Friday, October 19, 2012

Will The Real Economy Please Step Forward...

"I'm Dave In Denver and if you really believe that voting makes a difference, then I recommend voting early and often"
It really irritates me when I hear on financial tv and read in the online media/newspapers that the economy and the housing market are "recovering."  So I wanted to go over some data that is not widely presented in the above sources of news and let readers draw their own conclusion.  My contention is that, while on the surface the trillions pumped into the economy so far has provided a small, nominal "bounce" in the economy, beneath the "veneer" of this highly promoted bounce is an economy that is still rotting away at the core and that none of the structural and financial problems that caused the 2008 collapse have been fixed or even addressed.

First to address the economy in general.  I think most people who read this blog accept the concept that the Government manipulates and massages the economic numbers it reports, especially the big ones like unemployment and GDP.  They key to analyzing the extent to which they do so is to dig around for actual proof.  I've addressed unemployment in several recent posts, but if you want to see yet another take on this, read this report from John Crudele of the NY Post, who does the only truthseeking reporting in the mainstream media:  LINK

As for the economy, let's take a look at a couple earnings reports from this week.  IBM reported earnings earlier this week and its revenues fell more than analysts had forecast.  IBM is a GDP company people.  When IBM's revenues drop, it means the economy is not growing.  It's revenues in its "Americas" segment dumped 4%.  The U.S. market would be its largest market for both hardware and software services.  Businesses are not ordering hardware and services because they are not investing in growth because they don't see any.

Two more tech-oriented companies reported this week, Intel and AMD.  Combined they produce by far the majority of microprocessors in this country.  Intel's earnings and revenues "beat" estimates, but the estimate-bar had been lowered enough already by management and Wall Street to make it an easy one to jump over.  More significant, Intel lowered its outlook:   "The reasons for the lackluster report are pretty obvious. The PC market is crumbling; corporate IT departments have turned cautious, and the supply chain is trimming inventories"  LINK  Similarly, AMD reported disappointing results, lowered its outlook for the future and is cutting 1700 jobs:  LINK  Because microprocessors are used in almost everything electronic (durable goods), the microprocessor industry is a bellweather for the economy.

The last two company results are pretty much self-explanatory.  Both GE and McDonalds reported disappointing results.  Remember, we don't give a crap about reported net income, because that number contains a lot of accounting fiction and gimmicks in order to produce the headline grabbing, serially counterfeit earnings "beat."  GE's infrastructure-based orders dropped by over $21 billion and GE reduced its outlook  LINK  McDonald's actually missed its profit expectation and remarked that its growth was slowing.  I think we can all agree that these two significant GDP-relevant companies.

Obviously Google reported horrible earnings and, based on its stock action, the expectation for AAPL is that its ability to produce incremental growth is likely max'd out.  What all of the above indicate is that  big companies are not investing in growth and consumers are starting to really feel the bad economy, lack of jobs, and declining average income in their ability to spend over and above necessities.  Quite frankly, if the Government were to use a bona fide inflation number when it calculates the quarterly GDP, we would find that economy is actually contracting (negative real GDP) and has been for several quarters.

I wanted to go over the housing market today but I've run out of time to spend writing.  The bottom line for the economy, based on real numbers coming from companies which are considered, infrastructure/consumption/GDP-affecting businesses, is that the economy is in contraction.  I'll review the housing market next week, but once the affect of the recent massive Fed/Govt stimulus cycles through the housing market - and it largely has already as you'll see Monday - our economy is likely to go into crash mode.  My bet is that is why the big hedge-fund cash flow driven stocks like AAPL and GOOG are plummeting, meaning big hedge funds are pulling their cash out of the stock market.

Please note:  I will be a guest on new a.m./internet radio show based in Phoenix tomorrow at 2 p.m. Denver time.  The show is sponsored by All-Pro Gold, the program discusses wealth preservation, and you can listen to it by clicking on the "Listen Live" tab here:  LINK   Have a great weekend.


  1. Swaps Rule Sends Wall Street Into Clearing Limbo: Credit Markets
    The securities industry misinterpreted rules it assumed allowed as many as nine months to start moving swaps into clearinghouses that are meant to limit risks to the financial system.

    Firms dealing in $648 trillion of outstanding swaps contracts expected that trading during a phase-in period wouldn’t need to be processed by central clearinghouses, according to an Oct. 5 e-mail sent to clients by Davis Polk & Wardwell LLP, which represents the Securities Industry and Financial Markets Association. They were wrong, misreading one sentence in 17,000 words of regulation.

    Unless lobbyists convince the Commodity Futures Trading Commission to soften the deadlines, derivatives users that speculate on or hedge against losses on everything from changes in interest rates to corporate bankruptcies may need to find cash and Treasuries to back the trades sooner than they anticipated. The 2010 Dodd-Frank Act is requiring trades be moved to the central counterparties to limit the kinds of risks that fueled panic during the 2008 credit crisis.

    “Customers are scrambling to get arrangements with clearing brokers, so this is going to increase the operational complexity and challenge,” said Craig Pirrong, a finance professor at the University of Houston. Customers will have to find so-called margin that clearinghouses require to cushion against losses on swaps “that are all of a sudden going to be cleared,” he said, “so there’s the liquidity demand that’s also going to be fairly acute.”

    The swaps industry assumed it had been given the various implementation times to complete documents between banks and their clients for the clearing process, said Supurna VedBrat, co-head of market structure and electronic trading at BlackRock (BLK) Inc. BlackRock, the world’s largest money manager with $3.67 trillion of assets as of Sept. 30, has hundreds of accounts it has to bring into compliance, “a monumental task,” she said.

    “This is one of the biggest changes the financial markets have seen in a very, very long time,” she said. “We’re going from a world where there was a bilateral relationship between the counterparty and the fund to a relationship between six or seven entities to execute the same trade.”

  2. other GDP companies:
    Cummmins engine
    Fed Ex

    tons of others-a 1.25% admitted GDP does not get the job done and it has to show someplace. It also does not support a mid teens market PE, except when Uncle Ben and his merry bunch of who knows what manipulate interest rates.

    But then again, they have no other game plan.

    After the election congress has to deal with fiscal cliff and debt ceiling. Other than Ron Paul, how many really understand the inner workings?

    I will vote--but I will vote for:

    None of the Above. Its a statement and if enough would do it it would be one heck of a statement.

    1. I'm with Hal-- I take the time to go in and destroy my ballot because I hope the number of destroyed ballots is also counted and that, in itself, says something to the politicians (ie none of you douches on this ballot gives a rat's ass about me or my community and our future). I could be being idealistic, I guess.

      Justin from Canada

  3. But but .... Michelle just said that we are in the middle of a huge recovery!

  4. Greek Society Unravels Under Austerity Measures

    Costas Lapavitsas: Merkel's visit to Greece shows Eurozone leadership don't want to push Greece out, but situation is explosive as people are furious at austerity measures

  5. Social Media Bombs: Wells Fargo “Facebook-Bombed” By Hundreds of Messages in New Type of Activism
    The National People’s Action organized “Storm Wells Fargo Facebook Day” and hundreds of people partook. The focus of the action was to confront Wells Fargo for investing millions of dollars into private prisons. Of course, private prisons are a rapidly growing in the US as the slave population will need plantations to provide them food and menial labor to do. What the group did was organize individuals who were to post on Wells Fargo’s website protesting the afore-stated dollar investments into private prisons. This is a novel tactic, one I had not yet heard of, and I believe this tactic could be expanded upon and as effective as the cyber-attacks used by hacker groups.

    marketing in reverse?lol

  6. Full Show: Plutocracy Rising
    October 19, 2012
    Journalists Matt Taibbi and Chrystia Freeland discuss how far America’s super-rich will go to keep the One Percent in charge.

    1. Jersey: The richest offshore tax shelter of them all
      Among all the world's offshore tax shelters – the Cayman Islands, Bermuda, Gibraltar – the one at the top of the list is Jersey. While most everyone has heard of New Jersey, "old" Jersey has long eluded the spotlight. A 5-by-9-mile island just off the coast of France belonging to the British Crown, Jersey would rather be known for its delectable Jersey cream, cows and potatoes than its propensity for hiding billions. Yet walk into any bank on the island and anyone, not just the superrich, can open an offshore bank account without depositing a cent.

      In the island's glittering capital city of St. Helier, surrounded by yachts, champagne lounges and diamond shops, financial services professionals pack the streets, lined with nearly every global bank and a sprinkling of hedge funds -- the multibillion-dollar hedge fund Brevan Howard Asset Management and bulge-bracket bank Morgan Stanley (MS) are just two examples.

      I first learned of Jersey's tendency toward secrecy when it banned me from the island while researching a book investigating whether police officers and politicians were driven from their jobs while attempting to investigate decades of alleged rape, torture and the possible murder of children at one of the island's most notorious orphanages, Haut de la Garenne. The UK authorities have since invited me back, but only after detaining me for more than 12 hours in the basement of Heathrow Airport, going through my papers and enduring the glare of subsequent national press coverage from the BBC to the Guardian.

      This past month, members of both the UK and Jersey parliaments began a campaign to find out exactly how Jersey is run. Its medieval status as a so-called "peculiar possession" of the Crown endows it with some curious traits redolent of a modern-day special-purpose vehicle. Although it ultimately answers to the Queen, it acts autonomously, printing its own currency (pegged to the British pound) and presiding over its own parliament, judicial and financial systems.

      Jersey has a single newspaper, but it tends not to focus on questions of good governance, even as the island's voter turnout flags and its residents fall into increased muteness. Amid news of cover-ups in the UK in recent weeks and revelations this summer about what the Guardian dubbed as Jersey's "secrecy culture," Nicholas Shaxson, who wrote about Jersey in his 2011 best-seller, "Treasure Islands," warned last month of the dangerous road Jersey is headed down in potentially putting its image before its own democracy, stating, "This is just the snout of a gigantic black iceberg of global corruption."

  7. Sometimes we have to wake up, because when reality checks in , we get the truth splattered all over us and the sad fact is that we can't accept it. Like now,gold deflates then goes up then goes down of value. Considering the enormous quantity of gold above-ground in comparison with annual production, price is driven more by sentiment or demand instead of fluctuations in annual production or supply. Brian of how to sell your gold.

    1. "there is a 10-20% discount on the gold price in addition to the cost of providing a safe, convenient service " haha. go spam somewhere else. you aren't going to find anybody on this site falling for your cheesy sales pitch.