"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.