Orders to U.S. Factories Unexpectedly Declined 0.5% in June

 

"Orders placed with U.S. factories unexpectedly declined in June, reflecting less demand for business equipment and the biggest decrease in bookings for non- durable goods in more than three years.

The 0.5 percent drop in bookings followed a revised 0.5 percent increase in the prior month, the Commerce Department said today in Washington. The median forecast of economists in a Bloomberg News survey called for a 0.5 percent gain. June orders for durable goods climbed 1.3 percent, revised from the 1.6 percent surge reported last week. Demand for non-durable items, reported today for the first time, slumped 2 percent, the biggest drop since March 2009.

Orders may have waned last month as well, according to a purchasing managers’ report yesterday that showed manufacturing unexpectedly contracted in July. The industry, facing the headwinds of Europe’s debt crisis, a weakening global economy and a slowdown in corporate investment, is providing less of a boost to the economy."

http://www.bloomberg.com/news/2012-08-02/orders-to-u-s-factories-unexpectedly-declined-0-5-in-june.html

Supposedly new employment numbers are being released today.

 

If we are "between recessions" it seems we now have a structural unemployment rate of around 8%.  Which would be a historic high for an inter-recession unemployment rate (back in the 1980s the assumption that structural unemployment would be in the 6%-7% range).

 

 

Surprising job numbers but what do they really mean. Well the amount of people listed on the unemployed rolls rose 45,000 in July and the amount of people in the workforce dropped 195,000. Party on.

 

July jobs data show some improvement in hiring

Unemployment rate ticks up to 8.3% from 8.2%

 

"Unemployment rose by 45,000 to 12.8 million for July, while employment fell by 195,000 to 139.5 million. The labor force decreased by 150,000 as some discouraged workers left the labor market. The participation rate inched down to 63.7% in July from 63.8% in the prior month.

An alternate measure of employment, which includes discouraged workers and those forced to work part-time because of the weak economy, ticked up to 15% from 14.9%."

http://www.marketwatch.com/story/july-jobs-data-show-some-improvement-in-hiring-2012-08-03

When you try to print a positive GDP and have a lot of that 'money' never make it onto main street, then you end up with a GDP that has decoupled from what its actually happening to your average citizens.

 

Debt crisis: live

"Ben Bernanke, the chairman of the Federal Reserve, has said that official economic data may mask the "struggle" that many Americans face, as Germany's foreign minister warns politicians "not to talk Europe apart"."

"In a speech delivered in Cambridge, Massachusetts, Mr Bernanke said that focusing only on the numbers would paint "an incomplete picture of what many individuals are experiencing":

...even though some key aggregate metrics--including consumer spending, disposable income, household net worth, and debt service payments--have moved in the direction of recovery, it is clear that many individuals and households continue to struggle with difficult economic and financial conditions. Exclusive attention to aggregate numbers is likely to paint an incomplete picture of what many individuals are experiencing. One implication is that we should increase the attention paid to microeconomic data, which better capture the diversity of experience across households and firms. Another implication, however, is that we should seek better and more-direct measurements of economic well-being, the ultimate objective of our policy decisions."

http://www.telegraph.co.uk/finance/debt-crisis-live/9455101/Debt-crisis-live.html

 

Wall St banks prepare for euro break-up

By Tom Braithwaite and Dan McCrum in New York and Patrick Jenkins in London

 

"Wall Street banks are increasingly telling counterparties and borrowers to restructure contracts or find another bank as they prepare for the potential exit of a country from the eurozone.

Using hedges, such as credit default swaps, US banks have reduced their net exposure to troubled eurozone countries. But they are also engaged in more work behind the scenes to ensure that if a country leaves the eurozone they will not have to receive payments in a devalued drachma or peseta."

 

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This number, GDP and workforce numbers are not adding up very well. One or more of these numbers being reported have to be wrong. Either GDP will be revised up at the next report, workforce numbers will be revised up or the productivity number will get revised down.

 

U.S. productivity rebounds in second quarter

Increase reflects faster output, slowdown in hours of work put in

 

"The Labor Department said Wednesday that productivity rose 1.6% in the April-to-June period, a sharp contrast to the first quarter’s revised decline of 0.5%. Economists surveyed by MarketWatch expected productivity to climb by 1.3%."

http://www.marketwatch.com/story/us-productivity-rebounds-in-second-quarter-2012-08-08

 

^That's the best 'source' you have cited so far in this entire 131 page blog! ;)

 

*I take that comment back due to your edit.  There's nothing wrong with citing UO as a source.  A lot of people come here for information and reference

^That's the best 'source' you have cited so far in this entire 131 page blog! ;)

 

Actually its the second time I have cited that great source.

 

I think its starting to become more clear someone or someones will be exiting the EU over the next year or so. The goal will be to do it in an 'orderly' fashion.

 

Debt crisis: euro founder Otmar Issing admits some countries could leave EMU: live

 

"Otmar Issing, one of the founding fathers of the euro, believes some countries may not be able to remain in the currency bloc but Germany would be better off staying in."

 

"Asked in the book how strongly he was concerned about the euro, he said:

 

Much more strongly than I could have ever imagined. We are still a long way off saying 'that's it, now we are sure to make progress'. Substantial reforms in almost all countries are still pending... One should focus on bringing the euro back to what it was meant to be, a stable currency, stabilised by an independent central bank, which follows a clear mandate, nothing else, and that the other protagonists, especially national governments, do their homework.

 

"There is no quick fix and anything in the direction of [jointly-issued] euro bonds or something similar would mean for me the end of the stability-oriented currency union.

 

"The less politicians address the root of the problems, the more they look with their expectations and demands to the ECB, which is not made for this. It is a central bank and not an institution to rescue governments threatened by bankruptcy. A central bank always also acts as a lender of last resort for the banking system - but it does not rescue governments."

 

http://www.telegraph.co.uk/finance/debt-crisis-live/9460910/Debt-crisis-euro-founder-Otmar-Issing-admits-some-countries-could-leave-EMU-live.html

Weekly jobless claims fall unexpectedly

"Claims down 6,000 to 361,000 in week ended Aug. 4

WASHINGTON (MarketWatch) — The number of Americans filing for unemployment benefits fell unexpectedly last week, government statistics showed on Thursday.

Jobless claims fell 6,000 to 361,000 in the week ended Aug. 4, according to the Labor Department. Economists surveyed by MarketWatch had projected claims would rise to 370,000."

http://www.marketwatch.com/story/weekly-jobless-claims-fall-unexpectedly-2012-08-09?dist=lcountdown

 

 

Wholesale Inventories Drop MoM First Time in 9 Months

"As we noted last night, inventory destocking is the great unknown as far as consensus expectations and the wholesale inventories data this morning just confirmed that this is a worrying trend. With the first drop MoM since September 2011 and dramatically missing expectations, inventories dropped 0.2% and perhaps more worryingly - given the drop in inventories - is the critical inventory-to-sales ratio has now risen two months in a row as clearly sales are dropping faster than companies were expecting."

http://www.zerohedge.com/news/wholesale-inventories-drop-mom-first-time-9-months

 

 

Bloomberg Consumer Comfort Index Back At 'Severe Economic Discontent' Level

"Bloomberg's Consumer Comfort index slipped back below -40 this week (despite all the market ebullience) indicating empirically at least a period of severe economic discontent among the most critical segment of our economy. Worst still, the outlook for the economy is its weakest in six months and the last two months have seen confidence on the economy plunge its fastest in 13 months."

http://www.zerohedge.com/news/bloomberg-consumer-comfort-index-back-severe-economic-discontent-level

 

 

U.S. home prices rose 7.3% in second quarter

"WASHINGTON--U.S. home prices posted the strongest quarterly increase in more than six years in the second quarter of the year and rose in 75% of local markets, another sign that the housing market is turning around.

The national median price for single-family homes sold in the April-June quarter was $181,500, up 7.3% from the same quarter a year earlier, the National Association of Realtors said Thursday. It was the biggest increase since the first quarter of 2006."

http://www.marketwatch.com/story/us-home-prices-rose-73-in-second-quarter-2012-08-09

 

 

Debt crisis: live

"Christian Noyer, a member of the European Central Bank's governing council, said the bank should be ready to intervene decisively in bond markets very soon as the bank slashed its growth expectations for next year."

http://www.telegraph.co.uk/finance/debt-crisis-live/9462653/Debt-crisis-live.html

Numbers are now higher month over month and year over year.

 

Number of Homes Facing Foreclosure Rose in July

"More U.S. homes started on the foreclosure path in July, as lenders tackled a backlog of mortgages gone unpaid even as they pulled back on home repossessions.

The number of homes that received an initial notice of default — the first step in the foreclosure process — increased 6 percent in July compared to the same month last year, foreclosure listing firm RealtyTrac Inc. said Thursday.

Filings of initial default notices have increased on an annual basis for three months in a row."

http://www.cnbc.com/id/48563823

 

 

Yes we are going to charge you, oh wait, maybe we won't since we 'magically' waited until the statute of limitations are about to run out. oops, our bad. Carry on boys.

 

SEC abandons subprime probe of Goldman

"The SEC notification comes only six months after the regulator gave Goldman a “Wells notice” indicating that the former planned to recommend charges against the bank. The commission had originally said it was examining whether an array of big Wall Street banks including Goldman, JPMorgan and Wells Fargo had missold such mortgage-backed securities to investors.

The SEC’s decision to drop the investigation comes as authorities are approaching a statute of limitations deadline for mortgage securities issued before 2007.

Most of the deals were created in the boom years of 2006 and 2007, meaning 2012 will be the regulators’ last chance to file charges alleging mis-selling unless they extend the timeframe."

 

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Japan’s economic growth weakens sharply

"HONG KONG (MarketWatch) — Japan’s economic growth sharply decelerated in the April-June period as consumption weakened after a solid increase in the preceding quarter and as exporters struggled because of a strong yen.

Gross domestic product grew an annualized 1.4% from the preceding three months, the Cabinet Office reported Monday, with the result marking a sharp cooling from the upwardly revised 5.5% expansion in the January-March quarter.

The result fell far short of expectations for 2.7% growth, according to a Dow Jones Newswires survey, as a strong Japanese yen pressured the country’s exports.

On a quarter-on-quarter basis, Japan’s economy grew 0.3% in the three months to June, slowing from 1.3% the previous quarter and missing a 0.7% forecast. The annualized gain for January-March was marked upward from 4.7% previously."

http://www.marketwatch.com/story/japan-economy-shows-anemic-q2-growth-2012-08-12

 

 

So, if Greece continues in the Euro experiment they end up in a depression that has very little light at the end of the tunnel. If they default and go back to their own currency they end up in a depression with a light at the end of the tunnel, since they can then control their currency to make their exports more competitive on the world market.

 

Debt crisis: live

"Angela Merkel returned from holiday to find that Greece's economy shrank 6.2pc in the second quarter of the year as the German economy minister said he was disappointed with Greece's efforts to implement necessary reforms."

http://www.telegraph.co.uk/finance/debt-crisis-live/9471282/Debt-crisis-live.html

This is from earlier in the month, but an example of how the politicians & bureaucrats might have finally stopped kicking the downward mobility/ slide-in-to-homelessness can down the road:

 

What do jobless do when unemployment checks run out?

 

"The cutbacks, required by a federal law passed in February, are already taking a toll. They are nudging some Americans into poverty, straining social services just as states and localities face their own budget woes and further crimping weak economic growth as those who lose benefits spend less....

 

......Economists worry most about the likely suspension of all benefits past 26 weeks at year's end. The average unemployed American has been out of work 40 weeks, according to the Labor Department, and there are still about three jobless people for every job opening.

 

"We're still in a world where you can't expect anybody to find a job within a specific period of time because there aren't enough jobs out there," says Jesse Rothstein, economist at University of California-Berkeley. "I think it still calls for pretty long extensions.".....

 

.....Since jobless people tend to spend virtually all of their income, the phase-out of benefits may cut up to two-tenths of a percentage point off economic growth over the next year, says Mark Zandi, chief economist of Moody's Analytics.

 

 

So we are going to see this start to hit in a big way later 2012 and 2013, perhaps? 

 

Times are going to really suck.

from the article:

 

Joe Sangataldo, 54, of Vineland, N.J., is healthy and eager to work, making his grinding two-year job hunt even more frustrating. .....

 

....his search for civil-service jobs proved fruitless. He lived off jobless benefits for about 21 months until the $407 weekly check stopped July 7. Sangataldo has sought jobs as a front-desk clerk in Atlantic City, a server at a cookie stand, and a bathroom janitor. With Vineland area unemployment at 13%, he still has come up empty.

 

....this for a guy who has a bachelors degree in Human Resources and an associates in Accounting.  Pretty sad situation when even the most basic of jobs aren't available. 

 

Pretty sad, and  it says we have a real problem here.  We are going to be seeing a lot more people on the street soon.  Can't see how we won't.

 

 

Im wondering how one prepares for becoming homeless. 

 

I guess you'd have to get rid of your possessions somwhow (yard sales, or just junk them) and also your clothes.

 

You would probably want a minimal amount of clothes to take on the street with you.  Maybe a toothbrush and razor?  Stock up on deodrant and shaving cream?

 

Is there anything special you'd take beyond a necessity?  I'd probably take my partners ashes and our old photo album.  Keep the memories with.  That would be the bottom line minimal thing to take, at least for me.

 

 

^"Prepare for becoming homeless?" I thought if one became homeless, it was already too late to prepare, unless he was doing it for a reason other than necessity.

 

Homeless folks who I have met personally have had very few possessions. Besides the clothes he was wearing, one man owned a sleeping bag, one owned a winter coat that he stored at a friend's place in the summer, and another owned some camping gear including a tent.

 

I read of a guy who went through college living in a tent on campus, in a different place every night, but he wasn't truly homeless; he just didn't want to spend any money on rent. 

 

What i meant was that if you didn't have work, thus no income to pay rent & utilities and were losing your house or apartment and had no place to stay or live you'd have to plan on becoming homeless...

 

...there would be a point when you'd see that coming on and then have to plan for it, shedding your possessions and deciding what to take with you when you hit the street.

 

 

So here is the headline today.

 

U.S. retail sales jump 0.8% in July

"First monthly increase after three straight declines"

http://www.marketwatch.com/story/retail-sales-jump-08-in-july-us-data-show-2012-08-14

 

 

Here is the details. Actually sales declined from $405 million to $402 with some other massaging of the numbers going on.

 

Mystery Of July Retail Sales "Beat" Solved: It Is All In The "Seasonal Adjustment"

"The reason for this is because we happened to notice that Not Seasonally Adjusted (full series here) retail sales data in July actually declined by 0.9% from $405.8 to $402 billion."

"What we found would have shocked us if indeed this is not precisely what we expected: with the July seasonal adjustment factor routinely subtracting a substantial amount from the NSA number, averaging at -$5.2 billion, in 2012, for the first time this decade, the seasonal adjustment not only did not subtract, but in fact added "value" to the NSA number, resulting in a seasonally adjusted number that was $1.9 billion higher than the NSA number at $403.9 billion.

So what would have happened if instead of arbitrarily deciding to add a seasonal contribution for the first time in a decade, the Census Bureau had used the last decade average factor of $5.2 billion (not adjusted for inflation, so the end number would be far greater)? Instead of rising by 0.8% Seasonally Adjusted retail sales would have declined from $400.7 billion to $395.5 billion, or a 1.3% decline."

http://www.zerohedge.com/news/mystery-july-retail-sales-beat-solved-it-all-seasonal-adjustment

 

So it appears if they had kept with their typical formula that they have used for the last decade, for July, we would have seen a -1.3% decline. Oh well, I am sure the headline number makes the masses and wall street happier.

What i meant was that if you didn't have work, thus no income to pay rent & utilities and were losing your house or apartment and had no place to stay or live you'd have to plan on becoming homeless...

 

...there would be a point when you'd see that coming on and then have to plan for it, shedding your possessions and deciding what to take with you when you hit the street.

 

 

 

we could talk about this in another thread, but the most popular trend in the last couple of years seems to be people taking to their cars, keeping whatever they can in the cars. Several places have permits (churches, wal-marts) that allow homeless people to park their cars in their lots overnight and create overnight pop-up community of families living in cars. It's very hard to imagine.

What i meant was that if you didn't have work, thus no income to pay rent & utilities and were losing your house or apartment and had no place to stay or live you'd have to plan on becoming homeless...

 

...there would be a point when you'd see that coming on and then have to plan for it, shedding your possessions and deciding what to take with you when you hit the street.

 

 

 

we could talk about this in another thread, but the most popular trend in the last couple of years seems to be people taking to their cars, keeping whatever they can in the cars. Several places have permits (churches, wal-marts) that allow homeless people to park their cars in their lots overnight and create overnight pop-up community of families living in cars. It's very hard to imagine.

 

Low rent old motels and campgrounds are also becoming homes for families as well. I have seen this in the Town I live in and in many parts of Colorado. Its sad and doesn't reflect well, in my opinion, on the level of 'civilization' (not sure that is the best word) of our society.

 

I have dealings with some non profits and they will tell you that needs are greater today than any time in recent history. Apparently the 'recovery' is leaving more and more behind and this is in a region that is considered one of the wealthiest areas of the US.

 

This probably could be a huge thread on its own, but with all the wealth in America, children and their parents should not have to live in a car, or tent.

Industrial production climbs 0.6% in July

"WASHINGTON (MarketWatch) — Industrial production picked up in July after two months of slight growth, the Federal Reserve said Wednesday in the latest reading that shows the economy in the third quarter got off to a decent start.

Industrial production rose 0.6% in July after slender 0.1% monthly gains in May and June, the Fed said. The Fed had previously reported a 0.4% gain in June and a 0.2% drop in May.

The 0.6% gain was as expected in a MarketWatch-compiled poll of economists."

http://www.marketwatch.com/story/industrial-production-climbs-06-in-july-2012-08-15-91032518?dist=lcountdown

 

 

August Empire State index falls to negative figure

"WASHINGTON (MarketWatch) — Manufacturing activity stayed weak in the New York region during August, data showed Wednesday, raising concern that a slowdown seen in the factory sector since June could be more than a temporary soft patch.

The Empire State index fell below zero, sinking to negative 5.9 in August, worse than the 7.4 reading in July, according to the Empire State manufacturing survey released by the Federal Reserve Bank of New York.

This is the first negative reading since last October.

Fewer executives at manufacturing firms reported that conditions had improved in August, while more reported that conditions had worsened."

http://www.marketwatch.com/story/august-empire-state-index-falls-to-negative-figure-2012-08-15

 

 

Doesn't Take Much To Get Homebuilders Confident These Days

"We present the fudge free data on housing completions: not starts, not permits, completions, which is what you get on the other side of the homebuilding process once all i and t's have been dotted and crossed, because one can fudge both the start and permit metric more than Bank of Spain's X-13-ARIMA seasonal "models" can make MS' IPO track record successful. We leave it up to readers to decide just what homebuilders are so very confident about. Residual record hopium sloshing in the system notwithstanding.

 

The red arrows show the same level of confidence, at least as reported by the NAHB."

 

http://www.zerohedge.com/news/doesnt-take-much-get-homebuilders-confident-these-days

 

 

US Mortgage Applications Dropped Last Week

"Applications for U.S. home mortgages tumbled last week, with demand for new loans down for the fifth week in a row as interest rates held steady, an industry group said on Wednesday.

The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity, which includes both refinancing and home purchase demand, fell 4.5 percent in the week ended Aug 10.

The gauge of loan requests for home purchases, a leading indicator of home sales, dropped 2.0 percent.

The measure of applications for refinancing fared even worse and was down 5.1 percent."

http://www.cnbc.com/id/48671362

 

So homes being completed are still near all time lows, mortgage applications have now dropped for 5 weeks in a row, but the home builders confidence is at 2007 levels when they were completing 3x the amount of homes.

^

That is an absolutley fascinating time series since it goes back into the waning days of the great post WWII boom, and picks up the 1970s stagflation era, too...

 

The 1974 recession was the 'firebell in the night", signalling the end of the postwar expansion.

 

The two early 1980s recessions where the ones that pretty much finished off that postwar economic regime...and sent us into a new era. 

 

Wonder if we could interpret the period betw the 1980s double-dip and the recent "Great Recession" as its own economic era, and we are now entering a new one....

 

..interesting to see the 1980s was actually an era of decline in housing completions...and the 2000s look like a continuation of the 1990s....

Yes, love the graph. It perfectly illustrates the "rounds of sprawl" concept. And, just as I suspected, the early 2000s recession did little to curb sprawl. They just kept building anyway. The decline in building that didn't happen probably exacerbated the 2008 crash.

^

...i'd like to hear more about the 'rounds of sprawl' concept.  But interesting to see the 1980s drop, even during an expansion.

 

@@@

 

From the wonks at Brookings, more evidence that the economy is "growing" BUT that we appear to be locking-in a high rate of structural unemployment:

 

Employment Gains Keep Pace with Population Growth, but Leave Job Deficit Unchanged

 

Employer payrolls climbed faster in July than in any month since February, but households reported that fewer members were at work in July than in June. The mixed employment report reinforces the message from earlier reports that the economy continues to grow modestly. Since January labor market gains have been fast enough to keep pace with population growth, but not fast enough to put a dent in the nation’s unemployment rate. The number of unemployed and the unemployment rate were essentially the same in July as they were in January

 

 

Getting a bit off topic here, but what I mean by "rounds of sprawl" is that sprawl has not been constant but rather comes in spurts. The first round was during the 1920s with the emergence of streetcar suburbs. Then sprawl took a break for the most part until the '50s because of the Depression and WWII. Then it fired back up again rapidly. When the graph kicks in in 1965, there might have been a bit of a slowdown left over form the early '60s recession. But, look at how the housing graph doesn't necessarily move in lockstep with the recessionary periods. Sprawl didn't take a break for the early '70s recession, but did for the mid '70s one. Then you have a bit of mid '80s exuberance that dried up right around the '87 crash and the S&L collapse. But that wasn't a recession. I consider  the '20s Round One, the '50s-early '70s Round Two, don't really include that late '70s bump much because it wasn't very long, the '80s Round Three, the mid-late '90s Round Four and the early-mid 2000s Round Five. They all had different characteristics, architectural styles and features/amenities. Houses got progressively blander and cheaper looking both inside and out.

While I agree investors are waiting to see how events play out, there is a growing issue of distrust in the system. The Libor scandal, and many other illegal activities that have come to light over the last year or two is also making investors reduce their exposure to Wall Street. Add in the belief by many that the numbers that are being produced don't add up and you have some real issue that Wall Street and FEDs are going to need to deal with, sometime.

When you having something like the Stock Market that is built upon the idea that there is equality in the system and honestly in the numbers and then you have multiple items come forward that show these things are not true, you have a real problem.

 

Trading volume drop can’t just be blamed on summer

The month’s volume is on track for the lowest August since 2006

 

"Get used to it. Volumes could bump along at below-average levels for another three weeks, as investors hang on to recent gains and avoid making big moves before what’s seen as the next catalysts -- upcoming Federal Reserve and European Central Bank events.

On Wednesday, the volume of shares listed on NYSE Euronext’s NYX+1.55%  New York Stock Exchange totaled a paltry 2.64 billion, the fourth straight day with less than 3 billion shares changing hands and roughly 29% below this year’s average volume.The month’s average of 3.3 billion has dropped more than 40% from last August’s daily average."

http://www.marketwatch.com/story/trading-volume-drop-cant-just-be-blamed-on-summer-2012-08-16

Consumer sentiment rises in August

"WASHINGTON (MarketWatch) — A gauge of consumer sentiment rose in August on rosier views of current economic conditions, but remained relatively low, according to data released Friday by the University of Michigan-Thomson Reuters.

For a preliminary August reading, the UMich sentiment index increased to 73.6 — the highest level since May -- from a final July reading of 72.3."

http://www.marketwatch.com/story/consumer-sentiment-rises-in-august-2012-08-17-10103922?dist=lcountdown

 

 

Eurozone politicians at odds over break-up

Holland's finance minister defended the euro, saying the country never speculates about a break-up, after Finland's foreign minister warned the country was preparing for the single currency to split.

http://www.telegraph.co.uk/finance/financialcrisis/9482797/Eurozone-politicians-at-odds-over-break-up.html

 

 

That giant hole of defaults just keeps getting bigger.

 

Debt crisis: Spanish bad bank loans soar to fresh high

"Spanish bad bank loans soared to a fresh high in June, with almost 10pc of households and companies now behind on their payments."

http://www.telegraph.co.uk/finance/financialcrisis/9482208/Debt-crisis-Spanish-bad-bank-loans-soar-to-fresh-high.html

 

 

Finland prepares for break-up of eurozone

"Finland is preparing for the break-up of the eurozone, the country’s foreign minister warned today."

"The Nordic state is battening down the hatches for a full-blown currency crisis as tensions in the eurozone mount and has said it will not tolerate further bail-out creep or fiscal union by stealth.

“We have to face openly the possibility of a euro-break up,” said Erkki Tuomioja, the country’s veteran foreign minister and a member of the Social Democratic Party, one of six that make up the country’s coalition government."

http://www.telegraph.co.uk/finance/financialcrisis/9480990/Finland-prepares-for-break-up-of-eurozone.html

 

 

US Treasury Admits It Conducted A Circular Ponzi Scheme For Years

"...as part of its justification to demand faster liquidation of Fannie and Freddie's "investment portfolio" Tim Geithner gave the following argument:

This will help achieve several important objectives, including... Ending the circular practice of the Treasury advancing funds to the GSEs simply to pay dividends back to Treasury.

In other words not some fringe blog, not some "partisan" media outlet, not some morally conflicted whistleblowing former employee seeking immunity, but the US Trasury itself just admitted it had been engaged in circular check kiting scheme, which essentially has all the components of a Ponzi scheme in it, ever since the nationalization (about which there is no now doubt and which means the GSE's $6 trillion in debt is now fully on the Treasury's balance sheet) of Fannie and Freddie in 2008.

Transfer one more conspiracy theory into the conspiracy fact bin."

http://www.zerohedge.com/news/us-treasury-admits-it-conducted-circular-ponzi-scheme-years

Don't trust ZeroHedge's sensationalist headlines or their characterization of whatever facts they discover and/or report.  It's not a circular check kiting scheme, and the fact that he uses the phrase "circular Ponzi scheme" (just stringing together words with nefarious tones in order to sound ominous) ought to have convinced you to dismiss that columnist as just another sensationalist rhetorician.

 

Check kiting involves at least one account that literally has insufficient funds to cash the kited check (it uses the float to create the illusion that there are sufficient funds).  That is nothing like what is going on with the Treasury and the GSEs.  It's unfortunate that ZeroHedge engages in sensationalist (and factually inaccurate) rhetoric of this kind, because there is a great deal to legitimately criticize about the government's relationship with its GSEs, and easily-demolished arguments like this (i) stain the more legitimate criticisms of what the government is doing ("eh, these are just the same people who accuse the government of running a check kiting scheme") and (ii) suck up oxygen that could be used for addressing the much larger but simpler (i.e., less sexy) problem of the government guaranties of GSE debt.

ZeroHedge lays out concepts of which people need to be aware, but at the same time they need to remember that it's coming from the perspective of Superbears.

^Even that's too charitable, at least in this case.  It's not clear the zerohedge folks have the slightest idea what the recent GSE news was all about.

Corporate Profits Just Hit An All-Time High, Wages Just Hit An All-Time Low

Henry Blodget | Jun. 22, 2012, 8:55 AM

 

In case you need more confirmation that the US economy is out of balance, here are three charts for you.

 

1) Corporate profit margins just hit an all-time high. Companies are making more per dollar of sales than they ever have before. (And some people are still saying that companies are suffering from "too much regulation" and "too many taxes." Maybe little companies are, but big ones certainly aren't).

 

...

 

http://www.businessinsider.com/corporate-profits-just-hit-an-all-time-high-wages-just-hit-an-all-time-low-2012-6

Wages can't be at an all-time low. My dad used to make $2.00 an hour.

 

They  need to levy a huge tax on corporations that lays off people  and making a huge profit and reduce the tax on corporations that add people and making a profit or losing money.

^ Wages as a percent of the economy.

 

States already offer incentives for adding jobs. The federal government does to an extent. There are no incentives that will correct a massive and unproductive imbalance of wealth other than the income tax.

Corporate Profits Just Hit An All-Time High, Wages Just Hit An All-Time Low

Henry Blodget | Jun. 22, 2012, 8:55 AM

 

In case you need more confirmation that the US economy is out of balance, here are three charts for you.

 

1) Corporate profit margins just hit an all-time high. Companies are making more per dollar of sales than they ever have before. (And some people are still saying that companies are suffering from "too much regulation" and "too many taxes." Maybe little companies are, but big ones certainly aren't).

 

More accurately, a heavily-regulated environment plays into the hands of large, established players because regulatory compliance costs become more bearable with scale.  Even in an environment in which large players did not play significant roles in drafting the regulations to which they would be subject, the big players would have less reason to fear it.  And, of course, we know that the major players frequently are heavily involved in the drafting process.

 

Regulatory burdens are most onerous to small companies and startups that might threaten the models (and thus the revenues and profits) of the existing establishment.  Bob Evans can afford a regulatory compliance team that a local, independent restaurant cannot.  Kroger can afford a regulatory compliance team that anyone thinking of opening a mom and pop grocer could never dream of, especially at first.  Key, Huntington, and Fifth Third may grumble about Sarbanes-Oxley, the new CFPB, and so on, but they can deal with it--and many competitors that might have been able to emerge against them will remain just that: might-have-beens.

 

There is an important distinction between being pro-business and pro-market.  People on both the left and right lose sight of it.  Sometimes market-friendly policies may well lead to the destruction of businesses.  (A significant number of the nation's largest financial institutions might well have been on the receiving end of that had it not been for tremendous government support, for example.)

Corporate Profits Just Hit An All-Time High, Wages Just Hit An All-Time Low

Henry Blodget | Jun. 22, 2012, 8:55 AM

 

 

Very disturbing.

 

Regulatory burdens are most onerous to small companies and startups that might threaten the models (and thus the revenues and profits) of the existing establishment. 

 

Totally agree. This is also disturbing since small businesses and startups create so many jobs.

Goldman Non-Prosecution: AG Eric Holder Has No Balls

 

"But here’s the thing: most of the crimes Wall Street people commit involve highly specific, highly individualized transactions that won’t fit Eric Holder’s bag of cookie-cutter statutory definitions. That is not the same thing as saying they’re not crimes. They are: the crimes of the crisis period were and are very basic crimes like fraud, theft, perjury, and tax evasion, only they’re dressed up in millions of pages of camouflaging verbiage."

 

"You know that look a dog gives you when you show it something confusing, like an electric razor or a lawn sprinkler? That’s the look federal prosecutors give when companies like Goldman wave their attorneys’ sanctifying opinions at them. They scratch their heads and say: “Oh, wow, well since this was signed in Australia by three millionaire lawyers wearing magic invisibility cloaks, it really isn’t fraud! They’re right!”

As one high-profile attorney currently working on a closely-watched case involving a Wall Street bank put it to me yesterday: “With these Justice guys, everything the Wall Street lawyers say makes perfect sense to them, no matter how dumb it is.”

 

"It’s political, sure, these decisions not to go after the Goldmans of the world, but more than that what usually rules the day is just pure intellectual fear – appropriate in many cases, since any prosecutor who buys for a second any of the high-priced excuses being shoveled at them from corporate defense firms like Davis Polk or criminal defense mercenaries like Reid Weingarten (retained to defend Blankfein against possible criminal charges) probably really is no match, intellectually, for Wall Street’s lawyers.

 

They’re also no match morally. Wall Street firms pay their lawyers millions of dollars for their creativity, for their willingness to fight. They say to their lawyers, as Lehman Brothers said before it crashed: “We’d like to book $50 million in loans as sales. Find a way for us to call that legal.”

 

"Holder’s non-decision on Goldman is more than unsurprising. It amounts to an official announcement that the government is no longer in the business or prosecuting smart criminals. It’s pathetic. The one thing you pay any lawyer to have is balls, and our nation’s top attorney has none."

Read more: http://www.rollingstone.com/politics/blogs/taibblog/ag-eric-holder-has-no-balls-20120815#ixzz246klmCaZ

^^^ I like reading Matt's article, he simplifies all the bullshit that is happening in front of our faces. 

Agreed, Rollingstone has been one of the best at informing the public what has been going on.

Sales of existing homes rise 2.3% in July

 

"The National Association of Realtors said sales increased to a seasonally adjusted annual rate of 4.47 million from 4.37 million in June.

Economists polled by MarketWatch had anticipated a 4.5 million rate."

"Median home prices rose 9.4% year-on-year to $187,300, mostly due to upper-end home sales representing a larger percentage of the pie."

"Sales in homes priced below $100,000 actually fell 3.7% from a year ago.

Inventories increased 1.3% to 2.4 million, but the inventories actually tumbled 23.8% from a year ago. There are 6.4 months of supply at current sales rates."

http://www.marketwatch.com/story/sales-of-existing-homes-rise-23-in-july-2012-08-22?dist=lcountdown

 

 

I think its interesting the media point to Belize trying to pull a Greece move (which has all kinds of negative connotation to it). Maybe they are trying to pull an Icelandic move (which has a very different type of connotation).

 

Belize misses $23m interest payment as default looms

 

"Belize is in danger of defaulting on its debt after it missed a $23m (£14.6m) bond payment due on Monday.

The government still has a 30-day grace period to pay the interest, but said it was unlikely to be able to do so.

Creditors accuse Belize of trying to force a Greek-style debt restructuring on holders of the $550m bond, which represents half its public debt.

The row has drawn attention to Caribbean countries' growing debt burden amid falling tourism revenues.

Much of the region depends on tourists from Europe and the US for its income, but the global financial crisis has cut visitor numbers severely."

http://www.bbc.co.uk/news/business-19330491

They  need to levy a huge tax on corporations that lays off people  and making a huge profit and reduce the tax on corporations that add people and making a profit or losing money.

 

One of the more important rules of capitalism is that you can't pick the winners & losers.  They just naturally occur.  You have to allow the business cycle to run its course.  Sometimes a company may go through a layoff cycle after a new product has been developed & launched.  As soon as the government tries to implement some sort of tax to penalize them, the company will find a way around it, classifying the workers as temporary, or subcontracting the work, etc. 

Worth the read.

 

Beware the Faustian bargains of central banks

 

High quality global journalism requires investment. Please share this article with others using the link below, do not cut & paste the article. See our Ts&Cs and Copyright Policy for more detail. Email [email protected] to buy additional rights. http://www.ft.com/cms/s/0/acd91ad8-e79d-11e1-86bf-00144feab49a.html#ixzz24I1qDsPP

They  need to levy a huge tax on corporations that lays off people  and making a huge profit and reduce the tax on corporations that add people and making a profit or losing money.

 

One of the more important rules of capitalism is that you can't pick the winners & losers.  They just naturally occur.  You have to allow the business cycle to run its course.  Sometimes a company may go through a layoff cycle after a new product has been developed & launched.  As soon as the government tries to implement some sort of tax to penalize them, the company will find a way around it, classifying the workers as temporary, or subcontracting the work, etc. 

 

This may be true in a true capitalistic system, which we don't have and never really did.  Our system mixes a few different economic philosophies.  Specific to the idea, I wouldn't have a 'penalty' tax for layoffs..... but tax credits for each job created (here) might not be a bad idea.  That's not picking the winners, it is rewarding them.

 

 

You can't have it both ways. Either the economy is not in a recession and moving in the positive direction or we really are still in a recessionary environment. Back when QE was first done it was considered an emergency type action to a severe economic crisises. Are they saying these severe issues are still prevelent?

 

Get ready for QE3

Commentary: FOMC signals another round of bond-buying soon

 

"Top officials of the Federal Reserve are leaning strongly in favor of a third round of bond buying by the Fed, known colloquially as QE3, according to the minutes of the Aug. 1 meeting of the Federal Open Market Committee.

Here’s the money quote from the FOMC minutes: “Many members judged that additional monetary accommodation would likely be warranted fairly soon unless incoming information pointed to a substantial and sustainable strengthening in the pace of the economic recovery.”

http://www.marketwatch.com/story/get-ready-for-qe3-2012-08-22

More recession predictions...this one based on internal issues, not the foreign debt crisis:

 

CBO warns of significant recession if Congress doesn’t act to avoid fiscal cliff

 

(alarmist headline from a usually mainstream publication)

 

 

 

The nation would be plunged into a significant recession during the first half of next year if Congress fails to avert nearly $500 billion in tax hikes and spending cuts set to hit in January, congressional budget analysts said Wednesday.

 

The massive round of New Year’s belt-tightening — known as the fiscal cliff or Taxmageddon — would disrupt recent economic progress, push the unemployment rate back up to 9.1 percent by the end of 2013 and produce economic conditions “that will probably be considered a recession,” the nonpartisan Congressional Budget Office said.

 

 

^It's not an 'alarmist' headline..... it is exactly what the CBO forecast

 

^^yes..... which is not to say that things aren't moving in the right direction.  Scraping half the dog sh!t off the bottom of my shoe is 'moving in the right direction', but it doesn't mean I don't still have dog sh!t on my shoe

^It's not an 'alarmist' headline..... it is exactly what the CBO forecast

 

^^yes..... which is not to say that things aren't moving in the right direction.  Scraping half the dog sh!t off the bottom of my shoe is 'moving in the right direction', but it doesn't mean I don't still have dog sh!t on my shoe

 

QE is considered to be an extreme action for extreme economic conditions. Not something that you should implement when you are not even in a 'recession'. It would be more like saying, I have twice tried to scrap the crap off my shoes and its still there and now I must try a third time. While trying to convience everyone it actually worked the first two times.

The end of the tax cuts would have a slight depressing effect--in all fairness they did not stimulate the economy much during the Bush reign.  The tax cuts were not even his idea in the first place.  He was just countering presidential candidate Steve Forbes during the 2000 election. 

 

Spending cuts will harm the economy greatly.  Austerity in Britain put them into a long recession.  We should ultimately reduce defense spending, but not just go off a cliff. 

 

Public radio's "Marketplace" said the Congress will probably settle it after the November election.  Until then, they are just demagoging the issue.  Note the bogus claims that President Obama has increased spending.

Slumping Commercial Real Estate Sales Are Latest Flashing Red Non-Recovery Indicator

"Real Capital Analytics (RCA) released their US commercial real estate transaction data for July last night. The only way to interpret the data is - ugly. After a dismal June (down 33% YoY), July did not see any bounce and in fact plunged 20% YoY with transactions totaling $14.6bn. As Barclays notes, the takeaway is generally negative, as the growth trend has weakened considerably since March ( which was +62% YoY). What is interesting to us is that with Treasury yields so low, the cap-rate 'spread' makes commercial real estate relatively attractive and yet no-one's buying."

http://www.zerohedge.com/news/slumping-commercial-real-estate-sales-are-latest-flashing-red-non-recovery-indicator

 

 

U.S. weekly jobless claims rise to 372,000

"Applications reflect little change in nation’s hiring trends

Initial claims increased by 4,000 to a seasonally adjusted 372,000 in the week ended Aug. 18, the Labor Department said. That’s the highest level in five weeks.

Economists surveyed by MarketWatch had projected claims would rise to 369,000.

Initial claims from two weeks ago were revised up to 368,000 from an original reading of 366,000, based on more complete data collected at the state level."

http://www.marketwatch.com/story/us-weekly-jobless-claims-rise-to-372000-2012-08-23

So are banks and Fannie/Freddie holding back on inventory to restrict supply and increase prices? I think so. As before we can debate weather this is an OK practice or not. But it's becoming very clear it is happening in a large way and if successful (with home prices rising noticeable across the US this year - even though job growth and incomes are not) it will burden future buyers with home prices above the historic cost to income ratio, create another round of buyers in a manipulated/bubble market and end up in another future housing crisis.

 

Withholding 90% of the inventory is a clear manipulation of supply and demand that will simple blow another bubble at the expense of main street. It is also becoming clear that holding out 90% of the REO does take a coordinated efforts from the major banks and the government (Fannie and Freddie).

 

For those that don't believe that the banks and the government could coordinate at such a high level, we have learned about their joint efforts on libor and now we learn about their joint efforts on housing inventory.

 

'Shadow REO': As Many as 90% of Foreclosed Properties Held Off the Market, Estimates Suggest

"This home is part of what's known as the "shadow REO" inventory: repossessed homes across the country that banks or investors often purposely keep off the market. The practice isn't a secret, and refraining from dumping a large inventory of foreclosures on the market helps to keep home prices from crashing."

"As many as 90 percent of REOs are withheld from sale, according to estimates recently provided to AOL Real Estate by two analytics firms. It's a testament to lenders' fears that flooding the market with foreclosed homes could wreak havoc on their balance sheets and present a danger to the housing market as a whole."

"Analytics firm CoreLogic provided an even lower estimate, suggesting that just 10 percent of all REOs in the country are listed by their owners, which include mortgage giants Fannie Mae and Freddie Mac as well as the Federal Housing Administration. As of April 2012, 390,000 repossessed homes sat in limbo, while about 39,000 were actually listed for sale, said Sam Khater, senior economist at CoreLogic."

http://realestate.aol.com/blog/2012/07/13/shadow-reo-as-much-as-90-percent-of-foreclosed-properties-are-h/