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Crafty_Dog
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« Reply #150 on: September 06, 2011, 04:07:32 PM »

Give us this day our daily reminder that there is a bullish case to be made.
=================================

The ISM non-manufacturing composite index increased to 53.3 in August To view this article, Click Here
Brian S. Wesbury - Chief Economist
Robert Stein, CFA - Senior Economist
Date: 9/6/2011


The ISM non-manufacturing composite index increased to 53.3 in August, beating the consensus expected decline to 51.0. (Levels above 50 signal expansion; levels below 50 signal contraction.)

Key sub-indexes were mixed in August, but all remain at levels indicating economic growth. The new orders index rose to 52.8 from 51.7 and the supplier deliveries index gained to 53.0 from 50.5 last month. The business activity index fell to a still strong 55.6 in August from 56.1 in July and the employment index fell to 51.6 from 52.5.
 
The prices paid index rose to an elevated 64.2 in August from 56.6 in July.
 
Implications:  Today’s report on the service sector was a pleasant surprise!  The stock market has been volatile of late and many are concerned about financial turmoil in Europe. As a result, the consensus expected the ISM non-manufacturing index to decline to 51.0 from 52.7 in July. This seemed to make sense as the index sometimes reflects the vagaries of business sentiment rather than actual levels of service sector output. Instead, the index climbed to a respectable 53.3 and all the major sub-components of the index were above 50, signaling continued economic expansion. Sentiment among managers may not be as dour as thought, a positive sign going forward. Looking deeper into the report, the business activity index, which has a stronger correlation with GDP growth than the overall index, came in at a still strong 55.6 in August.  In addition, a composite that combines the ISM manufacturing and service indexes increased in August to 53.0 from 52.5 in July. This is simply not consistent with a recession and supports the case from “high-frequency” data that the US economy continues to grow, including unemployment claims, chain store sales, railcar loadings, auto sales, and box office receipts. On the inflation front, the prices paid index rose to an elevated 64.2 in August.  We believe quantitative easing was a mistake and any more would be an even bigger mistake.  Monetary policy is extremely loose, and no further monetary action is warranted. Inflation is already creeping upward.
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DougMacG
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« Reply #151 on: September 07, 2011, 01:01:54 AM »

"Give us this day our daily reminder that there is a bullish case to be made."

 - Funny!  Bullish or bullshi*? Just kidding! I like Wesbury. This is not an economy in freefall.  This is an economy with zero-point-something percent growth.
----------------
This from Bloomberg earlier this summer, still true:

Stocks Cheapest in 26 Years as S&P 500 Falls, Profit Rises

http://www.bloomberg.com/news/2011-06-19/stocks-cheapest-in-two-decades-as-s-p-500-falls-with-earnings-climbing-18-.html

What's missing in this Price-Earnings-Growth ratio?  Projected growth. 
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Crafty_Dog
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« Reply #152 on: September 07, 2011, 04:09:48 PM »

Just got in.  Looks like a strong day in the market.  What happened?
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Crafty_Dog
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« Reply #153 on: September 08, 2011, 10:49:50 AM »

The trade deficit in goods and services shrank $6.8 billion to $44.8 billion in July To view this article, Click Here
Brian S. Wesbury - Chief Economist
Robert Stein, CFA - Senior Economist
Date: 9/8/2011


The trade deficit in goods and services shrank $6.8 billion to $44.8 billion in July. The consensus expected a much larger trade deficit of $51.0 billion.

Exports increased $6.2 billion in July, led by autos/parts, oil, and widespread gains in capital goods. Imports declined $0.5 billion, with a drop in oil imports roughly offsetting a gain in autos/parts. The decline in oil imports was mostly due to lower volume, although prices fell as well.
 
In the last year, exports are up 15.1% while imports are up 13.6%.
 
The monthly trade deficit is $3.2 billion larger than last year.  Adjusted for inflation, the trade deficit in goods is $1.3 billion smaller than last year.  This is the trade measure that is most important for calculating real GDP.
 
Implications:  Exports boomed in July, helping push down the trade deficit far more than the consensus expected. In fact, of the 74 economic groups that forecast the trade deficit, none thought it would be this low. Exports of autos and related parts led the way but exports also increased substantially for oil and capital goods outside the auto sector, such as telecomm equipment. We still have two months to go, but it looks like trade will make a positive contribution to real GDP growth in the third quarter, which is so far shaping up much better than the first half of the year. Meanwhile, revisions to prior months – for both trade and construction – suggest real GDP growth will be revised up slightly for Q2. Beneath the headlines, the total volume of international trade in and out of the US – imports plus exports – rebounded in July after a temporary setback in June. We expect the total volume of trade to continue on an upward trend in the second half of the year. In other news this morning, new claims for unemployment insurance increased 2,000 last week to 414,000. Continuing claims for regular state benefits dropped 30,000 to 3.72 million. These numbers are not at all consistent with a recession.
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DougMacG
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« Reply #154 on: September 08, 2011, 11:14:32 AM »

"In the last year, exports are up 15.1% while imports are up 13.6%."

People will have to judge for themselves if the hundred year collapse of the currency was worth it.  Even after $5 trillion in Obaman Keynesian stimuli, demand is stronger elsewhere?

I wonder how much of those increased exports came from Solyndra solar, electric cars and new Marxism-based battery technologies and how much came from the surviving free market players out doing the hard work in competitive private enterprise.
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JDN
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« Reply #155 on: September 08, 2011, 11:37:44 AM »

I too wonder if the collapse of our currency was necessary, however on the plus side, I think much of those increased exports were a result of favorable dollar exchange rates.

Everyone I know (free market; hard working competitive private enterprise individuals) who export all love the weak dollar; it promotes sales overseas. 

In contrast I know people in Japan.  The strong Yen is killing them.  For example, because of the strong Yen (among other reasons), Toyota just announced that they will not be exporting Camry made in Japan to American anymore.  In the long run, that hurts jobs in Japan...

http://www.autoobserver.com/2011/09/toyota-to-end-camry-exports-to-us-from-japan.html

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Crafty_Dog
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« Reply #156 on: September 08, 2011, 01:02:18 PM »

When he was alive, Jude Wanniski made a pretty good case against the alleged benefits of competetive devlauations, but I don't feel up to trying to replicate it.  For the moment I will note that another name for comp-devs is "beggar-thy-neighbor devaluations" will the purported gains being illusory in the long run; in great part because the other nations respond similarly with the net result in the case of the US due to its reserve currency role of world wide inflation-- exactly as we have seen in food and other commodities.
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DougMacG
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« Reply #157 on: September 08, 2011, 01:14:09 PM »

JDN,  I guess you either missed or disagree with my point but that is a relatively small improvement in exports - not much bang for the buck - considering the fiscal and monetary carnage that was involved to get there.  Further I would add that the American consumer is also harmed by losing the option of choosing to buy a Japanese made Japanese car which traditionally held a higher value in the used market than its American made counterpart.  Not only exports, but also the right to buy from elsewhere and the ability to travel reasonably overseas are economic assets.  Pretty insulting  to have foreigners place a low value on our currency.

Exporting was my business and a weak dollar is one factor in sales.  Since the US is not a low cost producer in the first place, far more important factors are things like a climate and reputation for world leading innovation and manufacturing competitiveness that appear to have come and gone.  
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Crafty_Dog
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« Reply #158 on: September 09, 2011, 08:17:03 AM »

Here's is today's episode in the sort of insidious nonsense triggered by beggar-thy-neighbor currency devaluations:

By NEIL SHAH and JESSICA MEAD
Norwegian and Canadian officials on Thursday criticized Switzerland's move this week to cap the rise of its currency, as the impact reverberated in currency markets world-wide.

The Norwegian krone soared against the euro after the Swiss National Bank said Tuesday that it would use "unlimited" spending to prevent the euro from falling below 1.20 francs. The move sent investors flooding into other currencies belonging to economies viewed as fiscally sound, with Norway among the top destinations.

Norwegian central bank Gov. Oystein Olsen warned investors that a strengthening krone would stifle Norway's economy by hurting exports. A swift policy response—likely lower interest rates—is in the offing if the krone keeps rising, Mr. Olsen said.

The Federation of Norwegian Industries said Thursday that the krone's strength was putting pressure on Norway's companies. "It's a serious issue when the Norwegian krone is so strong," Knut Sunde, an executive of the federation said. "We hope that the Swiss effect will fade, but we are not sure," Mr. Sunde said.

Canadian Finance Minister Jim Flaherty on Thursday said he is "concerned" about Switzerland's audacious move into foreign-exchange markets and worried it could ignite another round of so-called currency wars. Brazil's Finance Minister Guido Mantega last year began referring to the prospect of "currency wars" among countries seeking to protect their economic growth by keeping the value of their currencies down.

Mr. Flaherty said he planned to discuss the issues at this week's meeting of Group of Seven finance ministers in France.

For months, funds have flowed into Switzerland and other supposedly safe countries as investors have sought havens from Europe's financial crisis and the U.S.'s economic woes. In early August, the euro fell to near-parity with the Swiss franc, from 1.50 francs at the start of 2010.

Such flows are the latest example of floods of capital leaving the world's sluggish economies—especially the U.S. and the euro zone—and entering faster-growing economies such as Canada and Brazil.

What Norway, Sweden, Japan and other refuges have in common is big current-account surpluses, which means they rely less on international investors for financing and seem safer to investors.

Japanese officials this week quashed speculation that Japan would follow Switzerland in curbing the yen with a ceiling. However, Norway's pushback is making investors wonder again where to run when markets turn turbulent.

"Investors are saying, if you're taking away one of our safe havens, where's the next one?" said Thanos Papasavvas, an analyst at Investec Asset Management in London, which manages around $100 billion in funds. The Norwegian krone "doesn't have the liquidity and the history of the Swiss franc," he added.

Axel Merk, chief investment officer at Merk Investments LLC, a Palo Alto-Calif., currency-management fund, says investors should stop looking for a safe place to hide.

It is also possible traders' preferences for Switzerland and Japan won't change much, especially if Switzerland's intervention effort eventually fails, as many expect. The euro traded at 1.2149 francs late Thursday in New York—close enough to the ceiling to indicate there is still investor demand, traders said.

—Katarina Gustafsson and Paul Vieira contributed to this article.
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Crafty_Dog
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« Reply #159 on: September 09, 2011, 02:55:01 PM »

Second post of the day:

Horrendous day.  Looks like we are finishing below 11,000 again.
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ccp
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« Reply #160 on: September 09, 2011, 03:19:26 PM »

See you at Dw 6K or thereabouts.  I'm with Soros.  Though, no thanks to him.

Of course Brian W will note the surge in condom retail sales as a sign things are getting better. rolleyes
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Crafty_Dog
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« Reply #161 on: September 09, 2011, 05:16:45 PM »

Refresh my memory please; what is Soros saying?
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ccp
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« Reply #162 on: September 10, 2011, 01:10:44 PM »

Crafty,
Please see my reply #111 from Sept 7 9:51 AM on Cognitive dissonance of the left thread titled Soros.  Despite multiple attempts for some reason I cannot seem to copy and past here.
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Crafty_Dog
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« Reply #163 on: September 10, 2011, 03:57:02 PM »

Thank you.
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G M
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« Reply #164 on: September 13, 2011, 04:30:31 PM »


http://www.telegraph.co.uk/finance/financialcrisis/8758400/European-banks-rocked-by-Greek-default-fears.html

European banks rocked by Greek default fears

Fears of a Greek default rocked European banking shares and led to warnings that US stock markets could fall more than 20pc as contagion spreads globally.
 

By Jonathan Sibun

10:30PM BST 12 Sep 2011


France's biggest lenders saw their shares fall more than 10pc amid fears their credit ratings will be downgraded over exposure to Greek debt, while global stock markets dropped sharply.
 
The FTSE saw £22bn knocked off its value, closing down 85.03 at 5129.62. The Cac-40 in France ended 4pc lower and the Dax in Frankfurt was down 2.3pc after touching its lowest point since July 2009.
 
In the US, the Dow Jones closed up 0.6pc at 11061.12. It was trading down 0.8pcin the afternoon, with analysts at Bank of America souring the mood further by warning that the S&P 500 – which was 1pc lower at 1145.57 – could fall as far at 910. The warning came as Bank of America announced 30,000 job cuts as it looks to adjust to tough trading conditions.
 
Market concerns escalated after Germany hardened its tone over bail-out loans for Greece, with Chancellor Angela Merkel backing remarks from her economy minister suggesting that an "orderly default" could no longer be ruled out.
 
German officials reiterated that Greece must meet bail-out terms to secure the next tranche of loans while the embattled country's deputy finance minister suggested cash could run low from next month. "We have definite manoeuvering space within October," said Philippos Sachinidis when asked how long the government would be able to pay wages and pensions.
 
The euro dropped to a 10-year low versus the yen and a seven-month low against the dollar as currency traders shifted their holdings to safe havens. The shift to the yen keeps alive the risk that Japanese authorities will follow the Swiss in intervening to weaken their currency.
 
"With the Swiss National Bank drawing a line in the sand, investors looking to exit the eurozone troubles are seeking the safety of the yen," said Jane Foley, senior currency strategist at Rabobank. The pound fell to a two-month low versus the dollar, with the yield of 10-year gilts hitting record lows of 2.198pc on safe-haven buying.
 
Markets braced themselves for credit rating downgrades for France's top banks, with speculation that Moody's will lower the ratings on BNP Paribas, Credit Agricole and Societe Generale. Credit Agricole shares fell 10.6pc, Societe Generale slid 10.5pc and BNP was off 12.4pc.
 
Societe Generale claimed its exposure to periphery eurozone debt was €4.3bn (£3.7bn), a level it labelled "declining and manageable". It said it would nonetheless speed up asset disposals and cut costs to free up capital.
 
BNP Paribas issued a statement in which it pointed out that Moody's had put French banks on review for downgrade as far back as June and that no rating decision had been "communicated". The bank said it had €3.5bn of exposure to Greek sovereign debt.
 
According to a report by the Bank for International Settlements, released in June, French banks top the list of creditors to Greek debt, with $56.7bn (£35.8bn) of exposure.
 
Bond yields for Europe's periphery nations were also hit hard. Italy sold €7.5bn of one-year debt at an average yield of 4.15pc, the highest level since September 2008.
 
Meanwhile, credit default swaps (CDS) on Greek debt – which measure the likelihood of default – soared to a record 3,650 basis points and Italian CDS broke through the 500 barrier for the first time.
 
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Crafty_Dog
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« Reply #165 on: September 20, 2011, 11:01:24 AM »


Monday Morning Outlook

--------------------------------------------------------------------------------
No Recession, No Panic To view this article, Click Here
Brian S. Wesbury - Chief Economist
Robert Stein, CFA - Senior Economist
Date: 9/19/2011


Online markets (at Intrade) put the odds of a recession in the next year at 40%. The consensus of economists (in a Wall Street Journal poll) has the odds of recession at one in three. These elevated fears are hitting consumer confidence, creating political pressures and causing volatility in financial markets.

We think the actual odds of a recession are much lower than the consensus thinks. We place them at 20%, barely above the 15% that history tells us exists in any year.
 
Yes, real GDP growth slowed to less than 1% in the first half of 2011, versus a 2.4% average growth rate in the past two years. But, recent data on consumption and production (as Japan recovered) suggests US growth reaccelerated to the 2.5% - 3.0% range in the third quarter.
 
Real consumer spending – goods and services combined – looks like it’s climbing at a 1.5% to 2% annual rate in Q3. Business investment – both equipment & software and commercial construction – is up in recent months. Home building appears flat and government could be a slight drag on growth, but any weakness here should be more than offset by net exports and inventories. In other words, despite fears, there is no evidence that GDP is turning in a negative direction.
 
This is not a surprise. The US economy does not double-dip or slip into recession when monetary policy is loose. Our nominal GDP rule for the Fed suggests a neutral federal funds rate should be 3.0%. With the Fed now holding rates at zero, it is running an accommodative policy. With the yield curve sloping upward, it seems clear that liquidity is not a problem for the economy.
 
Meanwhile, income tax rates remain relatively low and are not going to rise until 2013 at the very earliest. We believe the newest proposal from the White House to raise tax rates is dead on arrival.
 
So, what is causing the elevated odds of recession? It appears that many worry about another Lehman-style panic. They fret that we can scare ourselves into a recession. They fear that the US will see a sudden plunge in the velocity of money, possible deflation, and frozen financial markets.   
 
The catalyst for all this is supposedly Greece and its very real potential of default on its government debt. But as we pointed out two months ago, the five largest US banks have only $54 billion in exposure to the debts of Greece, Portugal, Italy, Ireland, and Spain, combined, versus more than $700 billion in bank capital. In the early 1980s, when Latin and South American countries were defaulting, the eight largest US banks had exposure to those countries equal to 263% of capital.
 
In other words, direct exposure is not a problem. So investors and some economists are worried about “counterparty risk,” with our banks coming under pressure if foreign banks with greater direct exposure become undercapitalized.
 
But here again, we think the fears are overblown. Does anyone seriously think Germany, France and the rest of the leading countries in Europe would not recapitalize their banks if they were on the brink of failure? Moreover, changes to mark-to-market accounting mean that illiquid markets can no longer spread mayhem like an out of control wildfire. We aren’t saying that losses won’t happen, but we don’t see how this spreads like Lehman. And in the meantime, our banks can borrow from the Federal Reserve’s discount window at nearly 0%.
 
We are watching high frequency data – weekly data – on railcar loadings, steel production, hotel occupancy, retail sales, box office receipts, and initial unemployment claims. Through the second week of September there is no evidence that a panic is underway. In fact, the economy continues to grow.
 
As a result, we do not agree with the elevated odds of a recession that so many seem to believe. We think there is opportunity in financial markets. Equity values and commodity prices (excluding precious metals) have been knocked down, while Treasury bond prices have been bid up. These market moves will reverse when the data show that recession fears have been unwarranted.
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DougMacG
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« Reply #166 on: September 20, 2011, 11:50:01 AM »

It depends on what the meaning of is is.

"climbing at a 1.5% to 2% annual rate"

Recession is not dictionary defined but agreed widely among economists to be the term for when real growth goes negative for 2 or more quarters.  By that definition, you don't know if you are already in one for a delay of more than 6 months, more like a year with revisions to numbers always coming out.  Also widely agreed among economists, breakeven growth in our economy is no less than 3.0 - 3.1%.  At zero to 2% growth going forward, if true, he is technically correct, but we are moving backwards and experiencing what ordinary people with their eyes and ears open would call an extended recession or worse.
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Crafty_Dog
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« Reply #167 on: September 22, 2011, 02:46:41 PM »

Down 490 with twenty minutes to go  shocked
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Crafty_Dog
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« Reply #168 on: October 03, 2011, 03:27:16 PM »



The ISM manufacturing index rose to 51.6 in September To view this article, Click Here
Brian S. Wesbury - Chief Economist
Robert Stein, CFA - Senior Economist
Date: 10/3/2011
The ISM manufacturing index rose to 51.6 in September from 50.6 in August, easily beating the consensus expected decline to 50.5. (Levels higher than 50 signal expansion; levels below 50 signal contraction.)
The major measures of activity were mostly higher in September. The production index rose to 51.2 from 48.6 and the employment index increased to 53.8 from 51.8.  The new orders index was unchanged at 49.6 and the supplier deliveries index rose to 51.4 from 50.6.
 
The prices paid index rose to 56.0 in September from 55.5 in August.
 
Implications: Today’s reports on manufacturing and construction show absolutely no sign of recession. Not only did the ISM manufacturing index beat consensus expectations, but it climbed to its highest level in three months.  The September index reading of 51.6 shows that growth in the manufacturing sector is accelerating, not declining.  An index level of 51.6 correlates with 3.2% real GDP growth according to the Institute for Supply Management, which publishes the report.  Given recent market volatility and fears of potential defaults in Europe, many regional manufacturing surveys have been beaten down.  But like today’s ISM report (and Friday’s Chicago PMI), we expect these manufacturing surveys to bounce back, as they often reflect sentiment rather than real business activity during times of uncertainty.  In other news this morning, construction spending increased 1.4% in August, easily beating consensus expectations of a 0.2% decline.  Including revisions to prior months, construction spending was up 1.2%.  The largest gain in August came from state and local construction, particularly high schools and bridges.  Home building rose due to both single-family construction and home improvements.  A gain in commercial construction was led by power plants.
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ccp
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« Reply #169 on: October 03, 2011, 04:16:01 PM »

Wesbury did the same thing during the tech crash of 2000.  Talk up the economis numbers all the while tech stocks lost 90% of their value.   His synopses are concise with all sorts of data and stats and numbers.  With regards to the stock market these numbers are obviously worthless.   I don't know what to do with them or what purpose or good they serve.

Get twenty economists in a room and they will give different ideas about where the economy is going.

His numbers don't mean anything for stock investors from where I sit. 

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DougMacG
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« Reply #170 on: October 03, 2011, 10:18:43 PM »

CCP,  My advice is just read Wesbury for the facts.  Statements like highest in 3 months remind me that one of my salesmen told the owner of our company that we doubled our sales last year in our division and won a national award.  He was surprised to hear the reaction that two times sh*t is still sh*t.  We were not their largest division.

Wesbury missed the crash of 2000, so did every other prognosticator except the ones who missed the entire runup to it.  Greenspan for one called it irrational exuberance in December 1996 - the tech crash began in March 2000.  Qualcomm for one went up 2400% in 1999.  Anyone following the doomsayers missed that, and remember fiber optic supplier JDSU IIRC had a billion dollars in the bank and all fiber optic companies had triple digit industry growth forecasts at the time the market came  down.  I had my largest fiber optic contract during that time - in the re-building of Kuwait.

"Get twenty economists in a room and they will give different ideas about where the economy is going."

Yes, or worse they will all give you a forecast within a couple of percent of consensus and they will all be right or all be wrong.  What I'm saying is that forecasting is done by looking out the rear view mirror.  No one has a window into the future. Take the facts from Wesbury and discount the prognostications.  Wesbury is only alleging something like 1% growth.  Breakeven growth is something like 3.1% growth.  If this economy is seriously coming out of its tailspin it would be growing at 4+% sustained growth.  It isn't.  Wesbury is only saying that the growth rate is not negative by accepted measurement standards. IMO, when counting the trillions of injected money diluting our currency and lowering our future standard of living, in reality we are moving backwards right now - at a frightening pace.  
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Crafty_Dog
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« Reply #171 on: October 05, 2011, 08:44:32 AM »

The situation in Europe is having great effect on the markets here.  I suggest taking a look at my two most recent posts in the Europe thread.
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G M
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« Reply #172 on: October 05, 2011, 08:54:46 AM »

The situation in Europe is having great effect on the markets here.  I suggest taking a look at my two most recent posts in the Europe thread.

Just wait until Grecian state you reside in crashes. We ain't seen nothin' yet.
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Crafty_Dog
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« Reply #173 on: October 05, 2011, 08:57:24 AM »

My guess is that there will be tremendous capital flight to here-- which may have some short term positive effects  , , , or not.  I know nothing!  cheesy
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G M
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« Reply #174 on: October 05, 2011, 09:02:31 AM »

My guess is that there will be tremendous capital flight to here-- which may have some short term positive effects  , , , or not.  I know nothing!  cheesy

Sure, we may be the cleanest shirt in the hamper, although we might better be described as the healthiest guy at the hospice.
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maija
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« Reply #175 on: October 07, 2011, 11:52:22 AM »

Non-farm payrolls were up 103,000 in September To view this article, Click Here

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

Date: 10/7/2011






Non-farm payrolls were up 103,000 in September and up 202,000 including revisions to
July/August. The consensus expected a gain of 60,000.
Private sector payrolls increased 137,000 in September.  Revisions to July/August
added 42,000, bringing the net gain to 179,000.  September gains were led by
professional & business services (+48,000), health care (+44,000), telecomm
(+38,000, due to the end of the Verizon strike), and non-residential construction
(+30,000).  The biggest decline was manufacturing (-13,000).
 
The unemployment rate remained unchanged at 9.1%.
 
Average weekly earnings – cash earnings, excluding benefits – increased
0.5% in September and are up 2.1% versus a year ago.
 
Implications:  The employment report for September shows, without a shadow of a
doubt, that the US economy is not in recession. Including upward revisions for July
and August, nonfarm payrolls increased 202,000. That easily beat consensus
expectations of a 60,000 gain and is a solid gain even if we exclude the 45,000
workers who ended a strike with Verizon. In addition, the number of weekly hours per
worker increased to 34.3 from 34.2 in August, which is the equivalent of 320,000
jobs. But the good news does not stop there. Civilian employment, an alternative
measure of jobs that factors in small business start-ups, increased 398,000. This
was enough to keep the unemployment rate at 9.1% despite a 423,000 gain in the size
of the labor force, the largest increase in more than a year. Very quietly, without
any fanfare, private sector payrolls have grown by 1.8 million in the past year,
while the workweek has lengthened and hourly cash wages are up 1.9%. A 9.1%
unemployment rate means the labor market is still far from operating at its full
potential, but it is moving in the right direction as are other data. September
chain store sales were up 5.5% versus a year ago, according to the International
Council of Shopping Centers. This includes luxury department store sales up 10.4%.
Meanwhile, core railcar loadings are up 5.7% versus a year ago, according to data
from the Association of American Railroads. Initial claims for unemployment
insurance increased 6,000 last week to 401,000. But continuing claims for regular
state benefits declined 52,000 to 3.70 million. Investors have been grossly misled
about the odds of a recession.

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It will seem difficult at first, but everything is difficult at first.
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Crafty_Dog
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« Reply #176 on: October 13, 2011, 11:41:05 AM »

By Matt Phillips

Credit SuisseLet’s get real.

Here’s an interesting chart we recently came across from Credit Suisse’s fixed income research team. We’ve all gotten somewhat used to seeing 10-year Treasury yields hovering around 2%. (They’re at 2.14%, as we write.)

But it’s important to keep in mind how just how remarkably low rates really are, especially “real rates,” which are essentially the yields on U.S. Treasurys minus some approximation of expected inflation. You can see from Credit Suisse’s chart that we’re at some of the lowest levels of real rates ever seen in the U.S.

This is important for investors to keep an eye on. Some, such as Pimco’s Bill Gross, have argued that real rates essentially show you that any bet on bonds is likely to be a losing one over the long term, as inflation eats into the fixed return of bonds.

Gross has argued that U.S. bond investors are “financially repressed” because real interest rates are negative relative to inflation. He told bond investors at a conference back in June, “You need to find something else that’s attractive.”

The question, of course, is what? And when? After all, there was no better short-term bet in the financial markets during the third quarter than loading up on long-term U.S. Treasurys. The “long” component — 10 year and over — of the Barclays Capital Treasury Index returned roughly 25% during the three months that ended in September. That was the period that saw the nominal 10-year yield fall well below 2% to levels not seen since the 1940s.

For borrowers, real interest rates this low are a great deal. In theory, they should help encourage companies and consumers to borrow. But in practice companies have tons of cash, thanks. And people who are scared about losing their job, unemployed or underwater on the mortgage aren’t interested — or able — to take advantage of these super low real rates. For what it’s worth, low real rates also helps the heavily indebted U.S. government too. But for yield-starved investors, charts like this underscore just what a tough environment they are facing.

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« Reply #177 on: October 14, 2011, 12:10:00 PM »

Data Watch
________________________________________
Retail sales surged 1.1% in September To view this article, Click Here
Brian S. Wesbury - Chief Economist
Robert Stein, CFA - Senior Economist
Date: 10/14/2011
Retail sales surged 1.1% in September (up 1.5% including revisions to July/August), easily beating the consensus expected increase of 0.7%. Retail sales are up 7.9% versus a year ago.
Sales excluding autos increased 0.6% in September (1.1% including revisions to July/August), also well above the consensus expected increase of 0.3%. Retail sales ex-autos are up 7.8% in the past year.
 
The increase in retail sales in September was led by autos, gas, and bars/restaurants. Most other major categories of sales increased.
 
Sales excluding autos, building materials, and gas were up 0.6% in September (1.1% including revisions for July/August). These sales are up 6.0% versus last year and up at a 4.8% annual rate in Q3 versus the Q2 average. This calculation is important for estimating GDP.
 
Implications:  Today’s report on retail sales killed any remaining chance that the US is in recession. The data speak for themselves. Overall retail sales were up 1.1% in September and up at a 7.6% annual rate in the past three months. Autos led the gain in September, as supply-chain disruptions coming from Japan continue to ease. But even excluding autos, sales were up 0.6% and up at a 6.2% annual rate in the past three months. “Core” sales, which exclude autos, building materials, and gas, were also up 0.6% in September and are up at a 5.6% annual rate in the past three months. Not only do these figures show no recession, but real GDP growth in Q3 was probably the strongest in more than a year; we’re estimating an annualized 3.5% real GDP growth rate in Q3. In turn, this means we do not need to run up the federal debt further through efforts to “stimulate” the economy for the short run. Nor do we need another round of quantitative easing from the Federal Reserve. In other news this morning, prior easing by the Fed continues to show up in prices for internationally traded goods. Import prices increased 0.3% in September and are up 13.4% versus a year ago. This is not just oil: excluding petroleum, import prices were up 0.2% in September and are up 5.5% from a year ago. Export prices were up 0.4% in September and are up 9.5% from a year ago. Ex-agriculture, export prices were up 0.3% in September and 8% from a year ago. In still other news, business inventories increased 0.5% in August. The inventory-to-sales ratio remains very low, particularly at retailers.
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« Reply #178 on: October 14, 2011, 01:58:21 PM »

Retail sales surged 1.1% in September !!!!!!!!!

Oh thank goodness! Our long national nightmare is over!





Let's just focus on that isolated data point and ignore the totality of the circumstances.


 rolleyes
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« Reply #179 on: October 14, 2011, 02:30:31 PM »

It certainly seems we hit a nearterm bottom which of course can change tomorrow with Soros' latest rumor.

I don't recall a weirder situation wherein some companies and investors are making money hand over fist yet nearly everyone I know personally is financially worse off.

The recent drop was I think due to the concern Europe banking would collapse.  Now the rumors are they are working on some sort of "deal" to kick the can down the road everything is back to hunky dorry?!

Perhaps BLoomberg can get Brian to go down to the Wall Street protesters and convince them all not to worry everything is really great.

What I screwed up country this is becoming.  More then once I have senior citizen patients coming in and telling me they are glad they don't have much time left.  They cannot stand what is going on.

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« Reply #180 on: October 14, 2011, 03:11:48 PM »

Giant pools of money, with no place sound and safe to invest, skittishly play momentum games.
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« Reply #181 on: October 17, 2011, 02:48:37 PM »



Monday Morning Outlook
________________________________________
Solid 3.5% Growth in Q3 To view this article, Click Here
Brian S. Wesbury - Chief Economist
Robert Stein, CFA - Senior Economist
Date: 10/17/2011
When real GDP growth barely budged in Q1 (0.4%) and sputtered in Q2 (1.3%), conventional wisdom became convinced that a recession was on its way. Many argued that unless the US “stimulated the economy” with more spending, temporary Keynesian tax cuts, or another round of quantitative easing, it was in for another recession.
We had a very different view. We suspected weakness in Q1 was overstated – after all, real GDI (gross domestic income) showed 2.4% growth in Q1. GDI and GDP are supposed to be equal. When they differ substantially, it is the income side that typically shows more accuracy. In other words, we think the weakness in Q1 will eventually get revised away.
 
That probably won’t happen with Q2, when the economy grew at only a 1.3% annual rate. But we have always believed that weakness in Q2 was driven by disasters in Japan and the unusually violent tornado season in the South.
 
With the Fed accommodative, and productivity strong, we never believed the pessimistic narrative. Conventional wisdom has been wrong. With most monthly data in, it looks like real GDP grew at a 3.5% annualized growth rate in the third quarter of 2011.
 
Consumption:  Auto sales are up at a 11.7% annual rate in Q3 while retail sales ex-autos are up at a 4.5% rate. Services, a major part of consumption, are not up as much, but it looks like real personal consumption – goods and services combined – probably climbed at a 2.1% annual rate in Q3, contributing 1.5 points to the real GDP growth rate. (2.1 times the consumption share of GDP, which is 71%, equals 1.5.)
 
Business Investment:  Business investment in equipment and software appears to have grown at an annualized 14% growth rate in Q3. Meanwhile, commercial construction looks to be up at a 19% rate. Combined, these two components of non-residential investment grew at about a 15% rate, which should add about 1.5 points to the real GDP growth rate. (15 times the business investment share of GDP, which is 10%, equals 1.5.)
 
Home Building:  Residential construction appears to have grown at about a 4% annual rate in Q3. This translates into 0.1 point for the real GDP growth rate. (4 times the home building share of GDP, which is 2%, equals 0.1.)
 
Government:  Real government purchases expanded at about a 2.5% rate in Q3, which should boost the real GDP growth rate by about 0.5 percentage points. (2.5 times the government purchase share of GDP, which is 20%, equals 0.5).
 
Trade:  We only have data through August, but the trade deficit is down so far in Q3 and we think this should add 0.3 points on the growth of real GDP.
 
Inventories:  As always, inventories are a wild card. At this point, we only have data on inventories through August and inflation-adjusted numbers are only available through July. To be cautious with our real GDP estimate, we assume inventory accumulation slowed slightly from the pace in Q2, resulting in a drag of 0.4 points on the real GDP growth rate.
 
Add-em-up, and you get 3.5% real GDP growth for Q3, with an upside risk. Not only that, but we expect more solid growth in Q4 and beyond. Anyone who has forecast an imminent recession has some explaining to do.
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« Reply #182 on: October 17, 2011, 02:54:33 PM »

We shall see. Hell, I'd love to be wrong here.
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« Reply #183 on: October 17, 2011, 03:01:30 PM »

Me too!  Though if he proves right I want some credit for continuing to post him!  cheesy
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« Reply #184 on: October 17, 2011, 03:07:22 PM »

Me too!  Though if he proves right I want some credit for continuing to post him!  cheesy

If I'm right, I want an extra ration in the soup line.
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« Reply #185 on: October 17, 2011, 04:22:16 PM »

Odd that economists use such powerful words as "real growth" to describe what of course is not real growth.  It is just the formula they all accept for adjusting 'nominal growth'.  Around here most people know that we have flooded multi-trillions of declining-value dollars into yesterdays numbers.  The resulting  inflation has already occurred, does not show up yet, but is certain to materialize in tomorrow's prices levels. 

Real growth for this year by honest definition is something we will never know because we chose instead to conduct such an artificial, contrived and manipulated experiment. MHO
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« Reply #186 on: October 17, 2011, 04:31:03 PM »

" by honest definition"

Like the honest stuff coming out of Europe.  Such as we have plenty of resources, lots of options, restructuring is taking place, move the bad debt into some isolated corner of the balance sheet as though it no longer exists,  the US is behind the European Union,  and on and on.

The attempts at maintaining confidence at the expense of honesty - well...

Think of the can in the road that has been trounced dozens of times and is so flat it looks like a pancake.

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« Reply #187 on: October 18, 2011, 11:17:19 AM »



Amid the wild swings of the past few weeks, cracks are appearing deep in the workings of the stock market that some professional investors say are making the market treacherous to trade.

Hedge-fund traders and mutual-fund managers say it has become increasingly tough to trade an individual stock without causing a big swing in its price. That's led many large investors to step back from the market instead of risking being stung by the trading difficulties.

Mind the Gap
The spread, or percentage difference between the price investors are willing to buy and sell a stock, grows as markets become more volatile.

Enlarge Image

Close..The big moves in stock indexes have caught attention. Just on Monday, the Dow Jones Industrial Average dropped 247.49 points, or 2.13%, to 11397.00. But market participants say trading conditions are much worse when they drill down to individual stocks, highlighting skittishness of investors of all stripes.

Even among some of Wall Street's most actively traded stocks, such as Apple Inc. or Netflix Inc., traders say it has been more challenging than usual to buy or sell.

The problem is a lack of liquidity—a term that refers to the ease of getting a trade done at an acceptable price.

Markets depend on there being many offers to buy and sell a particular stock, across a range of prices. But as investors have gotten nervous, many of those offers have dried up. That is causing wider-than-normal gaps between prices showing where stocks can be bought and where they can be sold—the difference between the "bid" price and the "ask" price.

Many big investors, such as hedge funds and mutual funds, which at times can act as shock absorbers for trading because they tend to trade large chunks of stocks, have been on the sidelines. Some hedge funds, for example, say they're not trading as much until they know how much money their clients will withdraw at the end of October, a deadline some clients have to inform funds of intentions to redeem money at year-end.

Enlarge Image

CloseBloomberg News
 
Traders at the New York Stock Exchange.
.Wall Street firms and banks, meanwhile, have significantly less appetite for taking on the risk of holding whatever it is that clients are buying or selling.

Some analysts and investors say poor liquidity and market turbulence, which has seen the Dow rise or fall by 1% or more in 14 of the past 19 trading days, will continue as long as government officials squabble on both sides of the pond, banks and others look to reduce trading risk and the global economy stays on a shaky footing.

In some ways, investors would be expected to leave the market in uncertain times, but traders say the exodus of late is striking and underscores the nervousness of market participants, and the lack of willingness of many to step in to trade.

"Liquidity will continue to be a big problem," says Patrick McMahon, co-founder of hedge fund MKP Capital. Mr. McMahon says he has noted the sharp decline in liquidity, or market depth, in recent months. And, with global banks reducing their risk exposure, they are less likely to step in and take either side of trades, Mr. McMahon says.

He says fewer investors are willing to buy or sell stocks, creating an effective vacuum.

"That's why you get 5% moves in a matter of minutes," he says. "When there are sellers, there are few buyers, creating an air pocket down."

And it's not just stock markets. Liquidity has also been sucked out of credit markets, too, traders say, from corporate bonds to mortgage-backed securities. Global banks have been reducing their exposure to riskier bonds and are less likely to step in and take either side of bond trades, Mr. McMahon says. In some cases this is spilling into the stock market, as debt investors scramble to trade there.

"Any reasonable sized selling is driving individual bond prices down quite a bit," says Jeffrey Kronthal, co-founder of hedge fund KLS Diversified in New York, who says bid-offer spreads in areas such as some residential and commercial mortgage-backed securities have more than doubled in the past month or so. "Really, no dealers are putting up capital. A lot of stuff just doesn't trade."

In the stock market, one well-known manager of a large hedge fund said he recently tried to buy $250 million of shares of Tempur-Pedic International Inc., a mattress maker with a nearly $4 billion market value. The manager, who declined to speak on the record, says he gave up after his initial order of $20 million of shares pushed prices of the stock up too far.

"You try to get something done at one level, and if you take your eye off the screen, it can move to the next level," says David Schiff, deputy head of equity trading at JPMorgan Asset Management. "There's not a lot of depth at any price point."'

To some degree there's a chicken and egg phenomenon at work. As poor liquidity begets more volatility, big investors and brokerage firms become even more wary of being active in the market. And individual investors, many of whom are out of market already, are less likely to return. Volumes, while erratic, have largely been lower in recent weeks. Some 3.7 billion shares changed hands in New York Stock Exchange composite trading on Monday, compared with this year's average of 4.4 billion.

Some traders say this kind of dynamic is what should be expected for such highly uncertain times.

"Yeah, of course it's harder to trade," the head of one mutual fund trading desk says. "You can't do things you used to be able to do four months ago, but it's a different market."

The best way to judge liquidity, some traders say, is by looking at the bid-ask spreads.

For the stocks in the Standard & Poor's 500 stock-index, spreads have been at their widest since late 2009, when markets were finally calming down from the worst of the financial crisis. The median spread on S&P 500 stocks on some days topped 0.05% of their share price on multiple days, up from an average of just over 0.03% for the first seven months of 2011, according to Credit Suisse's AES electronic trading group.

The lack of liquidity can also be seen in the spreads among actively traded stocks. On Apple, for example, the average spread has on many days been double what it was back in June, according to data compiled by T3 Trading Group. On shares of Amazon, the spread has gone from 0.03% of the share price to a spread of over 0.05% in recent weeks. The spread on Netflix shares widened to over 0.07% in September and early October from 0.05% in late June and July.

One surprising element of the fall-off in liquidity is that one key set of players actually appears to be more active in recent months: so-called high-frequency traders. These hedge funds use computer models to trade at a rapid pace. In recent years they have replaced brokerage firms as the go-betweens when investors trade stocks.

But with so many other players stepping back from the market, the liquidity that high frequency traders are providing isn't creating much of a cushion, traders say. In fact, some say they may be making matters worse.

Conditions have improved a bit over the past two weeks, says Scott Redler, chief strategic officer at T3 Trading, but overall, trading in stock such as these have "felt thinner and it's hard to get good executions. As soon as you get filled, it feels like the prices are against you."

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« Reply #188 on: October 24, 2011, 05:31:44 PM »

Pasting this from the China thread here to place it in the context of the Investing state of mind of this thread.
=======================

http://www.forbes.com/sites/gordonchang/2011/10/16/chinas-economy-the-correction-history-will-remember/2/

The stocks of Chinese banks fell this year and were trading at price-to-book ratios that assumed these institutions would suffer substantial losses on their loan portfolios.  Beijing’s sovereign wealth fund had to launch a rescue last week by announcing open-market share purchases of Chinese banks.

The move triggered a short rally, but it did not solve the fundamental problem: Credit Suisse last week said that bad debt could be as much as 60% of bank equity.  The 60% figure assumes that bad loans constitute only 12% of loan portfolios, but as in the bank crisis at the end of the 1990s, questionable assets are probably multiples of this figure.

The problem for Beijing is that this time, unlike the end of 2008, it has little flexibility to dump money in the economy to restart growth and save borrowers.  It already did that and has, in addition to inflation, created historically high property prices, vacant apartment buildings, and debt-swollen local government financing vehicles.  Yes, increasing liquidity would aid borrowers in the short-term, but that tactic would only make the debt bomb bigger.

Beijing could take foreign currency out of its reserves to recapitalize its largest banks—as it did in early 2004—but that just pushes the People’s Bank of China, the country’s central bank, deeper into insolvency.  In any event, recapitalization would buy only a little time.

The Chinese central government has, in past crises, sustained the momentum of the economy by creating circular flows of cash, using money from one state institution to bail out other ones.  Yet all artificial situations eventually end.  State-dominated economies have more ability to postpone the inevitable, but the corrections they suffer are often worse as a result of continual deferrals.

Like 2008, the Chinese economy is now emitting strong signals it wants to correct.  Last time, Beijing, flush with cash, chose to override the market and postpone the reckoning with its “tidal-wave” spending.  Now, Chinese technocrats are almost out of options.

As a result, the downturn in China this time is probably the one history remembers.
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« Reply #189 on: October 24, 2011, 05:39:28 PM »

As far as protecting your money, as I've said "guns, ammo and canned food". Seriously, tangible assets are the way to go. Owning a house free and clear is a good option.

Making money? Well, if the 500,000 real estate purchase=residency visa law goes through, I've got a ready made business plan. Much like the Hong Kongers that bought up Vancouver when HK got betrayed by the UK, Many wealthy mainlanders want US property and visas as a escape plan should China experience "troubles" in the future.
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« Reply #190 on: October 24, 2011, 05:57:54 PM »

As far as protecting your money, as I've said "guns, ammo and canned food". Seriously, tangible assets are the way to go. Owning a house free and clear is a good option.

Making money? Well, if the 500,000 real estate purchase=residency visa law goes through, I've got a ready made business plan. Much like the Hong Kongers that bought up Vancouver when HK got betrayed by the UK, Many wealthy mainlanders want US property and visas as a escape plan should China experience "troubles" in the future.

http://online.wsj.com/article/SB10001424052970203752604576641421449460968.html?mod=googlenews_wsj

HOMES OCTOBER 20, 2011.

Foreigners' Sweetener: Buy House, Get a Visa .

By NICK TIMIRAOS

The reeling housing market has come to this: To shore it up, two Senators are preparing to introduce a bipartisan bill Thursday that would give residence visas to foreigners who spend at least $500,000 to buy houses in the U.S.

The provision is part of a larger package of immigration measures, co-authored by Sens. Charles Schumer (D., N.Y.) and Mike Lee (R., Utah), designed to spur more foreign investment in the U.S.

Supporters of the bill, co-authored by Sen. Charles Schumer, say it would help make up for American buyers who are holding back.
.
Foreigners have accounted for a growing share of home purchases in South Florida, Southern California, Arizona and other hard-hit markets. Chinese and Canadian buyers, among others, are taking advantage not only of big declines in U.S. home prices and reduced competition from Americans but also of favorable foreign exchange rates.


To fuel this demand, the proposed measure would offer visas to any foreigner making a cash investment of at least $500,000 on residential real-estate—a single-family house, condo or townhouse. Applicants can spend the entire amount on one house or spend as little as $250,000 on a residence and invest the rest in other residential real estate, which can be rented out.

The measure would complement existing visa programs that allow foreigners to enter the U.S. if they invest in new businesses that create jobs. Backers believe the initiative would help soak up an excess supply of inventory when many would-be American home buyers are holding back because they're concerned about their jobs or because they would have to take a big loss to sell their current house.

"This is a way to create more demand without costing the federal government a nickel," Sen. Schumer said in an interview.

International buyers accounted for around $82 billion in U.S. residential real-estate sales for the year ending in March, up from $66 billion during the previous year period, according to data from the National Association of Realtors. Foreign buyers accounted for at least 5.5% of all home sales in Miami and 4.3% of Phoenix home sales during the month of July, according to MDA DataQuick.

Foreigners immigrating to the U.S. with the new visa wouldn't be able to work here unless they obtained a regular work visa through the normal process. They'd be allowed to bring a spouse and any children under the age of 18 but they wouldn't be able to stay in the country legally on the new visa once they sold their properties.

The provision would create visas that are separate from current programs so as to not displace anyone waiting for other visas. There would be no cap on the home-buyer visa program.

Over the past year, Canadians accounted for one quarter of foreign home buyers, and buyers from China, Mexico, Great Britain, and India accounted for another quarter, according to the National Association of Realtors. For buyers from some countries, restrictive immigration rules are "a deterrent to purchase here, for sure," says Sally Daley, a real-estate agent in Vero Beach, Fla. She estimates that around one-third of her sales this year have gone to foreigners, an all-time high.

"Without them, we would be stagnant," says Ms. Daley. "They're hiring contractors, buying furniture, and they're also helping the market correct by getting inventory whittled down."

In March, Harry Morrison, a Canadian from Lakefield, Ontario, bought a four-bedroom vacation home in a gated community in Vero Beach. "House prices were going down, and the exchange rate was quite favorable," said Mr. Morrison, who first bought a home there from Ms. Daley four years ago.

While a special visa would allow Canadian buyers like Mr. Morrison to spend more time in the U.S., he said he isn't sure "what other benefit a visa would give me."

The idea has some high-profile supporters, including Warren Buffett, who this summer floated the idea of encouraging more "rich immigrants" to buy homes. "If you wanted to change your immigration policy so that you let 500,000 families in but they have to have a significant net worth and everything, you'd solve things very quickly," Mr. Buffett said in an August interview with PBS's Charlie Rose.

The measure could also help turn around buyer psychology, said mortgage-bond pioneer Lewis Ranieri. He said the program represented "triage" for a housing market that needs more fixes, even modest ones.

But other industry executives greeted the proposal with skepticism. Foreign buyers "don't need an incentive" to buy homes, said Richard Smith, chief executive of Realogy Corp., which owns the Coldwell Banker and Century 21 real-estate brands. "We have a lot of Americans who are willing to buy. We just have to fix the economy."

The measure may have a more targeted effect in exclusive markets like San Marino, Calif., that have become popular with foreigners. Easier immigration rules could be "tremendous" because of the difficulty many Chinese buyers have in obtaining visas, says Maggie Navarro, a local real-estate agent.

Ms. Navarro recently sold a home for $1.67 million, around 8% above the asking price, to a Chinese national who works in the mining industry. She says nearly every listing she's put on the market in San Marino "has had at least one full price cash offer from a buyer from mainland China."


Corrections & Amplifications
Harry Morrison bought a four-bedroom vacation home in Vero Beach in March. He first bought a home there four years ago from Sally Daley, a local real-estate agent. An earlier version of this story incorrectly said Ms. Daley sold the four-bedroom home to Mr. Morrison in March.

Write to Nick Timiraos at nick.timiraos@wsj.com
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« Reply #191 on: October 25, 2011, 10:01:31 AM »


Fear and Loathing in the Eurozone
Xcerpt from Stock World Weekly: Fear and Loathing in the Eurozone, week ahead section.
 
(Click here for more Stock World Weekly)
Late Thursday afternoon, Jon Hilsenrath of the Wall Street Journal, a well-known sounding board for Bernanke when he wants to give signals to the markets, reported “Federal Reserve officials are starting to build a case for a new program of buying mortgage-backed securities to boost the ailing economy, though they appear unlikely to move swiftly.” (Fed Is Poised for More Easing)
This report builds on sentiments that Federal Reserve Governor Daniel Tarullo expressed in a speech on Thursday evening. Bloomberg reported “Federal Reserve Governor Daniel Tarullo’s call for resuming large-scale purchases of mortgage bonds may boost chances the central bank will start a third round of asset buying aimed at reviving U.S. growth.
“Policy makers should move the tool ‘back up toward the top of the list’ because it would help the economy through lower mortgage costs that would boost home purchases and spending by people who refinance their home loans, Tarullo said late yesterday in a speech in New York.”
Tarullo’s speech and Hilsenrath’s article both came out on Thursday, suggesting the Fed is making an effort to broadcast its seriousness about using its tools to jump-start the moribund U.S. economy. Any large-scale program of buying bonds will essentially be another round of quantitative easing (QE3), predictably leading to increases in stock and commodity prices.
However, regarding commodity prices, one event last week may put a damper on increases in commodity prices. On Tuesday, the Commodity Futures Trading Commission (CFTC) voted to put position limits on commodity markets, as it attempts to deal with problems created by runaway speculation. Phil has repeatedly reported on the manipulation in the oil markets, with articles such as last June’s “Which Way Wedne$day - Let’s Break the $peculator$.” Tuesday’s action, while welcome, is long overdue.
 The six month chart of the Dollar shows the 73 to 76 range that the Dollar traded in for five months, before it broke out in early September. Now, however, the Dollar’s impressive breakout is failing. It looks like the Dollar may return to its previous trading range. Moreover, with Bernanke and Tarullo banging the drums for more QE, market participants know that QE3 is likely to weaken the Dollar. If the inverse relationship between the Dollar and the stock market persists, the depressed Dollar is bullish for equities. This is no secret and is why hints of QE3 drive the Dollar down and prop equities up.
Europe will be the focus of the financial news again next week. German Chancellor Merkel and French President Sarkozy will try to work out a deal to give additional funding and more discretionary power to the EFSF, while simultaneously strengthening “economic integration” and capitalization of European banks, all under the auspices of implementing “economic governance of the euro area.” Achieving their goals would be historic by any measure.
A primary issue at the heart of the struggle is whether the theoretically unlimited funding of the European Central Bank (ECB) can be used to ‘backstop’ the EFSF, thereby guaranteeing sufficient capital to recapitalize banks and buy distressed bonds. While Sarkozy is a strong proponent of backstopping the EFSF with ECB funding, going so far as to abandon his wife during childbirth to travel to Frankfurt to make his case to Chancellor Merkel, his efforts were in vain. Merkel, backed by ECB President Jean-Claude Trichet, adamantly refused to consider Sarkozy’s proposal.
As the UK Telegraph noted “Europe's central bank could not be used to boost the EFSF because of a 20-year EU treaty clause forbidding the union from using its cash to save European governments. Unlike the EFSF, an ad hoc inter-governmental ‘special purpose vehicle’ based in Luxembourg, the ECB is governed by the detailed chapter and verse of European law.” According to a senior EU diplomat, “If the ECB could act like a national central bank that would make life a hell of lot easier, problem solved, but that runs up against the treaties and Germany's cult of the Bundesbank. Sarkozy was told 'game over’”(France and Germany: an unstoppable force meets an immovable object)
Indeed, the mood at this weekend’s summit in Brussels was somber. The impasse over the EFSF was overshadowed by a surprise announcement from Christine Lagarde, former French finance minister who is now chief of the International Monetary Fund (IMF). Lagarde warned that, without a default, the Greek debt crisis by itself could deplete the entire €440Bn EFSF fund. Her announcement further stated that the IMF was no longer willing to pick up a third of the total bill for rescuing Greece, estimated at €73Bn, unless European banks were prepared to write off at least 50% of Greek debt. One eurozone finance minister was quoted on Saturday as saying that the situation in Brussels was “Grim, the worst mood I have ever seen, a complete mess.” (Eurozone summit - despair and backbiting in the corridors of power)
Stock World Weekly writing and editing team, Elliott and Ilene, recently interviewed Russ Winter of Winter Watch at Wall Street Examiner. In part 1, Chaos in the Land of Oz, we established that the Fed is the Wizard, and we are living in an economic Land of Oz. This week, in part 2, we discussed the debt crisis in Europe, the too-big-to-fail (TBTF) banks, and whether there is a pathway back to Kansas. Ilene also asked Russ whether the was long or short any stocks:
Russ: Right now, I’m shorting the "Palace of Versailles" stocks, stocks like Tiffany’s, Ambercrombie-Fitch, Coach, Starbucks, that sell at rich multiples, because supposedly wealthy people are doing well. Well, rich people were losing their asses in the market in the last couple of months. If you look at the polls, rich people are just as negative as poor people now. The Palace of Versailles trade makes little sense when protesters are in front of your houses, and the stores you shop at. I try to run counter to the conventional wisdom. (Click on this link to read the full interview, Chaos in the Land of Oz, part 2)
Late Friday afternoon Phil took a “cashy and cautious” stance. He wrote, “Well that was a totally fun week. Congrats to all the bullish faithful and, of course, the $25KP players – CASH IS GOOD – enjoy the weekend!”
In contrast to Russ and Phil's more cautious positioning, Lee Adler of the Wall Street Examiner is on the cusp of potentially turning more bullish, BUT he wants to see some proof first. He wrote to subscribers of the WSE’s Professional Edition, "The market has broken a key resistance level. Unless this move whipsaws, the market could reach projections of 1280-1300 quickly. Such a breakout would in turn suggest that the 18 month 2 year cycle had entered an up phase. Unless bears mount a ferocious countermove on Monday, the likelihood is that they could be in hibernation at least through the winter months."
We have a trade idea this week from Pharmboy, who writes, “Bristol Myers Squibb (BMY, $32.56) is losing its patent protection on Plavix next year, but has a blockbuster replacement in Xarelto. The company has other interesting pipeline candidates, and a hefty 4.1% dividend yield.
I like starting a position by selling the January 2012 $31 puts for $1.10 or better.”
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« Reply #192 on: October 25, 2011, 11:05:23 AM »


Detlev Schlichter is one of the clearest thinkers I know on the subject of Austrian Economic theory applied to our current crises. Read his book, Paper Money Collapse. More more thoughts on investing in this environment, see the questions and Detlev's answers on the referenced page.

Tom

http://papermoneycollapse.com/2011/10/unstoppable-why-this-crisis-will-keep-unfolding/

Unstoppable: Why this crisis will keep unfolding
by DETLEV SCHLICHTER on OCTOBER 20, 2011 · 20 COMMENTS

Image by Salvatore Vuono
When the tectonic plates underneath society shift, confusion reigns, together with wishful thinking.

It appears that financial markets have again managed to get themselves into a state of unrealistic expectation. The European summit this coming Sunday (or the follow-up summit on Wednesday) is now supposed to bring a “comprehensive plan” to solve the European debt crisis. Of course, nothing of the sort will happen, and for a simple reason: it is impossible. Those who cherish such fanciful hopes are naïve and will be disappointed.

Let’s step back and look at the problem, which in a nutshell is this: The dominant societal model of the second half of the twentieth century – the social democratic nation state with its high levels of taxation, regulation and stifling market intervention, and thus increasingly dependent on a constantly expanding fiat money supply and artificially cheap credit –is rapidly approaching its logical endpoint everywhere, not just in Europe: excessive and unmanageable piles of debt, systemic financial fragility and weak growth.

For many, including quite a few of those demonstrating under the ‘Occupy Wall Street’ banner, this whole mess deserves the label “crisis of capitalism”.  That this is nonsense I explained here. What we are witnessing is not the crisis of capitalism but the failure of statism. The present system, certainly the financial system, has very little to do with true capitalism, and if financial markets are now being demonized for their failure to go on funding political Ponzi-Schemes, than this means shooting the messenger rather than addressing, or even understanding, the root causes of the malaise. As I said, this is also a time of great confusion.

Failure of statism

The monetary madness of recent decades was only made possible by the transition from apolitical and inflexible commodity money (free-market money) towards limitless, entirely discretionary fiat money (state money). This shift was completed on August 15, 1971, when this system was also made global. What does such a monetary system logically entail?

In a complete paper money system, banks cannot be private capitalist enterprises but must be extensions of the state because the state holds the monopoly of unrestricted money creation. The banking sector is cartelized under the state central bank. To operate a bank, you need a state license that requires that you open an account with the central bank.


Photograph by M. Bartosch
In such a system, the central bank can create bank reserves out of thin air and without limit, and has thus full control over the level and the cost of such reserves. The central bank has therefore ultimate control over the funding of the banks and the availability of credit in the economy – which is now supposed to be magically freed from its natural constraint under capitalism: voluntary savings.

In such a system, it is generally assumed that the state cannot go bankrupt as it can always print more money to fund itself. It is equally assumed that the banks cannot fail and do not ever have to shrink, at least collectively, as ever more bank reserves can be made available to them – if need be at no cost, as has become – now that the system arrived at the point of ultimate excess – the global norm.

It can hardly be surprising that those who are in charge of the banks and those who are in charge of state finances have behaved for decades as if the Great Regulator of economic life, the threat of bankruptcy, was of no concern to them. Now that the system has finally overdosed on cheap credit and that the forty-year fiat-money-fed boom is over, reality is sinking in. And it comes as a shock.

There is a lot of talk of return to normality. The market has, of course, a way of returning to normality, which involves liquidating the excesses, clearing out the dislocations, defaulting what will not be repaid, and deflating prices that do not reflect real demand. Liquidation, default and deflation, however, are politically unacceptable, as they cut right to the core of our system of state-managed ‘capitalism’: the notion that the state is above the laws of economics and that it can bestow a similar immunity on its protectorates, most importantly the banks.

What’s €2 trillion among friends?

Back to the alternate reality of the policy debate in Europe. The hope of many financial market participants seems to be that the summit will reveal measures by Germany and France to erect a firewall around Greece in case it will default, that the banks will get ‘recapitalized’, and that steps will be taken toward further ‘fiscal integration’. The wish here is evidently that Big Daddy will finally step forward, that he draws a line in the sand, and says, hey, this stops here. Time out on the crisis.

There is only one problem: Nobody has the money to do it.

Two days ago the British newspaper The Guardian broke the story, unconfirmed so far, that Germany and France had agreed to a €2 trillion bailout fund. In response, equity markets around the world enjoyed a brief rally. Finally, the big bazooka had arrived.

Really? I was wondering if nobody ever heard of Brian Cowen.

He was the hapless Irish chap who in 2008 played Big Daddy himself and implemented an official government back-stop for the Irish banks. And duly bankrupted his country.


Life of Brian (Image by Maxime Bernier)
If Merkel and Sarkozy were really stupid enough to launch a €2 trillion bailout fund, it would certainly pay to go short French BTANs and German Bunds right away. Germany and France have no money to bailout anyone. All they could do is pile on more debt on the already large and ever-growing debt pile of their own. It would not take the market as long as it did in 2008, in the case of Ireland, to figure out what the endgame must look like.

But surely, everyone involved must realize that the little boy in the crowd has already pointed out that Emperor Sarkozy and Empress Merkel have no clothes. Interest spreads on French bonds have already blown out, and Moody’s has warned that France’s AAA-rating (what? Triple-A?) might come under review. Credit-default spreads on German bunds have widened of late, and the cost of insuring against the bankruptcy of the Bundesrepublik Deutschland will most certainly only go one way: up. Have I mentioned that Bunds are the short of the century, and U.S. Treasuries, too?

The whole notion of ‘ring-fencing’ Greece is, of course, absurd, as if Greece had contracted some rare contagious disease from which healthier nations, such as Italy or Spain, had to be isolated. Ongoing, endless fiscal deterioration is, however, not a virus but a self-inflicted and ultimately fatal wound that all European states, and in fact, almost all modern social democratic states are already suffering from. The difference between Greece and Germany is one of degree, not principle.

For these reasons, the idea that some form of ‘fiscal integration’ could be the solution, is equally absurd, as if pooling the finances of the already-bankrupt and the almost-bankrupt will somehow give you a community of the fiscally strong, as if you could improve the financial standing of a trailer park community, in which some inhabitants are maxed out on their credit cards while others still have some borrowing capacity left, by giving all of them a joined bank account.

So does this mean that all political options are exhausted, that default, liquidation, and deflation are now unavoidable?

It will get worse

Not so fast. There are still some options left to governments. None of them will solve the problem, all of them will make the crisis worse. All of them are scarily ugly and destructive. Of course, I expect that all will be adopted by governments soon.


Unlimited Euros!, photo by Florian K.
There is, of course, always the prospect of growing regulation and market intervention, of capital controls and the banning of short selling of government debt. I expect all of this to be enacted at some point in the not-too-distant future. Like all government intervention, it will make things worse and accelerate the demise of the system.

But the biggest of all policy mistakes is already being made, and we will get more of it, much more of it: printing ever more money ever faster.

The ECB will be forced/asked/convinced to support the market for government debt of ever more European states to an ever larger degree. Central banks and fiat money are not creations of the free market but of politics. Their role has always been to fund the state. We have already reached the point at which all major central banks are dominant buyers, frequently the largest marginal buyers, of their governments’ debt. The U.S. Fed is already the single largest holder of U.S. Treasuries, and when the just-announced second round of ‘quantitative easing’ in Britain will have been completed, the Bank of England will own almost a quarter of all outstanding Gilts. Funding the state directly with the printing press is the logical penultimate stage of the demise of the present global fiat money system, and all major economies are approaching it fast. The eurozone will be no exception. The ultimate step is loss of confidence in paper money and inflationary meltdown.

If there is one outcome from the European debt summit that I am most convinced about it is that another crucial step will be taken to accelerate the ongoing debasement of fiat money.
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« Reply #193 on: October 27, 2011, 10:12:22 AM »

WSJ:

By JEFFREY SPARSHOTT And JEFF BATER
U.S. economic growth accelerated this summer as consumers and businesses boosted spending, allaying at least for now concerns of a slide back toward recession.

DJ Newswires reporter Paul Vigna has the morning's markets preview, which includes a positive GDP report for the third quarter. Photo: REUTERS/Shannon Stapleton
Separately, new claims for unemployment benefits fell slightly last week yet remained elevated, showing that the labor market is still struggling to find its footing.
Gross domestic product, the broadest measure of all the goods and services produced in an economy, grew at an inflation-adjusted annual rate of 2.5% from July through September, the strongest performance in a year.
 
Economists surveyed by Dow Jones Newswires expected GDP to rise 2.7%.

The economy grew a paltry 0.4% in the first quarter and 1.3% in the second quarter of the year, sparking concerns of a new downturn.  But in the third quarter, consumer spent more on durables -- goods like cars and refrigerators -- and services, while business investment surged.   The first estimate of the economy's benchmark indicator showed third-quarter personal consumption expenditures up 2.4%, compared with only 0.7% in the preceding period.  
 
"Despite negative economic headlines, we're not seeing evidence of a slowdown in demand," JetBlue Airways Corp. interim Chief Financial Officer Mark Powers said Wednesday after the company reported third-quarter earnings.
Businesses also are investing, especially in equipment and software. Nonresidential fixed investment jumped 16.3% after a 10.3% rise in the second quarter.
Federal government spending and rising exports also helped the economy, while inventory investment and falling state and local government spending dragged on growth.
Real final sales -- GDP less changes in private inventories -- increased 3.6%, compared with a 1.6% rise in the second quarter.

The pace of growth rose as businesses rebounded from natural disasters in Japan and despite uncertainty over the United  States' fiscal outlook and a rolling financial crisis in Europe. The outlook for Europe brightened Thursday -- leaders there said they secured a deal to reduce Greece's debt after they labored overnight to find agreement on what they had billed as a blockbuster package to stem the Continent's debt problems.

Looking ahead, some economists are concerned that the recovery will again slow as the real estate market remains moribund, unemployment high, wages stagnant and consumer confidence low more than two years after the recession formally ended.
"Even if the economy doesn't contract, growth should remain unusually lackluster next year," Paul Ashworth, chief U.S. economist at Capital Economics, said ahead of the GDP release.

Federal Reserve officials meet Tuesday and Wednesday to discuss whether there is anything else they can or should do to spur growth. At their last meeting, in September, they voted to shift the Fed's portfolio of securities so it will hold more long-term U.S. Treasury bonds and mortgage debt than previously planned. They hope the move will lower long-term interest rates, boosting investment and spending.

Some Fed officials, though, are worried the central bank will egg on inflation. The core inflation rate--which excludes volatile moves in food and energy prices and is closely watched by the Fed--increased 2.1% from the previous quarter, the Commerce Department said. That followed a 2.3% gain in the second quarter.   The overall price index for personal consumption expenditures increased by 2.4% in the third quarter, compared with a 3.3% rise over the previous three months.
Gross domestic purchase prices were up 2.0%, while the chain-weighted GDP price index increased by 2.5%.
Jobless Claims Flat
Initial jobless claims dropped by 2,000 to a seasonally adjusted 402,000 the week ended Oct. 22, the Labor Department said Thursday. In the prior week, jobless claims had decreased by 7,000 to 404,000, based on revised figures.
The four-week moving average of new claims, a more reliable indicator of the labor market's performance because it smoothes out volatile weekly figures, edged up by 1,750 to 405,500 in the latest week.
Economists surveyed by Dow Jones Newswires had forecast claims would fall by 3,000 to 400,000. Most economists believe jobless claims must fall below 400,000 for the economy to add more jobs than it is shedding. The figures released Thursday are consistent with the view that employers are reluctant to make big hires--or significant layoffs--as the economy remains stuck in a slow growth phase.

A poll of 70 corporate economists released last week showed that only 29% expect employment will increase in the next six months--the lowest number in the quarterly National Association for Business Economics survey since January 2010.
Last month the unemployment rate was stuck at 9.1%, even though U.S. employers did add jobs in September.
President Barack Obama has proposed a $447 billion package of spending initiatives and tax cuts aimed at boosting employment. That jobs bill, however, has meet resistance from Republicans in Congress who oppose new spending.
After Obama's plan was rejected as whole, Democrats have taken to trying to pass it on a piecemeal basis. Next week, the Senate is expected to take up a proposal to increase infrastructure spending for wide range of projects including bridge repairs and expanding high-speed Internet access.

Thursday's report showed the number of continuing unemployment benefits--those drawn by workers for more than a week--totaled 3,645,000 in the week ended Oct. 15. Continuing claims are reported with a one-week lag.
That number fell by 96,000 from the prior week, the lowest point since September 2008. It's not possible to know if that decrease is due to workers finding jobs or running out of benefits, a Labor official said.
The unemployment rate for workers with unemployment insurance was 2.9% for the week ending Oct. 15, down 0.1% from the week before, the new data showed.

The state-by-state breakdown in initial jobless claims, which is also released with a lag, showed the biggest rise the week ended Oct. 15 was in Wisconsin, where claims rose by 1,193. Puerto Rico also saw claims grow significantly, jumping by 1,286. The largest decline in claims was in California, down 8,942 as there were fewer layoffs in the service industry, the state reported.
Eric Morath and Andrew Ackerman

=========

Data Watch
________________________________________
The first estimate for Q3 real GDP growth is 2.5% at an annual rate To view this article, Click Here
Brian S. Wesbury - Chief Economist
Robert Stein, CFA - Senior Economist
Date: 10/27/2011
The first estimate for Q3 real GDP growth is 2.5% at an annual rate, exactly as the consensus expected.
The largest positive contributions to the real GDP growth rate were personal consumption, which grew at a 2.4% rate, and business investment, which grew at a 16.3% rate.
 
The weakest component of real GDP, by far, was inventories, which reduced the real GDP growth rate by 1.1 points.
 
The GDP price index increased at a 2.5% annual rate in Q3. Nominal GDP – real GDP plus inflation – rose at a 5.0% rate in Q3 and is up 4.1% versus a year ago.   
 
Implications: Real GDP growth came in exactly as the consensus expected, but the make-up of Q3 data bodes well for the end of the year and beyond.  The weakest part of today’s report was inventories, which were a drag of 1.1 points on the real GDP growth rate.  Inventories are at rock bottom levels.  Any boost will add to GDP in the months and quarters ahead.  If we exclude inventories, final sales grew at a robust 3.6% rate.  This drag from inventories is not new.  In the past four quarters, while overall real GDP has grown 1.6%, final sales (which exclude inventories) have grown a much more respectable 2.4%.  Private final sales, which excludes the government, shows a strong underlying growth trend: up at a 4.4% annual rate in Q3 and up 3.5% from a year ago.  Business investment grew at a 16.3% rate in Q3, the fastest pace so far this year.  In other words, consumer and business spending is growing much faster than those who watch consumer and business confidence data think it will, or should.  Even home building was up slightly, for the third time in the past four quarters.  Nominal GDP (real growth plus inflation) grew at a 5% annual rate in Q3 and is up at a 4.5% rate in the past two years.  The Federal Reserve cannot possibly justify another round of Quantitative Easing based on the growth rate of nominal GDP, nor should it continue to hold short-term interest rates near zero.  In other news this morning, new claims for unemployment insurance dipped 2,000 last week to 402,000.  Continuing claims for regular state benefits fell 96,000 to 3.65 million, the lowest since September 2008.  On the housing front, pending home sales, which are contracts on existing homes, declined 4.6% in September, suggesting a slight dip in existing home sales in October
« Last Edit: October 27, 2011, 11:15:12 AM by Crafty_Dog » Logged
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« Reply #194 on: October 31, 2011, 01:17:28 PM »



Monday Morning Outlook
________________________________________
What's Going Right? To view this article, Click Here
Brian S. Wesbury - Chief Economist
Robert Stein, CFA - Senior Economist
Date: 10/31/2011
Everyone knows housing is still weak. And, everyone knows jobs are growing, but not fast enough to seriously lower the unemployment rate, which stands at 9.1%.
Everyone also knows real GDP has expanded for nine consecutive quarters, at an average annual rate of 2.5%. No one is satisfied with this; but it is a recovery, not a recession.
 
So, how can real GDP grow when housing and employment are so weak? Something must be going right…somewhere.
 
Well, it turns out that the strongest part of the economy has been business investment.   Equipment and software investment (Cap-Ex) has grown five times faster than GDP – 12.9% at an annual rate over the past nine quarters.
 
The strongest category has been transportation and related equipment (trains, planes, trucks, etc.), up 43.3% at an annual rate over nine quarters. Computers and peripheral equipment (including servers, printers, routers, etc.) are also up 26.2% at an annual rate in the past 2 ¼ years. All of this data is adjusted for inflation, and what it shows is, contrary to popular belief, businesses are spending and investing. Moreover, businesses investment is a bigger share of the economy than housing.
 
Consumer spending is up, too, despite weak confidence data. After adjustment for inflation, consumer spending is up 2.2% at an annual rate over the past nine quarters. In a shocker, real furniture and household durable equipment spending (refrigerators, washing machines, etc.) increased by 5.0% in the past year and now stands just 0.3% below its all-time high from late 2007. Despite weak housing, and worries about credit, household durable spending has rebounded to pre-crisis levels.
 
Last we looked, the only help government is giving businesses is a more rapid depreciation schedule – which is a tax incentive for investment. Yet, trillions are being spent trying to stimulate housing and employment. In other words, what government is trying to boost by spending is going wrong, but where it uses tax cuts things are looking up and going right. If government could find the courage to have faith in markets and not itself, more things would be going right.
 
That said…it seems clear that the economy is finding enough strength in business investment and consumption to offset the pain caused by housing and employment. We expect the scales to remain tipped toward growth in the quarters ahead and look for 3% real GDP growth in 2012.
 
This growth could accelerate if government spending and regulation were reduced in a significant way. Housing already looks to have found a bottom. Imagine what happens when it finally turns up? Buck up, not everything is going wrong. In fact, there are many things going right in the US economy.
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« Reply #195 on: November 01, 2011, 07:20:52 AM »

WSJ:

By JEFFREY SPARSHOTT And JEFF BATER
U.S. economic growth accelerated this summer as consumers and businesses boosted spending, allaying at least for now concerns of a slide back toward recession.




WASHINGTON (AP) -- Americans are making a little more money and spending a lot more.

Under normal circumstances, that would be a troubling sign for the economy. But a closer look at some new government figures suggests another possibility: People are saving less money because they're earning next to nothing in interest.

Saving is already difficult because of more expensive gas and food. It's even tougher because of the lower returns -- the flip side of super-low interest rates that the Federal Reserve has kept in place since 2008 to help the economy.

Critics say the Fed is punishing those who play by the rules -- those careful enough to set aside money for savings or people who built up a nest egg and are living on fixed incomes that depend on interest.

Americans spent 0.6 percent more in September, three times the increase from the previous month, the government said Friday. Spending was especially strong on durable goods -- things like cars, appliances and electronics.

At the same time, what they earned was mostly flat. Pay increased 0.3 percent, and overall income just 0.1 percent. After deducting taxes and adjusting for inflation, income fell for a third straight month.

So to make up the difference, many have cut back on savings. The savings rate fell to its lowest level since December 2007, the first month of the recession -- and right about the time the Fed started its dramatic series of interest-rate cuts.

Considering how little you can get for parking your money at a bank, it hasn't been a tough choice.


Hmmmm. I'm not feeling the Kool-aid kicking in just yet.....
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« Reply #196 on: November 17, 2011, 12:17:47 PM »

Debt committee: Market reaction a big unknown
By Jeanne Sahadi @CNNMoney November 17, 2011: 5:24 AM ET
Tax revenue continues to make a deal difficult for the congressional debt committee, co-chaired by Republican Jeb Hensarling and Democrat Patty Murray.

NEW YORK (CNNMoney) -- Given how volatile markets have become, predicting how traders will react to the congressional debt committee next week is a dicey undertaking.

Two themes emerged in conversations with stock and bond strategists. First, Wall Street never expected much from the committee, thanks to the disastrous debt ceiling debate. Second, markets don't expect lawmakers to make meaningful decisions on fiscal reform until after the 2012 election.

The committee, by law, is supposed to vote on a plan by next Wednesday.

If the panel simply approves $1.2 trillion in debt reduction -- its minimum target to stave off automatic cuts in 2013 -- the market reaction will be "a great big yawn," said Adrian Conje, chief investment officer of Balentine, an investment advisory firm.

That deal, in other words, has been factored into stock traders' considerations.

A $1.2 trillion plan is considered small relative to what's needed but it could give markets a lift if it seems to demonstrate the start of real compromise between Democrats and Republicans on revenue increases and entitlement cuts, said John Toohey, vice president of equity investments at USAA.

Debt committee: Deal or no deal, then what?
Conversely, Toohey noted, a failure by the committee to agree on a deal at all could hurt stocks.

Another potential negative for stocks: A deal that would reduce debt by $1.2 trillion but take no short-term measures to boost the economy, such as extending temporary payroll tax relief or providing another temporary extension of federal emergency jobless benefits for the long-term unemployed.

Of course, Congress can still decide to extend those measures separately before the end of the year, but a super committee proposal had been considered a possible vehicle.

"If that all goes away, that could mean a 1.5% to 2% drag on GDP growth next year," Toohey said.

It's even less clear how bonds might respond.

Traders may be disappointed if the super committee can't come to a deal or can only come to a deal worth less than $1.2 trillion. But their disappointment is likely to be offset by concerns elsewhere in the world. The same holds should a super committee failure trigger another downgrade or negative ratings action.

0:00 / 1:35 Europe's issues make U.S. look pretty good
"Global and U.S. investors will continue to be disappointed in U.S. fiscal policy but will look at Europe and Japan and not see governments with unassailable credit ratings in the future," said Steve Van Order, fixed income strategist at Calvert Investments

There is, of course, one super committee action that would make both stock and bond markets cheer: Agreement on a true "grand bargain" -- the kind of proposal that reduces debt by at least $3 trillion to $4 trillion over the next decade but is mindful of not undermining the economic recovery in the short-term.

The Holy Grail for traders? More certainty about long-term fiscal policies and the balance lawmakers will strike between spending and revenue in the future.

"Markets want less ideology and more problem-solving," Conje said. "They want clarity. They want to know the rules of the road."

Given that the two sides have yet to produce a single plan that they can at least agree to vote on, markets may have to wait a little longer.
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« Reply #197 on: November 20, 2011, 01:13:26 AM »

http://news.yahoo.com/next-financial-crisis-hellish-way-204303737.html

..

The next financial crisis will be hellish, and it’s on its way
By Addison Wiggin | Forbes – Wed, Nov 16, 2011...

"There is definitely going to be another financial crisis around the corner," says hedge fund legend Mark Mobius, "because we haven't solved any of the things that caused the previous crisis."
 
We're raising our alert status for the next financial crisis. We already raised it last week after spreads on U.S. credit default swaps started blowing out.  We raised it again after seeing the remarks of Mr. Mobius, chief of the $50 billion emerging markets desk at Templeton Asset Management.
 
Speaking in Tokyo, he pointed to derivatives, the financial hairball of futures, options, and swaps in which nearly all the world's major banks are tangled up.
 
Estimates on the amount of derivatives out there worldwide vary. An oft-heard estimate is $600 trillion. That squares with Mobius' guess of 10 times the world's annual GDP. "Are the derivatives regulated?" asks Mobius. "No. Are you still getting growth in derivatives? Yes."
 
In other words, something along the lines of securitized mortgages is lurking out there, ready to trigger another crisis as in 2007-08.
 
What could it be? We'll offer up a good guess, one the market is discounting.
 
Seldom does a stock index rise so much, for so little reason, as the Dow did on the open Tuesday morning: 115 Dow points on a rumor that Greece is going to get a second bailout.
 
Let's step back for a moment: The Greek crisis is first and foremost about the German and French banks that were foolish enough to lend money to Greece in the first place. What sort of derivative contracts tied to Greek debt are they sitting on? What worldwide mayhem would ensue if Greece didn't pay back 100 centimes on the euro?
 
That's a rhetorical question, since the balance sheets of European banks are even more opaque than American ones. Whatever the actual answer, it's scary enough that the European Central Bank has refused to entertain any talk about the holders of Greek sovereign debt taking a haircut, even in the form of Greece stretching out its payments.
 
That was the preferred solution among German leaders. But it seems the ECB is about to get its way. Greece will likely get another bailout — 30 billion euros on top of the 110 billion euro bailout it got a year ago.
 
It will accomplish nothing. Going deeper into hock is never a good way to get out of debt. And at some point, this exercise in kicking the can has to stop. When it does, you get your next financial crisis.
 
And what of the derivatives sitting on the balance sheet of the Federal Reserve? Here's another factor behind our heightened state of alert.
 
"Through quantitative easing efforts alone," says Euro Pacific Capital's Michael Pento, "Ben Bernanke has added $1.8 trillion of longer-term GSE debt and mortgage-backed securities (MBS)."
 
Think about that for a moment. The Fed's entire balance sheet totaled around $800 billion before the 2008 crash, nearly all of it Treasuries. Now the Fed holds more than double that amount in mortgage derivatives alone, junk that the banks needed to clear off their own balance sheets.
 
"As the size of the Fed's balance sheet ballooned," continues Mr. Pento, "the dollar amount of capital held at the Fed has remained fairly constant. Today, the Fed has $52.5 billion of capital backing a $2.7 trillion balance sheet.
 
"Prior to the bursting of the credit bubble, the public was shocked to learn that our biggest investment banks were levered 30-to-1. When asset values fell, those banks were quickly wiped out. But now the Fed is holding many of the same types of assets and is levered 51-to-1! If the value of their portfolio were to fall by just 2%, the Fed itself would be wiped out."
 
Mr. Pento's and Mr. Mobius' views line up with our own, which we laid out during interviews on our trip to China this month.
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Crafty_Dog
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« Reply #198 on: November 22, 2011, 11:33:18 AM »

Hard to argue with that!!!  shocked shocked shocked

On a much more mundane level, , ,

Real GDP was revised to a 2.0% annual growth rate in Q3 To view this article, Click Here
Brian S. Wesbury - Chief Economist
Robert Stein, CFA - Senior Economist
Date: 11/22/2011
Real GDP was revised to a 2.0% annual growth rate in Q3 from a prior estimate of 2.5%.  The consensus had expected GDP growth to remain unchanged at 2.5%.                             
Inventories were revised down the most, while net exports were revised up.
 
The largest positive contributions to the real GDP growth rate in Q3 were personal consumption and business investment in equipment/software.  By far the weakest component was inventories.
 
The GDP price index was unchanged at a 2.5% annual rate of change.  Nominal GDP growth – real GDP plus inflation – was revised down to a 4.6% annual rate from a prior estimate of 5.0%.   
 
Implications:  Real GDP growth in the third quarter was revised down, coming in at a 2% annual rate versus a consensus expected 2.5% rate.   Most major categories were only revised slightly, for example, revisions to personal consumption subtracted a tenth from GDP while trade added two tenths, but it was inventories that subtracted 0.5% from the original GDP estimate (now -1.6% versus -1.1% originally).  The composition of growth was more promising for the economy going forward. Inventories are at rock bottom levels.  Any boost will add to GDP in the quarters ahead.  If we exclude inventories, final sales grew at a robust 3.6% annual rate.  Net exports were revised up in Q3.  Business investment grew at a 14.8% rate in Q3, the fastest pace so far this year.  In other words, consumer and business spending is growing much faster than those who watch consumer and business confidence data think it will.  Nominal GDP (real growth plus inflation) grew at a 4.6% annual rate in Q3 and is up at a 4.4% rate in the past two years.  The Federal Reserve faces an uphill battle trying to justify another round of quantitative easing based on the growth rate of nominal GDP.  Even zero percent interest rates are inappropriate when nominal GDP growth is this high.  The most newsworthy part of today’s report is that corporate profits increased at an 8.5% annual rate in Q3 and are up 7.9% versus a year ago.  Most of the increase was due to domestic firms, not the rest of the world.  Profits are at an all-time record high and are the highest share of GDP since 1950.  The worst part of today’s report was an unexpected downward revision in wages and salaries in Q2 and Q3.  Slow growth in personal income probably reflects weak economic growth in the first half of the year, but bears watching if it persists into the fourth quarter.  In other news this morning, data on chain store sales show no let up by consumers.  Sales are up 2.8% from a year ago according to the International Council of Shopping Centers and 3.7% according to Redbook Research.  The Richmond Fed index, a measure of manufacturing in the mid-Atlantic increased to 0 in November from -6 in October.
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G M
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« Reply #199 on: November 26, 2011, 10:46:03 PM »

http://blogs.the-american-interest.com/wrm/2011/11/25/guns-better-investment-than-gold/

November 25, 2011


Guns Better Investment Than Gold?


At least someone is making money in these difficult times.  Arms dealers in Lebanon’s Bekaa Valley are making out like, well, bandits as unrest in Syria sends black market gun prices through the roof says this story in Lebanon’s Daily Star.  Rocket grenade launchers appear to be the hottest investment grade item, with prices more than sextupling from $400 to $2500 in recent months.  Kalashnikovs and M16s are also up sharply, with 75 percent appreciation on the Russian guns and 100 percent on the US model.
 
Perhaps more investments in Lebanese arms dealer funds could rescue US state and municipal pension funds; those are the kind of returns states like New York, Illinois, California and Rhode Island need to avoid massive service and benefit cuts in the years ahead.
 
But what this news really means, of course, is that more and more people in Syria and Lebanon are preparing for all out civil war.  Religious and ethnic divides half forgotten during the long decades when the dictatorship was secure are now beginning to revive as the Assad clan looks weak.
 
This is the pattern I saw at work in Yugoslavia and the Caucasus twenty years ago as ethnic groups geared up to butcher their neighbors and drive them from their homes; I will never forget the night a Georgian poet asked me how much guns cost on the Istanbul black market; he was arming himself against what he called the “Abkhazian menace.”
 
I made a note to myself at that time: when poets buy guns, tourist season is over.  They are buying them now in Damascus; something wicked this way comes.
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