The Shanghai Composite (SHCOMP) closed right at its July low, and is just 3% from breaking its March 2009 low! Something very dangerous could be developing in China, which could have a significant impact on global equity and commodity prices.
---Prop source.
Tuesday, July 31, 2012
Romney - Is there a there there?
A few posts back, we reported (gloated about?) Romney's uber-cluelessness about what he actually says.
Vitus has been in a position of having to get up in front of a corporate audience to speak, and have nothing to offer but vapid, content-free verbal boilerplate. Most "business" leaders are familiar with this performance. Romney certainly must be, and he seems to have assumed that, NP, he can just "My Fellow Americans blah, blah" his way to the White House. It seems to work in business, so wtf? The scary thing is, maybe he can.
But as Krugman says, the Romney World Tour is getting surreal. Yesterday, Vitus tweeted:
Jonathan Chiat has a piece which sets out to find actual substance in Romney's gathering record of persenting random strings of words as insight. The substance in this instance is that if one digs, one can discover that Romney believes in the Cultural Determinism of John Galt: Palestinians are poor because their culture does not admit of "success" in business, building, creating.
But then Chiat deconstructs his own observation and gives evidence that Romney's views appear to have the sophistication of naught but a high-schooler 's discovery of Ayn Rand. Sort of like Paul Ryan.
However, it takes a longish and interesting but not tightly argued article to present these issues.
The point (there is one) is that it is really hard to determine what, as Krugman says, is actually going on inside Romney's head.
What if the answer is: Nothing. Well, that is scary. Maybe more scary than the mental movie magazine flipping from page to page in Sarah Palin's head. With Palin, what you see is what you get. With Romney, you don't see anything except an Avatar with nice hair, representing - what? Senator Iselin in Manchurian Candidate comes to mind.
Vitus has been in a position of having to get up in front of a corporate audience to speak, and have nothing to offer but vapid, content-free verbal boilerplate. Most "business" leaders are familiar with this performance. Romney certainly must be, and he seems to have assumed that, NP, he can just "My Fellow Americans blah, blah" his way to the White House. It seems to work in business, so wtf? The scary thing is, maybe he can.
But as Krugman says, the Romney World Tour is getting surreal. Yesterday, Vitus tweeted:
But. What if #romnyshambles is actually as dim-witted as he seems? Yikes...
Jonathan Chiat has a piece which sets out to find actual substance in Romney's gathering record of persenting random strings of words as insight. The substance in this instance is that if one digs, one can discover that Romney believes in the Cultural Determinism of John Galt: Palestinians are poor because their culture does not admit of "success" in business, building, creating.
But then Chiat deconstructs his own observation and gives evidence that Romney's views appear to have the sophistication of naught but a high-schooler 's discovery of Ayn Rand. Sort of like Paul Ryan.
However, it takes a longish and interesting but not tightly argued article to present these issues.
The point (there is one) is that it is really hard to determine what, as Krugman says, is actually going on inside Romney's head.
What if the answer is: Nothing. Well, that is scary. Maybe more scary than the mental movie magazine flipping from page to page in Sarah Palin's head. With Palin, what you see is what you get. With Romney, you don't see anything except an Avatar with nice hair, representing - what? Senator Iselin in Manchurian Candidate comes to mind.
What is FB?
Someone out there phuleeze tell me: What is Facebook for?
At best: Bunch of random blog-ettes with huge amount of random crap all over the pages and tiny content in not-quite the middle.
Way beyond 'ol Vitus.
Uh... We were dramatically right about our FB "investment" call...
At best: Bunch of random blog-ettes with huge amount of random crap all over the pages and tiny content in not-quite the middle.
Way beyond 'ol Vitus.
Uh... We were dramatically right about our FB "investment" call...
Monday, July 30, 2012
QOTD
The way an investor can garner a decent riskadjusted return in this current period of general economic malaise is to go long what we need and short what we want.
---Rosenberg
---Rosenberg
Romney calls for US to copy Israel's Single-Payer Health System
Romney via DeLong:
"Do you realize what health care spending is as a percentage of the G.D.P. in Israel? Eight percent,” [Romney] said. "You spend eight percent of G.D.P. on health care. You’re a pretty healthy nation. We spend 18 percent of our G.D.P. on health care, 10 percentage points more. That gap, that 10 percent cost, compare that with the size of our military — our military which is 4 percent, 4 percent. Our gap with Israel is 10 points of G.D.P. We have to find ways — not just to provide health care to more people, but to find ways to fund and manage our health care costs."
But
Don't tell Mitt but it's funded with a progressive health care tax.
"Do you realize what health care spending is as a percentage of the G.D.P. in Israel? Eight percent,” [Romney] said. "You spend eight percent of G.D.P. on health care. You’re a pretty healthy nation. We spend 18 percent of our G.D.P. on health care, 10 percentage points more. That gap, that 10 percent cost, compare that with the size of our military — our military which is 4 percent, 4 percent. Our gap with Israel is 10 points of G.D.P. We have to find ways — not just to provide health care to more people, but to find ways to fund and manage our health care costs."
But
Don't tell Mitt but it's funded with a progressive health care tax.
Sunday, July 29, 2012
Housing Central
Rosenberg, Thursday:
New home sales plunged 8.4% in June - the steepest decline since February of last year. The decline was exaggerated by the upward revision in May from 369k units at an annual rate to 382k - but even so, the 350k we did see in June was far beiow the consensus estimate of 372k, not to mention coming in at the lowest level since January. The median price was cut 1.9% on a MOM basis and has deflated 3.2% from year-ago levels. The inventory situation also detenorated, with the unsold backlog going from 4.5 months‘ supply in May hack to 4.9 in June — where it had heen in March and April...
How can it possibly be that the housing market is showing a durable recovery when it is still taking a median of eight months for the builders to find a buyer upon completion of the unit? Up until April 2008 — in the midst of the Great Recession - a number this high was unheardof, having happened but once previously and that was the peak of the previous housing market meltdown in June 1991. See the chart below
New home sales plunged 8.4% in June - the steepest decline since February of last year. The decline was exaggerated by the upward revision in May from 369k units at an annual rate to 382k - but even so, the 350k we did see in June was far beiow the consensus estimate of 372k, not to mention coming in at the lowest level since January. The median price was cut 1.9% on a MOM basis and has deflated 3.2% from year-ago levels. The inventory situation also detenorated, with the unsold backlog going from 4.5 months‘ supply in May hack to 4.9 in June — where it had heen in March and April...
How can it possibly be that the housing market is showing a durable recovery when it is still taking a median of eight months for the builders to find a buyer upon completion of the unit? Up until April 2008 — in the midst of the Great Recession - a number this high was unheardof, having happened but once previously and that was the peak of the previous housing market meltdown in June 1991. See the chart below
Geek moment
Vitus's normal computer is a 2011 Macbook Air i5 w/4g of Memory.
Installed new Mountain Lion OS X yesterday. Running latest Chrome browser (21.0.1180.57 beta) with around 37 tabs open, some with flash, but letting the activity settle down, we get ~94% idle cpu with activity monitor using ~4% of it.
Somebody along the line massively fixed something; there are other rumors of ML offering performance enhancements.
Good job Apple! ('bout time...).
Installed new Mountain Lion OS X yesterday. Running latest Chrome browser (21.0.1180.57 beta) with around 37 tabs open, some with flash, but letting the activity settle down, we get ~94% idle cpu with activity monitor using ~4% of it.
Somebody along the line massively fixed something; there are other rumors of ML offering performance enhancements.
Good job Apple! ('bout time...).
Tuesday, July 24, 2012
The really bad news about housing
Some pundits say that against a constant demand for housing of about 4.5M units per year, especially given that new home formations seem to be increasing, the visible supply of houses for sale at ~2.8M should be cleared out in by the end of 2012. Others add the shadow inventory of ~10M houses, which pushes a recovery out 3 or so years. But here is Mark Hanson, via Ritholtz:
Ritholtz then says:
In order to really de-lever the housing market something needs to be done about the 20 to 30 million homeowners in a negative or “effective” (lacking the equity to pay a Realtor 6% and put 20% down on a new house) negative equity position; with 2nd liens; and without the credit needed to qualify for a new vintage loan. That’s because repeat buyers are the “durable” demand cohort, not first-timer buyers and “investors” who come and go with the stimulus wind like we saw in 2010 and will again in the second half of this year.
Ritholtz then says:
Quite a few comments about Mark’s 25-40m ghost inventory. My back of the envelope calculations (data from Census):This seems to be a calculation of what Hanson calls "Distressed Loans", not of any items in the Ghost Supply:
131 million housing units, with an owner occupancy rate about 66.66%. About ~88 million homes, of which 30% or so — about 27 million — have no mortgages. Of the remaining ~60 million houses, if the general estimate of 20-25% are underwater is accurate, than its about 12-15 million homes.
- “Effective” negative equity (lacking the equity to pay a Realtor 6% and put 20% down on a new house)
- Second liens
- Impaired credit
Monday, July 23, 2012
Housing looking better. Wait...
On 7/18, we sent to a friend this upbeatish housing report.
Then, on Friday (7/20), this from Rosenberg:
Then, on Friday (7/20), this from Rosenberg:
All of a sudden, the string of positive news on housing came to an end yesterday with existing home sales sliding 5.4% in June to 4.37 mllllon units at an annual rate (the consensus was looking for +1.5%) — the steepest decline since Fehruary of last year.
The declines were broad based across product types (single famlly and condos) and the first-time buyer remains dormant, accounting for just 32% of total sales activity, down from 34% in May and 35% in April. At the same time, the inventory of homes has come down in level terms in each of the past two months and much of this seems to be coming out of the lowend of the market, where mvestors had been buying in bulk and providing sales support in recent months, but that appears to have run its course and is evident in the pricing data — median prices jumped 5% to $189,400. the fifth monthly increase in a row to the highest level since September 2008. But this is more a reflection of the reduction in investor-based buying activity at the low end than a signal of any meaningul appreciation on individual units. And with sales declining the inventory backlog in months‘ supply terms rose to 6.6 from 6.4, the highest since last November.
Saturday, July 21, 2012
Does Stephanie Pomboy read Zero Hedge?
Probably not - at least probably not a lot. However her interview in Barron's this week ($$), entitled "Coming: The End of Fiat Money" is rote ZH fair, if, mercifully, passed through an hirsuteness filter:
The standard argument against the gold standard, which she of couse knows, was expressed simply in 2010 by Doug Irwin, a professor at Dartmouth (Pomboy's Alma Mater!):
Pomboy, at least in the Barrons piece, does not address the extensive anti-gold standard literature. (An interesting observation on the similarity of the gold standard and the euro by Martin Wolf is here. The best and most fun discussion Vitus has seen of the gold standard itself is by DeLong. Etc.)
Perhaps Pomboy is right. The interview, however, reminds Vitus of Meredith Whitney's ill-fated call for muni defaults on December 19, 2010.
In the long run, again, they both may be right. About the long run, Keynes (supposedly) said...
We checked in with [Pomboy] last week, as central banks around the globe weighed more easing and as Fed chief Ben Bernanke described to Congress the headwinds facing the U.S. economy, including the automatic tax increases and spending cuts set for year end, called the "fiscal cliff." With the Fed being the biggest buyer of Treasuries, Pomboy thinks the 40-year-old fiat system will crack within five years.The whole article is recommended. Pomboy is a contender for the best comentatress out there. We at Vitus are great admirers, and followers (when we can get a snippet from her - the cost of her newsletter is so huge it shall not be named). In the above, we especially like the "Fed is really the only natural buyer of Treasuries anymore" observation.
Barron's : What don't investors anticipate today?
Pomboy: That the Fed will be a presence in the Treasury market for a long, long, long time. Some believe that, with another round of quantitative easing, we move forward, emerge from the morass, and the need for further intervention will dissipate. But the Fed is really the only natural buyer of Treasuries anymore. It will have to continue to monetize Treasury issuance at the same time all the other major developed economies—from the Bank of Japan to the Bank of England to the European Central Bank—are doing the same. Pursue that to its natural conclusion, and you see the inevitable demise of fiat money. To look at our policies and not be concerned about the risks to our currency would be dangerously naive...
The standard argument against the gold standard, which she of couse knows, was expressed simply in 2010 by Doug Irwin, a professor at Dartmouth (Pomboy's Alma Mater!):
Any proposal to resurrect the gold standard today overlooks the stark lessons of economic history. The malfunctioning gold standard was intimately related to the Great Depression of the 1930s. Countries that were not on the gold standard managed to avoid the Depression, while countries on the gold standard did not recover from the Depression until they left it (as the United States did in early 1933).Vitus, it should come as no surprise, agrees with the latter.
Furthermore, the gold standard intensified protectionist pressures in the 1930s. By making exchange rate adjustments more difficult, the gold standard hampered a monetary policy response to the slump. This forced countries to resort to protectionist measures, including higher tariffs, import quotas, and exchange controls. Such measures helped destroy world trade during that horrible decade.
Pomboy, at least in the Barrons piece, does not address the extensive anti-gold standard literature. (An interesting observation on the similarity of the gold standard and the euro by Martin Wolf is here. The best and most fun discussion Vitus has seen of the gold standard itself is by DeLong. Etc.)
Perhaps Pomboy is right. The interview, however, reminds Vitus of Meredith Whitney's ill-fated call for muni defaults on December 19, 2010.
In the long run, again, they both may be right. About the long run, Keynes (supposedly) said...
Thursday, July 19, 2012
Monday, July 16, 2012
The Bull Case for the US
I think we are going through the same recession "head fake" we have experienced for the past two summers. If correct, when it becomes apparent that no recession is on the horizon, analysts will again have to raise earnings estimates (like they have had to do for the past two years) with a concurrent raise due for the equity markets.
As scribed in the recent edition of The Economist (as paraphrased): America's economy is once again reinventing itself. The U.S. economy has repaired [itself] quickly in the last three years. Home prices are among the world's most undervalued (19% below fair value). U.S. banks [are] among the best capitalized in the world. Consumer debt loads are down. Exports are extremely strong. [And] energy, long the U.S.' "Achilles Heel," is now turning into an advantage with the shale gas boom.
---Trader prop. source
---Trader prop. source
Sunday, July 15, 2012
Quote of the day
[Romney is] like a teenager who stays up all night thinking of a way to impress the prom queen, and what he comes up with is kicking a kid in a wheelchair.
---Tiabbi on Romney at NAACP
---Tiabbi on Romney at NAACP
Friday, July 13, 2012
Slack Demand => Unemployment
The truth is always in the price. If there was not massive slack in the jobs market. then we wouldn't be seemg the trend In average hourly earnings down to a record low of 1.5% from 2% a year ago. To put this in perspective. at no time in the December 2007-lune 2009 Great Recession did this trend ever break below 3%. It is now half that pace, for an economy that allegedly just finished the third year of economic recovery
---Rosenberg today
---Rosenberg today
If the slaveringly rightest NFIB says the problem is demand, then...
In the latest NFIB (National Federation of Independent Businesses) small business sentiment survey, a mere 6% cited labour quality issues as a top concern. There were times In the past when more than 20% had the quality of available labour as their top complaint Labour costs were cited by only 2% of the sample of 740 as their chief concern too. If there is a noncyclical impediment, maybe it is in the form of govemment red tape (19%) and taxes (21%). But the one complaint that received the most votes was the sales environment and 23% cited this as their primary difficulty at the current time - just more evidence that much of the troubles in the labour market is related to soft cyclical forces.
---Rosenberg today
---Rosenberg today
Thursday, July 12, 2012
Republicans: Taxes are for the little people
“It’s really American to avoid paying taxes, legally,” said Senator Lindsey Graham, Republican of South Carolina, on Tuesday. He was defending Mitt Romney, who, as this morning’s editorial in The Times notes, appears to have the most elaborate history of tax avoidance – offshore tax havens, disputed sheltering mechanisms, complex trusts – of any major presidential candidate in history.
---David Firestone, NYT
---David Firestone, NYT
We actually do know the future
From Krugman today is the below chart. What do we notice about the chart? K uses it to bash the likes of Simpson and Bowles. To Vitus, this is a chart which shows us the Future.
We know that ZH, Rick Santelli, and many many others' ranting about imminent hyper-inflation is completely bogus.
Fine, but note the nature of the curve. It shows almost a symmetric behavior of interest rates before and after 1980. If it continues to be somewhat symmetric, it bodes ill for the economy. No significant recovery for 10 or 20 years.
Interest rates more than anything else tell us the state of the economy. They don't vary dramatically over time. That is a fact. Thusly, the economy's basic nature varies slowly also. This is not a statement about the stock market; it's about what the society, and so the economy, does over long time periods.
James Carville's comment about wanting to be re-incarnated as the Bond Market is a favorite quote in the finance community. Said community, end of the day, does not have a lot of wisdom embedded in its makeup. A few formulas and such - that's it. Useful day-to-day, but not profound. Eg, technical stock analysis is one of those things that makes great sense until it does not - which is quite frequently. However, the finance community does know that whatever drives interest rates is the fundamental life-force of economics.
We know that ZH, Rick Santelli, and many many others' ranting about imminent hyper-inflation is completely bogus.
Fine, but note the nature of the curve. It shows almost a symmetric behavior of interest rates before and after 1980. If it continues to be somewhat symmetric, it bodes ill for the economy. No significant recovery for 10 or 20 years.
Interest rates more than anything else tell us the state of the economy. They don't vary dramatically over time. That is a fact. Thusly, the economy's basic nature varies slowly also. This is not a statement about the stock market; it's about what the society, and so the economy, does over long time periods.
James Carville's comment about wanting to be re-incarnated as the Bond Market is a favorite quote in the finance community. Said community, end of the day, does not have a lot of wisdom embedded in its makeup. A few formulas and such - that's it. Useful day-to-day, but not profound. Eg, technical stock analysis is one of those things that makes great sense until it does not - which is quite frequently. However, the finance community does know that whatever drives interest rates is the fundamental life-force of economics.
Wednesday, July 11, 2012
US is 24th Least Corrupt Country. Wahoo!
A well-functioning market economy in many ways depends on a normative superstructure that's eroded by the ethic of money-making by any means necessary. When firm managers believe it is not only permissable but obligatory to engage in fraudulent and corrupt practices and to exert time and energy into rent-seeking, you ultimately destroy the background conditions of prosperity.
---Matt Yglesias
---Matt Yglesias
Banks rig Libor, Lie (subprime ratings), and Steal (foreclosure fraud), etc. But they still need bailouts.
It isn't clear that the LIBOR rigging had any major impact on typical households directly, but it probably had a big impact on many municipalities.
Something to ponder: The ability to rig a rate like that is basically a license to print free money for yourself. And still they need bailouts.
---Atrios
Something to ponder: The ability to rig a rate like that is basically a license to print free money for yourself. And still they need bailouts.
---Atrios
Rosenberg Daily - Investing
In my view. bond yields have further potential to drop under the assumption that the US (indeed. global) economy continues to expand below its potentiai You don't need a recession call to have deflation, and Japan is evidence of that, though a recession cannot be ruled out given how little a cushion the US. economy has with a sub-2% growth trend and fiscal retrenchment around the oorner combined with lagged effects of the European recession on exports and industrial activity,
The VIX index at 18x, the Investor Intelligence bear camp shrinking to less than 24.5% (42.5% for the bulls) and Market Vane sentiment at 59% (which is still constructwe for the S&P 500) do not tell me we are anywhere near a cathartic selling climax in equities just yet. But when the market shifts to an oversold extreme, only then will it be appropriate to shift asset allocation away from a defensive posture and more towards the opportunities that cyclical and growth stocks will inevitably offer once they price in the outlook currently being discounted by the Treasury market...
The VIX index at 18x, the Investor Intelligence bear camp shrinking to less than 24.5% (42.5% for the bulls) and Market Vane sentiment at 59% (which is still constructwe for the S&P 500) do not tell me we are anywhere near a cathartic selling climax in equities just yet. But when the market shifts to an oversold extreme, only then will it be appropriate to shift asset allocation away from a defensive posture and more towards the opportunities that cyclical and growth stocks will inevitably offer once they price in the outlook currently being discounted by the Treasury market...
Sunday, July 8, 2012
How Zero Hedge makes your money vanish
...As you might expect, it's not hard to look back at Zero Hedge's predictions and see that a large number of them are junk. For example, here's a bunch of posts from 2009 predicting imminent hyperinflation...
---Noah Smith
---Noah Smith
Friday, July 6, 2012
US investors are dangerously complacent regarding what is really going on in Europe.
This article quotes Finland's finance minister saying that the nordic nation is prepared to exit the Euro if it is required to pay the debts of other nations. She says that "Finland is not going to stay within the Euro at any price." This is a serious escalation of rhetoric by a top official and investors around the world should take note. The sentiment expressed by Finland's finance minister is not isolated. This sentiment is growing throughout Europe and poses a nontrivial threat to the integrationist project.
I believe US investors are dangerously complacent regarding what is really going on in Europe.
---Prop. Source
I believe US investors are dangerously complacent regarding what is really going on in Europe.
---Prop. Source
Rosenberg Daily - Jobs Numbers Summary
For the fourth month in a row nonfarm payrolls surprised the consensus to the downsrde — not to mention the ADP survey (which has overstated the official data by an average of 65k over this time frame). The 80k headline was a good 20% shy of Street forecasts and dragged the average tally for the second quarter to a mere 75k, nearly 70% slower than the 226k average gain in Q1 and the most sluggish performance since the third quarter of 2010 (so don't fret — that was the quarter that touched off QE2). This continues to go down as the most tepid recovery on record. In fact, even though the recession technically ended in mid-2009 with the help of the govemment defibrillator, I wouldn't even hazard to call this a recovery. What is typical for this part of the cycle is for payrolls to be up more than 240k in the 36th month into the expansion. That more or less puts 80k into a proper context. Something else to ponder is that 36 months into an alleged recovery, employment is still 3.6% below the prerecession peak. Scouring the historical record in the post-WWII era shows that it generally takes no longer than 25 months to recoup the job losses suffered in the recessionary phase. At the rate we are going so far this year, that fateful day won't happen until March 2015.
QOTD
In reality, Europe's economic situation is terminal without far more radical changes than those contained in this [last week's EU summit] or likely any other pact that will be reached.
---Rosenberg (yesterday)
---Rosenberg (yesterday)
Thursday, July 5, 2012
LIBOR for laymen
So, the LIBOR scandal: It's a big deal. it's confusing. And this@DylanMatt post will make everything clear: http://wapo.st/M7rB9l
Monday, July 2, 2012
Rosenberg Daily - Global Slowdown Showing Through
For now, [there is a] belief that the euro area has bought some more time (though this cuts both ways - it just means ongoing volatility until there is a concrete resolution at hand.) For the here and now. we have some shortcovering and end-of-quarter window dressing underpinning the price action in the marketplace...
At the same time. we have to fess up to the reality of a global economic downturn that is both continuing and spreading out. We have seen estimates show that 80% of the world economy is now In a visible deceleration. Global corporate earnings are now in contraction mode and the results over the past 24 hours have done little to reverse that trend. Ford's announcement that it expects to lose about $750 million from its overseas operations in Q2 due to the spreading European recession is certainly cause for pause. General Motors issued a similar statement that “it is tough in Europe right now". Indeed. Companies are pullmg back on spending and hiring plans too as the economic future is increasingly clouded — see Blame Fear, Not Greed, as Firms Hoard Cash on page B4 of the WSJ.
The U.S. labour market has hit a major speed bump. In the aftermath of the latest Challenger data showing a steep falloff in hiring intentions and a substantial increase in layoff plans. coupled with the poor employment readings in the latest Conference Board confidence poll, we have this ongoing upward drift in jobless claims. Not good.
Oh yes - the headlines read that initial claims “fell” 6k in the week of June 23rd but off an upwardly revised 392k level. This has been a pattern of late - upward revisions to the claims data, and the one thing we know about revisions is that. in a given direction for as long as claims have been (sic), they feed on themselves and are pro-cyclical. Incredibly and incredulously, initial jobless claims have been revised up every single time since the week of July 7, 2011...
The real economy may still be growing above the zeroline - though not by much. But nominal profits are now contracting and this is what equity investors inevitably pay for - earnings. not GDP. And earnings are no longer merely slowing but now are shrinking. This means more emphasis on tradmg up In quality, minimizing risks. and focusing on defensives over cyclicals with reliance on sectors and companies with track records of generatmg stahle cash flows in troubled times.
---6/29
At the same time. we have to fess up to the reality of a global economic downturn that is both continuing and spreading out. We have seen estimates show that 80% of the world economy is now In a visible deceleration. Global corporate earnings are now in contraction mode and the results over the past 24 hours have done little to reverse that trend. Ford's announcement that it expects to lose about $750 million from its overseas operations in Q2 due to the spreading European recession is certainly cause for pause. General Motors issued a similar statement that “it is tough in Europe right now". Indeed. Companies are pullmg back on spending and hiring plans too as the economic future is increasingly clouded — see Blame Fear, Not Greed, as Firms Hoard Cash on page B4 of the WSJ.
The U.S. labour market has hit a major speed bump. In the aftermath of the latest Challenger data showing a steep falloff in hiring intentions and a substantial increase in layoff plans. coupled with the poor employment readings in the latest Conference Board confidence poll, we have this ongoing upward drift in jobless claims. Not good.
Oh yes - the headlines read that initial claims “fell” 6k in the week of June 23rd but off an upwardly revised 392k level. This has been a pattern of late - upward revisions to the claims data, and the one thing we know about revisions is that. in a given direction for as long as claims have been (sic), they feed on themselves and are pro-cyclical. Incredibly and incredulously, initial jobless claims have been revised up every single time since the week of July 7, 2011...
The real economy may still be growing above the zeroline - though not by much. But nominal profits are now contracting and this is what equity investors inevitably pay for - earnings. not GDP. And earnings are no longer merely slowing but now are shrinking. This means more emphasis on tradmg up In quality, minimizing risks. and focusing on defensives over cyclicals with reliance on sectors and companies with track records of generatmg stahle cash flows in troubled times.
---6/29
Rentier Nation
[Thomas] Friedman argues that [cuts to Social Security of ~3%] are necessary to allow the country to pay for health care...[H]e might instead consider more open trade in health care. He might also consider ending patent monopolies for prescription drugs, which could save the country $270 billion a year (5 times the size of the Bush tax cuts for the wealthy) on drug expenditures. He might also consider allowing people to buy into the Medicare system. These routes would provide enormous savings and efficiency gains, although the primary losers would be wealthy people instead of retired workers.
---Dean Baker
---Dean Baker
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