks from Social Security creates a “powerful disincentive to work.”
 
Jacob Slaton for The New York Times
Christopher Howard and his wife live on his $574 a month disability check from Social Security. He is confident he will find a job.
Though he has been collecting disability checks for three years, Mr. Howard, who is just 36, desperately wants to work, recalling dredging for gravel rather fondly and repairing cell towers less fondly.

“It makes me feel like I am doing something,” said Mr. Howard, a burly man with a honey-colored goatee. “Instead of just being a bum, pretty much.”

Programs intended to steer people with more moderate disabilities back into jobs have managed to take only a small sliver of beneficiaries off the Social Security rolls.

Yet, at a time when employers are struggling to create spots for the 13.5 million people actively looking for jobs, helping people like Mr. Howard find employment — or keeping them working in the first place — is becoming increasingly important to the nation’s fiscal health.

For the last five years, Social Security has paid out more in benefits to disabled workers than it has taken in from payroll taxes. Government actuaries forecast that the disability trust fund will run out of money by 2018.

About 8.2 million people collected disabled worker benefits totaling $115 billion last year, up from 5 million a decade earlier. About one in 21 Americans from age 25 to 64 receive the benefit, according to an analysis of Social Security data by Prof. Mark G. Duggan, an economist at the University of Maryland, compared with one in 30 a little over a decade ago. In Mr. Howard’s home state of Arkansas, the figure is one in 12, among the highest in the nation.

Along with monthly checks that are based on the worker’s earnings history, beneficiaries generally qualify for Medicare — otherwise reserved for those over 65 — two years after being admitted to the disability rolls.

There are several reasons for the increase in beneficiaries. Baby boomers are hitting the age when health starts to deteriorate, and more people are claiming back and other muscular-skeletal ailments and mental illnesses than claimed those as disabilities a generation ago. Lawyers who solicit clients on television and on the Internet probably play a role. And administrative law judges say pressure to process cases sometimes leads to more disability claims being accepted.

But given the difficult job market, some economists say they believe that an increasing number of people rely on disability benefits as a kind of shadow safety net.

The program was designed to help workers who are “permanently and totally disabled,” and administration officials say that it is an important lifeline for many people who simply cannot work at all.

But Social Security officials can take into consideration a claimant’s age, skills and ability to retrain when determining eligibility. So one question is: How many of these beneficiaries could work, given the right services and workplace accommodations? Social Security officials say relatively few.

Nicole Maestas, an economist at the Rand Corporation, has examined Social Security data with fellow economist Kathleen J. Mullen, and concluded that in the absence of benefits, about 18 percent of recipients could work and earn at least $12,000 a year, the threshold at which benefits are suspended.

Other economists say that even among those denied benefits, a majority fail to go back to work, in part because of medical problems and a lack of marketable skills.

“In an atmosphere in which there is a concern about fiscal problems, it’s always easy to point the finger at groups and say, ‘These people should be working,’ ” said Prof. John Bound, an economist at the University of Michigan, “exaggerating the degree to which the disability insurance program is broken.”

Even if claimants have more ambiguous medical cases, once they are granted disability benefits, they generally continue to collect. Of the 567,395 medical reviews conducted on beneficiaries in 2009, Social Security expects less than 1 percent to leave because of improved health.

The benefits have no expiration date, like the current 99-week limit for collecting unemployment. And because many people spend years appealing denials and building their medical case before being granted benefits, their skills often atrophy and gaps open on their résumés, making it more difficult for them to get back to work.

Beneficiaries, who also fear losing health care coverage, may view their checks as birds in the hand. “Even if you’re taking just $800 or $900 a month, that’s better than nothing,” said Bruce Growick, an associate professor of rehabilitation services at Ohio State University.

Shortly after Mr. Howard’s benefit checks started arriving, he received a four-by-six-inch card from Social Security informing him of services to help him return to work. Confused by the bureaucratic language and fearing the loss of medical coverage, he discarded it. When he called the local office, he said a staff member did not seem to know what his rights were or what help was available.

“I thought it is just better to get what we are getting,” he said.

In fact, Social Security offers disability beneficiaries some incentive to ease back into the work force. For nine months after starting a job, they can earn any amount without threatening their benefits. For another three years, if their income falls below $1,000 a month, they can immediately receive full benefits again. And they can keep Medicare coverage for eight and a half years after going back to work, something few beneficiaries may realize.

In 1999, Congress passed a law authorizing the Ticket to Work program, which offers beneficiaries practical help with a job search. Social Security also waives medical reviews for those who participate.

So far, the program has had little success. Out of 12.5 million disabled workers and those who receive benefits for the disabled poor, only 13,656 returned to work over the last two and a half years, with less than a third of them earning enough to drop the benefits.

A Social Security spokesman noted that some other beneficiaries had returned to work without using its Ticket to Work program. In 2009, 32,445 recipients left the benefit rolls because they were earning enough in jobs.

Officials say they have streamlined and simplified the Ticket to Work program. But even with more awareness, they say not enough people could go back to work to make a difference in the disability trust fund.

“We could make this program exponentially more successful and it wouldn’t be enough to dramatically improve the solvency picture,” said Michael J. Astrue, the commissioner of Social Security. “You do it because work — for people who can work — gives them dignity and improves their economic condition.”

In Batesville, a small manufacturing town about 80 miles northeast of Little Rock, Ark., Mr. Howard and his wife, Darlene, who is also out of work, scrape by on his monthly $574 check. They live in a garage behind the home owned by Mr. Howard’s parents. Inside the forest green shack, which has no running water, they have crammed some shabby furniture and a tiny galley kitchen.

Mr. Howard, who went to a community college for only six weeks and quit before becoming a certified nursing aide, landed work over the years through friends and family. One job was building and repairing cell towers in Illinois. In 2000, during a climb up a tower, Mr. Howard fell more than 20 feet before a pull cord stopped him. He quit on the spot, but ignored the back pain.

He moved back to Arkansas, met Ms. Howard and began working for a company that dredged the White River for gravel used to make asphalt and concrete. He operated 25- to 40-pound pumps, drove a forklift and repaired plant vehicles, earning $8.50 an hour, or about $22,000 a year with overtime.

The job kept him outside every day, and sometimes he fished for bass and trout on the way upriver. “I would still be doing that job if I could,” he said on a cool March afternoon as he sat in a booth at McDonald’s, sharing refills of Dr Pepper with his wife.

Six years ago, his working life came to a halt. While fixing a dump truck, he began vomiting blood. He was rushed to the hospital, where his gallbladder was removed, because of complications of the hepatitis C he had contracted from a tattoo in his early 20s.

Mr. Howard, who said he spent much of his 20s hanging out with the “wrong crowd,” admits he played a role in his poor health. “I was living pretty heavily on the weekends,” he said.

After the surgery, doctors determined he had herniated discs. He tried to go back to work but found he could not perform many tasks, like heavy lifting, and was dismissed.

His initial application for disability benefits was denied. He tried going back to work, hanging dry wall, but pain stopped him. Eventually, he hired a lawyer. After three years and three tries, he won benefits.

Last September, he met Shawn Blasczczyk, a coordinator of the Ticket to Work program with the White River Area Agency on Aging in Ash Flat, Ark., who had given a presentation at an employment office where Mr. Howard’s father worked. After learning he had some protections while searching for work, Mr. Howard decided to try.

Advocates for the disabled say Social Security makes lackluster efforts to promote the Ticket to Work program. All new beneficiaries should have an appointment to “talk to a benefits counselor about returning to work and how it will affect you,” said Lori Gentry, a care manager at the White River agency, a nonprofit that works with disabled beneficiaries. “I don’t think that is a whole lot to ask to get a monthly check.”

Some advocates recommend intervention before people receive benefits to try to help the disabled stay in jobs in the first place.

In a proposal for the Center for American Progress and the Brookings Institution’s Hamilton Project, Professor Duggan of the University of Maryland and Prof. David H. Autor, an economist at M.I.T., suggest that disabled workers be offered partial income support and services to remain in the workplace. Moreover, they advocate for employers to purchase mandatory disability insurance as they do unemployment insurance and workers’ compensation, giving them incentive to accommodate workers rather than send them to the federal benefit rolls.

Mr. Howard is bumping up against his limitations, only some of which have to do with his medical condition. Last September, Ms. Blasczczyk helped place him in a job driving seniors to doctors’ appointments, but he quit after six months because of the stress. Scrolling through job listings at McDonald’s on a recent afternoon, he noted that many required college degrees.

Still, Mr. Howard is confident he will eventually find some work. While searching, he and Ms. Howard, who is also applying for work, have quit smoking and are trying to eat healthier foods. They have joined Mr. Howard’s father in a Bible study group.

“I would feel better if I worked and made my own money,” he said. “Because that way when somebody who needs it even more than I do, the Social Security would be there for them.” ****

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DougMacG
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« Reply #243 on: February 07, 2012, 09:42:40 AM »

Crafty: JDN raises an interesting theoretical question of import here.

JDN: "Well it seems the financial markets are impressed. [by jobs report]...

I don't look at short term moves as matter of import.  Dow is lower now than when JDN wrote that - about where it began.  The headline sounded positive; the deeper analysis of it over the weekend wasn't.  Stocks across the global economy don't move on one reason only, contrary what headline writers say.

JDN:  Dow finishes at highest since 2008, Nasdaq at highest since 2000

Away from short term hysteria we move to peak and trough analysis.  Another way of saying this is that the Dow is still below levels of 4 years ago and the NASDAQ is still below levels of 12 years ago meaning net negative 'growth' over selected longer periods of time.

The Dow is NOT a measure of the US economy, it is an index of named companies operating globally.  NASDAQ also.  The growth rate in emerging markets is 3 times what it is in America or Europe and these companies are still free to participate in that.

When I ask friends in Dow companies like 3M how business is and they don't tell me about expanding opportunities in NYC or LA.  They are shipping safety equipment as fast as they can build it to the nuclear site in Japan and expanding their manufacturing capabilities in China.  Are you hearing something different?

The market correctly predicted 13 of the last 4 recessions.  Tell me what the market will do in the next 6 months and that is helpful information.  If you announced to the market that the government of 2009 Obamanomics will be reinstalled for the next 4+ years with Pelosi as Speaker writing more laws into healthcare and stricter CO2 bans with Al Franken casting the 60th vote in the Senate and Obama as multi-term President 'growing jobs' at this rate for as far as the eye can see, then tell me what the markets would do.   sad

Markets are up slightly since the crash because of previous over-correcting.  Is it really more complicated than that?
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Crafty_Dog
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« Reply #244 on: February 07, 2012, 12:02:51 PM »

Very good post Doug, though in place of "overcorrecting" I would suggest the Rep recapture of the House, thus enabling blockage of the worst of Baraq has much to do with it.
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DougMacG
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« Reply #245 on: February 07, 2012, 12:33:55 PM »

"...in place of "overcorrecting" I would suggest the Rep recapture of the House, thus enabling blockage of the worst of Baraq has much to do with it."

True.  They can block more from coming but they have the power at this point to repeal almost nothing so it is a mixed bag. 

Fluctuations aside, the markets are at the value of what a slow growth economy deserves.  Missing in the index of existing, named, successful companies is the lack of new startups and domestic expansions that should have been taking place the last several years.  Lack of new competition and creative destruction may be good for entrenched players but bad for the economic outlook overall.

Even the massively increasing regulations can be good for the profit outlook of the entrenched players (GE, Goldman Sachs etc.) but thwarting of new competition and innovation and bad for US employment and our economic outlook overall.  That may explain why 'the markets' do fine under Democrat and RINO rule.
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Crafty_Dog
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« Reply #246 on: February 07, 2012, 12:36:06 PM »

This from Prudent Bear on the meaning of the markets performance makes sense to me.

http://www.prudentbear.com/index.php/creditbubblebulletinview?art_id=10627
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Crafty_Dog
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« Reply #247 on: February 14, 2012, 03:55:54 PM »



http://www.mebanefaber.com/2012/02/13/obamas-budget-proposal-will-drive-fewer-companies-to-pay-dividends/
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Crafty_Dog
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« Reply #248 on: February 21, 2012, 01:15:59 PM »



Monday Morning Outlook
________________________________________
Stocks Rising, But Still Cheap To view this article, Click Here
Brian S. Wesbury - Chief Economist
Robert Stein, CFA - Senior Economist
Date: 2/21/2012
The stock market is on a roll. The S&P 500 has had the best start to any year since 1997, while the Dow Jones Industrial Average looks set to move back above 13,000 for the first time since May 2008.
Fears about some sort of Lehman-style financial panic in Europe are waning. While problems in the Middle East persist, this is nothing new. Moreover, analysts and investors are increasingly focused on reports that show improvement in the US economy. The Fed has not been able to justify QE3.
 
Maybe the best news is that investors are looking deeper into economic data, not just trading on headlines. Last week’s retail sales and industrial production reports were both lower than the consensus expected, but each came with a convincing alibi.
 
In the case of retail sales, the Census Bureau estimated a drop in auto sales even though reports on sales by automakers themselves, were up strongly. The markets believed the automakers.
 
Industrial production came in with a big fat zero for January, but a steep drop in output at utilities and mines masked a strong 0.7% increase in manufacturing, driven largely by automakers, who, even after a recent production surge are still running well behind demand, leaving dealer inventories unusually thin.
 
Meanwhile, regional manufacturing surveys – the Empire State index and Philadelphia Fed index – both beat consensus expectations for February and reported better employment conditions. On cue, new claims for jobless benefits hit the lowest level since early 2008. In addition, housing starts climbed, more proof that the trend in home building is now consistently upward.
 
The rise in equities so far this year is not just a “sugar high.” The Fed has done nothing new, while Keynesian pump-priming is on the wane. Federal spending peaked at 25.3% of GDP back in 2009. It’s still way too high, but has fallen to 23.7%. Meanwhile, despite shenanigans like the temporary payroll tax cut, federal revenue has risen from 15.1% of GDP to 15.4% in the past year. Spending is down and taxes are up. From a Keynesian perspective, fiscal policy is contractionary.
 
Yes, the Fed is loose and is holding interest rates down artificially. But even if we assume more normal interest rates and stable profits (with implies declining margins), stocks are very cheap. Cheap enough in our view to take us to 14,500 on the Dow and 1475 on the S&P 500 by year end 2012.
 
Using a capitalized-profits approach, we divide corporate profits by the current 10-year Treasury yield of 2% and then compare the current level of this index from each quarter for the past 60 years. Hold on to your hats…this method estimates a fair-value for the Dow at 46,000. But, this extremely bullish result is largely due to artificially low interest rates. Current levels on inflation are above the 10-year Treasury yield and we believe that once the Fed normalizes its policy stance interest rates will climb to much higher levels.
 
If we use a more realistic discount rate of 5% for the 10-year Treasury, we get a fair value of 18,800 on the Dow and 1,975 for the S&P 500.
 
Another potential problem is that profits have been an unusually large share of GDP – currently almost 13%.   If profits revert to a historical norm of about 9.5% of GDP at the same time the 10-year Treasury yield is 5%, fair value would be 13,900 for the Dow and 1460 for the S&P 500. Just to be clear, that would be in a world where profits fall roughly 25% and interest rates more than double from their current levels. In other words, this doesn’t look like a dead cat bounce to us.
 
Valuations are robust and with the economic recovery re-accelerating, the bull market that started in March 2009 has much further to run.
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Crafty_Dog
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« Reply #249 on: February 27, 2012, 03:28:36 PM »

Monday Morning Outlook
________________________________________
Don?t Bet on a Correction To view this article, Click Here
Brian S. Wesbury - Chief Economist
Robert Stein, CFA - Senior Economist
Date: 2/27/2012
The US stock market has defied all but its most bullish friends. Last Friday, the S&P 500 closed at a 1365, its highest close since May 2008. It’s up 8.6% so far in 2012 and 24% from its low of 1099 on October 3, 2011. The NASDAQ Composite Index has performed even better – up 13.8% so far this year and 26% from the October lows.
None of this has deterred those involved in the three main branches of bearishness. The first branch is the long-term bears, who still believe that the 2008 financial crisis changed everything. It signaled a new normal of slower economic growth, deleveraging and reduced expectations.
These long-term bears think that problems in Greece, and Europe, are just the continuation of the 2008 financial crisis. Some even blame the US for causing Europe’s problems.
The long-term bears think economic problems have been papered over by government stimulus, Federal Reserve accommodation and the European bail-out. They fret that all of these economic mistakes cannot and will not cover up the crisis for much longer and that a relapse into crisis could occur.
 
The second branch of bearishness is a medium-term series of fears about a double-dip. These bears fret about high oil prices, inflation, deflation, weak consumer confidence, foreclosures, uncertainty about Obamacare, Dodd-Frank, the expiration of the Bush tax cuts, low interest rates, the labor force participation rate, and the list goes on and on. These bears think the economy is vulnerable to a relapse of weakness caused by just about anything.
 
The third branch is all about short-term trading. Many traders think the market has overdone it. They follow technical measures – valuation tools based on how far, how fast, how lopsided, how volatile a market has been. Many traders think the market is over-valued.
 
What is interesting is that these technically-driven traders will often argue their points by borrowing from the other branches of bearishness. For example, traders will say that the market is over-valued and high oil prices will be the catalyst to knock the economy and markets back down. They are trying to back up their technical analysis with some fundamental fear.
 
Nonetheless, with so many clamoring for a correction, should investors expect one? And, if so, should they trade it?
 
Our advice to investors is that they should ignore all this talk about a correction. Last August and September is the perfect example. The stock market was getting slammed. All three branches of the bears were standing on their hind legs, growling loudly and beating their chests. Short-sellers made tremendous profits.
 
But then the stock market turned around on a dime when no one expected it to. Even though the bears have remained bears, the market had a huge October and then continued on its merry way to new post-crisis highs. Investors who sold in August or September have paid a huge price.
 
There may be a trader who can capture all of this, but in the end, the history of America is clear. Bears make money every once in a while, but it’s the long-term bulls, who believe in the steady progress of technology and wealth creation, that make money most consistently. Don’t bet on a correction.
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