Wall Street’s “Recovery” Leaves Main Street Mugged in the Gutter
by ilene - November 17th, 2010 4:42 pm
Wall Street’s "Recovery" Leaves Main Street Mugged in the Gutter
Courtesy of Charles Hugh Smith, Of Two Minds
Rising costs and taxes and declining income have mugged Main Street while Wall Street revels in the Fed-engineered "recovery"--in the stock market.
The Fed would have us believe that the stock market is the leading indicator of the economy: if stocks are rising, then that is strong evidence the economy is improving.
This is the bogus "wealth effect" I have taken pains to discredit:
Why the Fed’s ‘Trickle-Down Economics’ Is Failing
Are the Fed’s Honchos Simpletons, Or Are They Just Taking Orders? (Nov. 1, 2010)
Fraud and Complicity Are Now the Lifeblood of the Status Quo (Nov. 12, 2010)
Fed’s QE2 Misadventure Costs U.S. Households $4.6 trillion (Nov. 10, 2010)
Main Street didn’t buy "the stock market is rising, so you must be richer" either, for the simple reason that Main Street’s wallet is now much thinner. Even as the S&P 500 has soared 80% from its March 2009 lows, 70% of Americans don’t believe the recession is over.
That must really hurt the apparatchiks in the Ministry of Propaganda and the Fed. Here they go to all this trouble to orchestrate a bogus stock market rally and Mainstream Media propaganda campaign hyping "the recovery," and Main Street America refused to buy it. How irksome.
It seems Main Street’s grasp on reality is firmer than that of either the Fed or its partner, Wall Street.
Let’s consider income.
The stock market rally off the March 2009 lows was by some measures the sharpest such advance in the past 100 years. Yet as stocks went on a tear,household income actually declined. According to the Census Bureau, the median household income fell 0.7% to $49,777 in 2009, down 4.2% since pre-recession 2007.
The Federal Reserve’s stated policy objective is to boost the stock market to trigger a "wealth effect" which will then lead consumers to open their wallets.
As noted here before, the Fed failed to notice that only the top 10% of households hold enough stocks to see much benefit from a rising market. Household income actually fell, despite the huge run-up in stocks.
In other words, a rising stock market did not increase household incomes. The Fed is gambling on an effect with no evidence to support it.
How about jobs?
While the Bureau of Labor Statistics reported that…
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Mr. Obama’s Most Recent “2%” Sellout is his Worst Yet
by ilene - November 15th, 2010 5:14 pm
Mr. Obama’s Most Recent “2%” Sellout is his Worst Yet
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Courtesy of Michael Hudson
Now that President Obama is almost celebrating his willingness to renew the tax cuts enacted under George Bush for the super-rich ten years ago, it is time for Democrats to ask themselves how strongly they are willing to oppose an administration that looks increasingly like Bush-Cheney III. Is this what they expected by his promise of an end to partisan politics?
It is a reflection of how one-sided today’s class war has become that Warren Buffet has quipped that “his” side is winning without a real fight being waged. No gauntlet has been thrown down over the trial balloon that the president and his advisor David Axelrod have sent up over the past two weeks to extend the Bush tax cuts for the wealthiest 2% for “just” two more years. For all practical purposes the euphemism “two years” means forever – at least, long enough to let the super-rich siphon off enough more money to bankroll enough more Republicans to be elected to make the tax cuts permanent.
Mr. Obama seems to be campaigning for his own defeat! Thanks largely to the $13 trillion Wall Street bailout – while keeping the debt overhead in place for America’s “bottom 98%” – this happy 2% of the population now receives an estimated three quarters (~75%) of the returns to wealth (interest, dividends, rent and capital gains). this is nearly double what it received a generation ago – while the rest of the population has been squeezed, and foreclosure time has now arrived.
One would not realize that the financial End Time is here from today’s non-confrontational White House happy-talk. Charles Baudelaire quipped that the devil wins at the point where he manages convince the world that he doesn’t exist. We might paraphrase this today by saying that the financial elites win the class war at the point where voters believe it doesn’t exist – and believe that Mr. Obama is trying to help the middle class, not reduce it to debt peonage and a generation of victimhood as the economy settles into debt deflation.
The first pretense is that “two years” will get us through the current debt-induced depression. The Republican plan is to make more Congressional and Senate gains in 2012 as Mr. Obama’s former supporters “vote with their backsides” and…
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Stock World Weekly
by ilene - November 14th, 2010 10:28 pm
The latest Stock World Weekly Newsletter summarizing the events of last week, and discussing next week, is now available here. As always, we love feedback. - Ilene
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HOW GOVERNMENT AUSTERITY CRUSHED CISCO’S EARNINGS
by ilene - November 11th, 2010 9:08 pm
HOW GOVERNMENT AUSTERITY CRUSHED CISCO’S EARNINGS
Courtesy of The Pragmatic Capitalist
This is a VERY interesting development in the corporate
**Cisco’sKeyTakeaways. (1) Cisco reporting notable weaknessinthe Public/Gov’t vertical, in which the company cited weakness particularly in the U.S. with a rapid change (deceleration) in State/Local Gov’t spending dynamics. Total public vertical accounted for ~22% of Cisco’s total product orders; total global orders up only 6% yr/yr vs. +23% yr/yr in the prior quarter. Within this, Cisco did report that it saw mid-teens/stable growth in the U.S. Federal vertical.
This quarter’s weakness was largely the result of declines in state & local
“The level of complacency around this issue is alarming. Most assume, as last week’s Buttonwood panel did, that the federal government will simply come to the rescue of the states without appreciating the immensity of the cumulative state-budget gaps. I expect multiple municipal defaults to trigger indiscriminate selling, which will prompt a federal response. Solutions attempted in piecemeal fashion, as we’ve seen thus far, would amount to constantly putting out recurring fires.
Rather than waiting for more federal intervention, states need to make their own hard decisions and not kick the can down the road. How will taxpayers from fiscally conservative states like Texas or Nebraska feel about bailing out threadbare Illinois or California? Let’s hope we never have to find out.”
Perhaps even more interesting in recent days is the action in the muni market, which has been priced for perfection:
[click on chart to enlarge]
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CORPORATE AMERICA REMAINS STRONG
by ilene - November 11th, 2010 8:50 pm
CORPORATE AMERICA REMAINS STRONG
Courtesy of The Pragmatic Capitalist
If there has been one undeniably bullish trend in the last 18 months it has been the strong
- 72% of companies have topped EPS estimates.
- 60% have topped revenue estimates
- Just 19% missed EPS estimates.
- Sales are up 9.8% year over year.
- EPS growth is 32% year over yar
Of course, the cost cuts have come at a cost as millions of Americans remain out of work. Thus far domestic revenues have not sustained a level that has resulted in a substantial pick-up in hiring. But corporations have made up for the less than stellar top line growth by boosting margins. Margins are currently approaching their 2007 peaks, but likely have some room for expansion. It will be interesting to see how QE2 and the impact of rising input costs influences this picture. At first blush, the impact does not appear to be widespread, however, we’ll have a better understanding of the Q4 earnings picture in the coming months when pre-announcements begin. For now, the margin story is intact. At risk, of course, is the labor force in the case that margins begin to turn. For now it looks like the combination of strong international sales and weak domestic sales will be enough to help labor markets slowly continue to heal. In a fluid and low visibility environment, however, this could change given the numerous exogenous risks.
(Figure 1)
The revenue story has been better than expected, however, is far from v-shaped. Revenues per share remain well off their all-time highs despite a strong rebound in bottom line growth. Quarter over quarter revenues per…
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Jobs Expand by 151,000, Unemployment Steady at 9.6%; Birth-Death Methodology Changes for the Better; Reflections on the Numbers
by ilene - November 6th, 2010 4:46 pm
Jobs Expand by 151,000, Unemployment Steady at 9.6%; Birth-Death Methodology Changes for the Better; Reflections on the Numbers
Courtesy of Mish
Today the BLS reported jobs expanded by 151,000. This should not be totally unexpected as I noted last night in Gaming the Jobs Report that TrimTabs called for +95,000, ADP +43,000, and Gallup showed a surge in October hiring.
Moreover, recent ISM surveys were stronger than expected. The important question this morning is whether or not this surge is sustainable. I do not think it is, nor does TrimTabs.
Here is the Email alert from TrimTabs once again (sorry, no link).
TrimTabs
Sausalito, CA – November 3, 2010 – TrimTabs Investment Research estimates that the U.S. economy added 95,000 jobs in October, the first monthly increase since May.
“The economy clearly improved in October,” said Madeline Schnapp, Director of Macroeconomic Research at TrimTabs. “Unfortunately, the gains probably aren’t sustainable.”
Multiple indicators suggest the labor market perked up last month. Real-time tax data shows wage and salary growth accelerated, TrimTabs’ proprietary measure of online job postings jumped 5.6%, and initial unemployment claims fell to the lowest level since August 2008.
In a research note, TrimTabs argues that the economy will remain stuck in slow-growth mode. October’s employment increase likely owes to temporary factors such as inventory building. Also, a cheaper dollar boosted exports, and record low mortgage rates spurred refinancing activity.
“Economic growth is likely to stay sluggish because the private sector isn’t able to pick up the slack from waning government stimulus,” Schnapp noted. “State and local government budget crises and the weak housing market will be significant drags on growth for a long time.”
I strongly concur with that last paragraph in red above.
I had a typo in the headline number from TrimTabs yesterday (now corrected). The TrimTabs estimate was +95,000 not +75,000 as I had in the title. No changes were made to the body of my post.
Had I read that properly I would have upped last night’s estimates higher by 20,000. I was very aware today’s report might be on the hot side.
This is what I said …
Anything from +40,000 to +110,000 seems like a reasonable guess. I certainly would not be surprised to see a number in the upper end of that range. Stores are hiring, Black Friday sales are starting 3 weeks early, and ISM reports seemed
…
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Obama No Longer Bothering to Lie Credibly: Claims Financial Crisis Cost Less Than S&L Crisis
by ilene - October 29th, 2010 3:29 pm
Obama No Longer Bothering to Lie Credibly: Claims Financial Crisis Cost Less Than S&L Crisis
Courtesy of Yves Smith at Naked Capitalism
I’m so offended by the latest Obama canard, that the financial crisis of 2007-2008 cost less than 1% of GDP, that I barely know where to begin. Not only does this Administration lie on a routine basis, it doesn’t even bother to tell credible lies. .And this one came directly from the top, not via minions. It’s not that this misrepresentation is earth-shaking, but that it epitomizes why the Obama Administration is well on its way to being an abject failure.
On the Jon Stewart Show (starting roughly at the 1:10 mark on this segment) Obama claims the cost of this crisis will be less than 1% of GDP, versus 2.5% for the savings and loan crisis (hat tip George Washington, sorry, no embed code, you need to go here):
The reason Obama makes such baldfacedly phony statements is twofold: first, his pattern of seeing PR as the preferred solution to all problems, and second, his resulting slavish devotion to smoke and mirrors over sound policy.
The savings & loan crisis led to FDIC takeovers of dud banks and the creation of a resolution authority to dispose of bad assets. That produced costs which were largely funded by the Federal government. I’ve heard economists repeatedly peg the costs at $110 to $120 billion; Wikipedia puts it at about $150 billion. This approach, of cleaning up and resolving banks, has been found repeatedly to be the fastest and least costly way to contend with a financial crisis.
The reason Obama can claim such phony figures is that many of the costs of saving the financial system are hidden, the biggest being the ongoing transfer from savers to banks of negative real interest rates, which is a covert way…
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Krugman: “The Question Is Whether Our Economy Is Governed By Any Kind Of Rule Of Law”
by ilene - October 17th, 2010 3:50 pm
Krugman: "The Question Is Whether Our Economy Is Governed By Any Kind Of Rule Of Law"
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Courtesy of Washington’s Blog
Paul Krugman writes:
The mortgage mess is making nonsense of claims that we have effective contract enforcement — in fact, the question is whether our economy is governed by any kind of rule of law.
***
True to form, the Obama administration’s response has been to oppose any action that might upset the banks, like a temporary moratorium on foreclosures while some of the issues are resolved. Instead, it is asking the banks, very nicely, to behave better and clean up their act. I mean, that’s worked so well in the past, right?
The response from the right is, however, even worse …. conservative commentators like those at The Wall Street Journal’s editorial page have come out dismissing the lack of proper documents as a triviality. In effect, they’re saying that if a bank says it owns your house, we should just take its word. To me, this evokes the days when noblemen felt free to take whatever they wanted, knowing that peasants had no standing in the courts. But then, I suspect that some people regard those as the good old days.
I’m happy that someone as prominent as Krugman is weighing in on the side of the rule of law.
I’ve been hammering on that topic for years:
- Fraud Finally Being Discussed in Polite Company … Now Where Are the Prosecutions?
- A Free Market Is Not Possible Without Strong Laws Against Fraud
- The Economy Will Not Recover Until The Perpetrators Of Our Crises Are Held Accountable
- Economist James Galbraith: Economists Should Move into the Background, and "Criminologists to the Forefront"
- Senior S&L Regulator Says Government Engaging in Massive Cover-Up of Economic Crisis: “The Entire Strategy Is to Keep People from Getting the Facts”
- No Wonder the Economy Isn’t Improving
- The Root of the Economic Crisis: Dishonesty
Pic credit: Jesse’s Americain Cafe
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STIGLITZ: WHY THE CURRENT FED POLICY IS MAKING THINGS WORSE
by ilene - October 7th, 2010 2:37 am
STIGLITZ: WHY THE CURRENT FED POLICY IS MAKING THINGS WORSE
Courtesy of The Pragmatic Capitalist
Nobel Prize winner http://globaleconomicanalysis.blogspot.com explains why the global imbalances will continue to cause problems in the global economy and why the Fed’s policy of dollar devaluation will have unintended consequences. Ultimately, he sees the Fed making matters worse:
Stiglitz’s thoughts on a possible trade war:
“I think there is this concern. The interesting thing is the United States was one of the first countries to say that of the sources of our recovery would be exports. The problem is that the unintended consequences of economic turmoil, bad economic policies, is what we’re seeing.”
“When the U.S. lowers interest rates, when the U.S. floods the world with liquidity, the effect of it is to try to lower the dollar and cause other countries currencies to appreciate.”
On whether Stiglitz would blame the U.S. for causing other countries’ currencies to appreciate:
“I don’t know if I want to blame [the U.S.] It’s the unintended consequence. But it is the consequence of our policies. What is happening now is this curious thing is that Fed policy was supposed to re-ignite the American economy, but it’s not doing that. And so the flood of liquidity is going abroad and causing problems all over the world.”
Stiglitz on his previous comments that Germany should abandon the euro and that the euro should be devalued:
“There’s a lot of currency misalignments. There are large surpluses on the part of Germany, for instance, and those have to be corrected. There are two problems going on. One of them is a problem of a flood of liquidity that’s causing bubbles, causing turmoil in many of the more successful emerging markets. And then there’s the other problem of the global imbalances. They’re related. But they are really two distinct problems.”
“The worry is that the flood of liquidity is going to cause what is sometimes being referred to an emerging market bubble. Money is going in. The worry is that it will cause a real estate bubble, in one developing country or another.”
“The problem is very easy to understand. There’s a flood of money into the financial sector. It’s asking, Where is the best place in the world to go? In a world of globalization, the answer is not in the United
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The Road to World War III – The Global Banking Cartel Has One Card Left to Play
by ilene - September 28th, 2010 2:19 am
The Road to World War III – The Global Banking Cartel Has One Card Left to Play
By David DeGraw (h/t ZH)
The following is Part I to David DeGraw’s new book, “The Road Through 2012: Revolution or World War III.” This is the second installment to a new seven-part series that we will be posting throughout the next few weeks. You can read the introduction to the book here. To be notified via email of new postings from this series, subscribe here.
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Editor’s Note: The following is Part I to David DeGraw’s new book, “The Road Through 2012: Revolution or World War III.” This is the second installment to a new seven-part series that we will be posting throughout the next few weeks. You can read the introduction to the book here. To be notified via email of new postings from this series, subscribe here.
I: Economic Imperial Operations
When we analyze our current crisis, focusing on the past few years of economic activity blinds us to the history and context that are vital to understanding the root cause. What we have been experiencing is not the result of an unforeseen economic crash that appeared out of the blue with the collapse of the housing market. It was certainly not brought on by people who bought homes they couldn’t afford. To frame this crisis around a debate on economic theory misses the point entirely. To even blame it on greedy bankers,…
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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
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