Economy Recovering? No, it’s not. Housing? NO. Unemployment? NO. Stock Market? NO.
A couple of quick clarifications related to stories now in the news:
A. NO, housing has NOT hit bottom. If anyone tells you they think it has, just reply by saying: “Shut up, shut up, shut up, shut up.” Until they go away.
The way things stand today, housing won’t “bottom” this year, it won’t bottom next year, and it won’t bottom the year after that, and should you come across someone who has money and disagrees vehemently, please give them my email so I can make some extra cash on the side.
How do I know this? Well, I’ve been right since 2007 and that would be pretty remarkable if there was anything else that could possibly have happened… but there couldn’t have been, so the more interesting question is how can all these people running our show be so consistently wrong? That’s the question, and I’ve asked it before… are they stupid or lying?
Housing can’t bottom because there’s essentially no demand for housing, okay… very little demand for housing… and you don’t need a calculator to figure this one out. Follow me here…
- At least half the homeowners in this country are under water or effectively underwater, so they can’t move. And they used to be about 66 percent of home sales, those who would sell a home in order to buy another one.
- Getting a loan today requires 20 percent down at least and a fairly high credit score, and we’re short a few million people with either of those things going for them, right? (Average FICO at Fannie Mae still over 760.)\
- The only people selling now are those who have to, because this isn’t exactly the best time to cash in your equity position. And the only people buying are trying to steal something.
- The burden of student loan debt continues to cause people to delay family formation, and that means fewer first time buyers than in the past. (Allan Carlson PhD, president of The Howard Center for Family, Religion & Society has an excellent research paper here.)
- There’s a shadow inventory, made up of homes that have gone back to the bank but are not being put on the market. Why? Because there’s no one to buy them, silly. In Maricopa County, which is Phoenix et al, has about 16,000 properties listed in the MLS and roughly 112,000 REOs. Beverly Hills has a dozen homes on the market at the moment, and 186 REOs. Just for future reference, that’s not what a “bottom” looks like, millions of distressed and deteriorating homes being kept off the market.
- Foreclosures haven’t slowed down. No they haven’t. No… they haven’t. Banks slowed down on foreclosing this past year because they were waiting for the AG settlement to provide them with immunity from the whole fraudulent paperwork thing. They’re about to kick foreclosures back into high gear again, so NO THEY HAVEN’T. And there’s no reason for them to.
- Is that enough, or do you want to hear about aging baby boomers, changing attitudes about homeownership, or consumer debt ratios? ‘Nuf said, right? If you want more, it looks like Michael Olenick has a great piece on this subject this morning on Naked Capitalism here. (I haven’t read it all yet though, so let me know if I missed something important. I’m pretty sure that he and I agree on most everything related to this subject.)
Just try to remember what I’ve said countless times… NOTHING goes down in a straight line.
Warren Buffett admitted yesterday that he was “dead wrong” about housing when he predicted it would recover by now. That’s cute, isn’t it? The billionaire made a boo-boo. Ooopsie! But, he’s still a billionaire and the people that listened to him in 2009 and 2010 are the current wave of foreclosures at FHA, which by the way, is the new sub-prime and the next bailout for sure.
Buffett has no idea what he’s talking about. He’s been living in the same house in Omaha, Nebraska since 1958. Have you been to Omaha, Nebraska? Well, I have. And the fact that some multi-billionaire is still living in the same house he bought in 1958 in Omaha is not quaint… it’s not “old school.” It’s f#@king nuts. Insane. Weird. Like, as in… needs some sort of clinician to diagnose it, sort of weird.
I don’t know what his deal is… but I’ll bet it’s difficult to pronounce.
B. NO, unemployment is NOT “down.” The only thing that changed to any significant degree is the participation rate, which dropped to its LOWEST point in 29 years.
That means that more people stopped looking for work, not that more people found it.
The participation rate sunk to 63.7 percent last month, which is the lowest since May of 1983! Do you remember 1983? I do, and it was God awful. It means that roughly 88 million people in this country over 16 years old not only didn’t have a job, but weren’t even trying to find one. Not even trying.
I’ll bet they’re a cheery, upbeat bunch. Probably all out looking for houses to buy now that we’re hitting the bottom and all. Maybe Buffett will put them to work so they can all buy homes in Omaha…. and then kill themselves.
The employment-to-population ratio, which is the percentage of Americans that have jobs… HAS NOT CHANGED AT ALL. It’s 58.5… the SAME as it was in January 2010. Oooh baby… what our dust, we’re recovering now.
Oh, wait. That’s right… I totally forgot… everything’s fine… it’s a “jobless recovery,” remember? So, why is Bernanke so worried about the whole unemployment thing anyway? It’s “jobless” so we’re right on track, we’re in line with the forecasts… hitting the numbers perfectly.
The “headline” unemployment rate in which we like to bathe in this country only counts people who answer the phone and tell the survey taker that they’re actively looking for work. And if more people were looking, then the unemployment rate would be a lot higher. So, what Obama really needs is for more people to STOP LOOKING. And if that doesn’t make you want to chew on glass all by itself, then I don’t really know what to say to you.
Seems like most folks are cooperating though, because at the beginning of this month, based on the latest census data, the Labor Department increased the number of working age people by 1.5 million, and of those 1.25 million were not even looking for work, so you gotta’ figure they’re all Obama supporters, right? Just doing their part.
Bloomberg’s got the data here, in case you feel a need to check my numbers.
C. NO, the stock market at 13,000 doesn’t mean anything good. Think of it as Bernanke pushing string.
The Fed chief continues to do the only thing he can do, I suppose… come right out and promise low interest rates until at least 2014 and pump money into the system like a mad man. The problem is that money isn’t exactly going places.
Since the recession in 2008, M1 money supply has increased by an absolutely jaw-dropping 60 percent, coming in over $2.2 trillion in January of this year, and with no end in sight… it’s going higher for sure. And tons of cash makes the stock market happy, but today’s cash flood isn’t doing much for the economy.
Money supply is one part of the equation, but the other component to the deal is called “velocity,” and the velocity of money in this country has fallen off a cliff, going from 10.37 in late 2007 to 7.09 as of late 2011. Ouch.
Velocity of money is about how fast money is changing hands, buying goods and services… you know, making for economic activity. And the scads of money Bernanke continues to pump into the system with reckless abandon isn’t moving… it’s not changing hands… he’s just pushing string, get it?
As a result of all this, what they call the M1 “multiplier” has stayed below the 1.0 level for the last three years. The multiplier effect is an economics term that refers to the amount of commercial bank money that’s created by central bank money. So, it’s like the Fed increases it’s loans to banks and its purchases of government securities (called bonds) and by doing so pushes money into the commercial banks who are in turn supposedly “encouraged” to loan it out and earn interest, and thereby turn the Fed’s one dollar into more than one dollar.
Except it’s not happening, right? In fact, between August 2008 and November 2009, bank reserves grew by 500 fold, from $2 billion to one trillion. The banks didn’t lend it out. They didn’t find the excess money very encouraging. Do you know why? Because they knew that we were getting screwed, that’s why.
They knew we were in debt big time, because they’re the ones that put us there, and they knew that we’d be getting no help from the government, so there weren’t a whole lot of people to lend it to without taking on too much risk. So, they just kept it. And that’s why I keep saying, it’s not a liquidity crisis, it’s a credit crisis.
So, you know you have a credit crisis if the money multiplier is 1, right? Because if banks were lending the money out, the multiplier would have to be greater than one, right?
And when you have a credit crisis, then many people can’t buy houses, and that means that the prices of houses will go DOWN. And that means that we won’t spend like we used to when our houses were worth a lot more and there was credit available, and that means companies will make less money and lay people off. And that leads to more foreclosures, which puts additional downward pressure on house prices, which leads to more foreclosures still.
So… super low interest rates for an extended period of time… literally trillions in cash sitting in bank reserves with more being pumped into the system every day, but with the velocity of that money falling and a multiplier that stays at 1… add it all up and what do you get?
Well, on one hand you get a stock market that’s artificially pumped up by the Fed’s assurance of continued low rates, and a free flowing money supply. But on the other hand you have anemic velocity, a multiplier stuck on 1, and unemployment that’s only getting worse, which means company’s won’t be growing they’ll be shrinking… so you has is an economy that’s deflating.
Bernanke would rather deal with just about anything than deflation, so he just keep a-printing and a-pumping hoping against hope that one day the banks will be so bloated with cash that they loan it to anyone that asks. It’s really quite sad, if you think about it. Poor little man… only knows one trick and when it isn’t working all he knows to do is just try it over and over again. Makes me get all teary eyed, poor guy. Someone should really teach him a new trick.
Last thing… take the artificially pumped up stock market and hold it up next to the dog-doo economy and what do you see? You see some seriously over valued stocks, which is another way of saying that you see stocks priced to deliver some exceptionally poor returns to investors.
Because one day, the Fed won’t be able to pump, because the pump she will run dry, as all pumps do. And then what will be holding up the market at these levels… uh oh… no clothes… run away!
Then you’ll hear, “Come Mr. Tally man, tally me banana,” and daylight will come and you’ll want to go home.
So… housing is not, not, not at bottom, – check. Unemployment not improving – check. And does the stock market at 13,000 mean something to the economy? Nothing good – check.
Oh yeah… and then there’s always Greece, et al. Can’t forget them. Opah!
You might want to bookmark this page, so as the election gets closer and thing get even better than they are today, you’ll be able to contain yourself.
Mandelman out.
I guess one out of 3 ain't bad.
Yep, housing still sucks, and will for a while.
Your explanation of employment is completely wrong. I am willing to give you half credit though....
The number of people looking for work did not suddenly drop and therefore the unemployment rate dropped. What actually happened is that the census numbers (you remember the good ole census?) showed that there were far fewer people of working age, than were previously thought.
The reason you should be "railing" on the employment number, is the fact that the number of people who are underemployed, or working part time with no benefits, is ridiculously high.
Your explanation for the dow 13,000 is completely wrong. The Dow is reaching 13,000 not because of anything, other than the fact that the earnings of the companies in the Dow, is at multi year highs. Yes, I said multi year highs.
The multiples that stocks sell at is extremely low. this makes the price of stock attractive to owners. Consequently, this has zero to do with "pushing a string".
More to the fact, this has everything to do with companies laying off employees, and getting the most out of the rest of the employees. The employees who are so afraid of joining their former co-workers in the unemployment line.
Hey Martin,
Talk about THAT!!!
About 70 resignations so far this month.
Kevin Rudd austrailian foreign minister resigns
http://www.huffingtonpost.com/2012/02/22/kevin-rudd-resigns_n_1292796.html?ref=world
Senior isreali official steps down
http://www.haaretz.com/news/national/senior-official-at-netanyahu-s-office-to-resign-following-eshel-affair-1.414011
Mumbai congress chief resigns
http://www.ndtv.com/article/india/corruption-case-mumbai-congress-chief-kripashankar-singh-resigns-178709
Dutch labor leader
http://www.ft.com/cms/s/0/69dbef00-5bdc-11e1-bbc4-00144feabdc0.html?ftcamp=published_links%2Frss%2Fworld_europe%2Ffeed%2F%2Fproduct#axzz1n90gb9qB
Komen vice president of public policy
http://www.thelantern.com/campus/vice-president-of-public-policy-resigns-after-controversy-with-planned-parenthood-1.2771477
Cincinnati treasurer resigns
http://news.cincinnati.com/article/20120215/NEWS0103/302140118/Kenton-treasurer-resigns?odyssey=tab%7Cmostpopular%7Ctext%7CFRONTPAGE
First white house CTO resigns
http://www.computerworld.com/s/article/9224126/First_White_House_CTO_Chopra_Resigns
Washington D.C Director of Homeland Security and Emergency Management Agency
http://www.examiner.com/government-in-washington-dc/west-resigns-from-dc-government#ixzz1n92mNz00
UK cabinet minister resignation
http://articles.cnn.com/2012-02-03/world/world_europe_uk-government-huhne_1_energy-secretary-criminal-charges-european-parliament?_s=PM%3AEUROPE
Arizona us attorney office criminal chief
http://www.mainjustice.com/2012/01/31/arizona-u-s-attorney-office-criminal-chief-resigns-amid-fast-and-furious-probe/
French minister resigns
http://www.reuters.com/article/2012/02/22/france-election-minister-idUSL5E8DM6FF20120222
Johnson and johnson ceo to resign
http://www.nytimes.com/2012/02/22/business/j-j-chief-to-resign-one-role.html
Chinese communist party secratary to resign
http://english.ntdtv.com/ntdtv_en/news_china/2012-02-21/reports-bo-xilai-resigning-from-china-s-politburo.html
Codexis (biotechnology company) ceo resigns
http://www.businessweek.com/news/2012-02-22/codexis-has-historic-drop-after-ceo-resigns-san-francisco-mover.html
Andarko (oil company) ceo to resign
http://www.wyomingbusinessreport.com/article.asp?id=62143
South african ceo
http://www.sowetanlive.co.za/news/business/2012/02/21/union-welcomes-ceo-s-resignation
Stryker ceo resigns
http://online.wsj.com/article/BT-CO-20120209-717910.html
Christopher and banks ceo
http://www.thehawkeye.com/story/Christopher---Banks-021912
Dubai aerospace ceo resigns
http://www.reuters.com/article/2012/02/15/emirates-dubaiaerospace-idUSL5E8DF6K520120215
Sonata ceo resigns
http://www.business-standard.com/india/news/sonata-ceo-resigns/464675/
Gibbs smith ceo
http://www.publishersweekly.com/pw/by-topic/industry-news/publisher-news/article/50679-gibbs-smith-ceo-resigns.html
Chairman of nabors (major oil company) resigns
http://www.sfgate.com/cgi-bin/article.cgi?f=%2Fg%2Fa%2F2012%2F02%2F06%2Fbloomberg_articlesLYZ0HO6S972K01-LYZXP.DTL
Sundia (chinese company) chairman
http://www.cnbc.com/id/46375123
Vestas ceo resigns
http://ventnorblog.com/2012/02/08/vestas-chief-financial-officer-and-deputy-ceo-resigns/
executive vice president, corporate and legal affairs and general counsel of Kraft Foods to leave
http://www.thelawyer.com/philip-morris-turns-to-kraft-as-general-counsel-resigns/1011509.article
China sky ceo resigns
http://business.asiaone.com/Business/News/Story/A1Story20120209-326872.html
Virginia railway express ceo resigns
http://fredericksburg.patch.com/articles/vre-s-ceo-will-resign-in-june
Head of abcs current affairs department resigns
http://news.ninemsn.com.au/national/8423709/abc-current-affairs-head-resigns
canrock ceo resigns
http://www.nasdaq.com/article/canrock-announces-resignation-of-president-and-ceo-greg-busby---quick-facts-20120217-00802
South africas largest supermarket chain ceo resigns
http://www.moneyweb.co.za/mw/view/mw/en/page295799?oid=561597&sn=2009+Detail&pid=287226
Edesa ceo resigns
http://www.latinfinance.com/Article/2980040/News/Edesa-Pauses-after-Edenor-CEO-Resigns.html
Neon finance director
http://www.thehour.com/story/518958/finance-director-resigns-from-neon-leaving-questions-behind
Kosmont ceo resigns
http://www.sgvtribune.com/news/ci_19933803
Two more greek ministers resign
http://au.finance.yahoo.com/news/two-more-greek-ministers-resign-160304687.html
Five bank and insurance directors resign
http://www.thefinancialexpress-bd.com/more.php?news_id=120917&date=2012-02-21
Swiss national bank chairman
http://moneylife.in/article/swiss-national-bank-chairmans-resignationmdasha-pointer-to-all-regulators-in-india/23690.html
From RMN http://kauilapele.wordpress.com/2012/02/20/and-now-even-more-heres-whats-going-on-with-those-bankers-articles-thanks-w-at-rmn/
Romanian prime minister and cabinet resign en masse
http://www.guardian.co.uk/world/2012/feb/06/romania-pm-cabinet-resign
Christian Ruff resigns (financial corruption charges)
http://www.dailymail.co.uk/news/article-2102524/German-President-Christian-Wulff-forced-resign.html
Chief executive of Saunderson House [Private Bank] steps down
http://www.ftadviser.com/2012/01/05/ifa-industry/people/saunderson-house-chief-executive-steps-down-M0vEWlpbSqKA3OCLZDCcGM/article.html
Switzerland’s central bank chief resigns
http://www.aljazeera.com/news/europe/2012/01/201219145612935171.html
Lloyds’ head of wholesale quits
http://www.bankingtimes.co.uk/2012/02/01/lloyds-head-of-wholesale-quits/
Spanish bank Santander’s Americas chief quits
http://www.expatica.com/es/news/spanish-news/spanish-bank-santander-s-americas-chief-quits_202395.html
Normura’s head of wholesale banking quits
http://www.euromoney.com/Article/2959021/Nomuras-head-of-wholesale-banking-quits.html
New Zealand Reserve Bank Governor Alan Bollard to Step Down in September
http://www.bloomberg.com/news/2012-01-29/new-zealand-reserve-bank-governor-alan-bollard-to-step-down-in-september.html
(Greece) Banks’ top negotiator quits Greece, but talks go on
http://www.france24.com/en/20120121-banks-top-negotiator-quits-greece-but-talks-go
Dhanlaxmi Bank CEO Amitabh Chaturvedi quits: http://www.livemint.com/2012/02/06160111/Dhanlaxmi-Bank-CEO-Amitabh-Cha.html
Falguni Nayar quits Kotak Mahindra Bank
http://articles.economictimes.indiatimes.com/2012-02-07/news/31031134_1_kotak-mahindra-bank-falguni-nayar-shanti-ekambaram
Iran denies central bank resignation rumor (don’t believe until its denied?)
http://finance.yahoo.com/news/iran-denies-central-bank-resignation-164154294.html
Four Priests Charged In Vatican Banking Scandal
http://articles.businessinsider.com/2012-02-09/europe/31040509_1_anti-money-laundering-law-vatican-finances-italian-tv
Tamilnad Mercantile Bank CEO resigns
http://www.business-standard.com/india/news/tamilnad-mercantile-bank-md-resigns/464259/
Kuwait Central Bank CEO resigns
http://www.washingtonpost.com/business/industries/kuwait-central-bank-chief-resigns-amid-political-tensions/2012/02/13/gIQAcxrOAR_story.html
Nicaraqua Central Bank Pres Rosales resigns
http://www.bloomberg.com/news/2012-02-14/nicaragua-central-bank-head-quits-amid-row.html
Social finance pioneer Hayday steps down from Charity Bank
http://www.socialenterpriselive.com/section/news/people/20120214/social-finance-pioneer-hayday-steps-down-charity-bank
World Bank CEO Zoellick resigns
http://business.time.com/2012/02/15/world-bank-president-zoellick-resigns/
Did the White House tell the World Bank president that he’s out?
http://bosco.foreignpolicy.com/posts/2012/02/15/did_the_white_house_tell_the_world_bank_president_that_hes_out
Slovenia TWO largest Banks CEO’s (2) resign
http://www.bloomberg.com/news/2012-02-15/slovenia-s-nova-kreditna-banka-maribor-ceo-plos-resigns.html
Governor of Kenyan Central Bank to Resign
http://www.centralbanking.com/central-banking/news/2152753/parliamentary-committee-calls-kenyan-governor-resign
Ken Ofori-Atta steps down as Executive Chair of Databank Group
http://business.thinkghana.com/pages/finance/201202/57429.php
Saudi Hollandi Banks Managing Director Quits
http://webcache.googleusercontent.com/search?q=cache%3AZVfFZypqVIcJ%3Awww.a1saudiarabia.com%2F4489-saudi-hollandi-banks-md-quits%2F+&cd=4&hl=en&ct=clnk&gl=us
Anz Bank CFO Australia resigns
http://www.proformative.com/news/1470243/cfo-anz-bank-resigns-amid-turmoill
Royal Bank of Scotland Austrailan CEO Stephen Williams resigns
http://www.theaustralian.com.au/business/wall-street-journal/andrew-chick-to-lead-royal-bank-of-scotlands-australian-arm/story-fnay3vxj-1226272513981
Blankfein out as Goldman Sachs CEO by summer
http://finance.fortune.cnn.com/2012/02/17/gary-cohn-goldman-sachs/
AJK Bank’s executive steps down
http://www.nation.com.pk/pakistan-news-newspaper-daily-english-online/national/18-Feb-2012/ajk-bank-s-executive-steps-down?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+pakistan-news-newspaper-daily-english-online%2F24hours-news+%28The+Nation+%3A+Latest+News%29
Head of Russian Bank Regulator Steps Down
http://newsley.com/articles/head-of-russian-bank-regulator-steps-down/206711
Credit Suisse Chief Joseph Tan resigns
http://www.businessweek.com/news/2012-02-20/credit-suisse-s-private-bank-chief-asian-economist-tan-resigns.html
Korea Exchange Bank chief steps down
http://english.yonhapnews.co.kr/business/2012/02/10/0503000000AEN20120210005100320.HTML
Kevin Rudd, Australia's Foreign Minister, Resigns Amid Political Dispute
www.huffingtonpost.com
CANBERRA, Australia — Australia's foreign minister resigned Wednesday in a bitter rift with Prime Minister Julia Gillard, who may poll party lawmakers next week on who should lead the country. Foreign Minister Kevin Rudd announced his resignation during a news conference in Washington, where h.....
Enraged... Wow... I'll check the links you provided, but please email me and tell me what you're thinking and tracking. mandelman@mac.com
actung...
Well, unemployment is due to both, the census data added 1.5 million of working age, but and the percentage of people answering their survey reporting that they have actively looked for a job last month, led to reporting the overall decline in the participation rate. The point is that the employment to population ratio remains unchanged. We are running in place, at best.
What is that we're doing that would possibly be creating jobs anyway?
The stock market is a different mess. You're saying that the market is up because companies are leaner and meaner and therefore posting record earnings.
According to Jonathan Golub, chief U.S. equity strategist:
"Without Apple's earnings, total U.S. corporate earnings growth goes from being in the mid-teens to only 2 percent. Apple's earnings "obfuscate" the underlying trend in corporate earnings, which he says is "really weak." He also pointed to stronger growth in foreign markets and high oil prices, both of which are good for S&P profits, along with a weaker dollar, as contributors to the profit trend.
Mr. Golub questions how the U.S. could have 2 percent economic growth in the face of 16-17 percent earnings growth. He reasons that cost-cutting and other corporate measures cannot explain the stellar earnings trend of the past couple of years. "If you take away that one name [Apple]," he says, "you get greater clarity on the fact that earnings are moving much closer with the direction of the economy."
I understand that companies have laid off and cut way back but they're still hitting weaker numbers, not the sort of thing that would reverse our downward spiral. The bottom-line is that the fundamentals haven't changed, the data and propaganda is to be expected, and the Multipli and velocity numbers support the stagnant or no growth expectations.
And then there's the credit crisis, Greece and housing. None of which has any positive news, beyond the hype. Be careful out there.
Always careful out there, M. Since you brought up Golub, I believe he was referring to the 4th quarter of 2011 where Apple was spectacular.
http://www.factset.com/insider/2012/2/earningsinsight_2.17.12
Fact still remains that 68% of companies increased their EPS.
Factoring out Apple is the stupidest thing one could say, by the way. (not calling anyone stupid, really)
It would be the same if we all decided to factor out Countrywide. yippee! the mortgage market looks great!
You would tar and feather anyone who would say that, yet you are embracing an idea that is similar ... for what reason?
Regardless of what information you are gleaning from Mr Golub, the P/E of the S&P (which does not include Apple) is 13.5, or so, and heading for 15 times earnings.
I am not about to argue employment figures. One can take the BLS numbers with a grain of salt, as I did with this statement from their latest results.
From the BLS
"Although the total
unemployment rate was unaffected, the labor force participation rate
and the employment-population ratio were each reduced by 0.3
percentage point. This was because the population increase was
primarily among persons 55 and older and, to a lesser degree, persons
16 to 24 years of age. Both these age groups have lower levels of
labor force participation than the general population."
What I do know is the underemployment is severe, and the long term unemployment numbers are stable ( yes we are standing still).
What are we doing about it, you ask? Nothing. WE cannot do Anything. The gov cannot do anything. The companies can, and as I said before, they laid off thousands to get lean.
All we can do at this point is wait until demand picks up. Demand is the only metric that expands the labor market.
Do we have demand? No! We are still lining up to buy products produced overseas. GM recently made record profits ( I am sure they are in Golub's multiple) but what was sold here to increase the labor front?
I believe they increased head count by 2000 this year .... hardly putting a dent in the numbers.
Velocity of money (Geldumlaufgeschwindigkeit) is not exact. It is just money supply and GDP. It all depends on WHO has the money you are talking about.
In the case of the US, would you say that the money is in the hands of the consumers, or the corporations, or the Government? Money is only good in the hands of those who exchange it for something of value.
If you buy an Apple product, and Apple hoards the cash, you don't exactly have velocity. Same with housing. If I sell my house and return the capital to the bank, and the bank does not lend, the effect of the transaction has little effect on velocity.
Yes, Q4 2011 is right. Is that bad? And yes, companies are hitting numbers but aren't they significantly diminished numbers? Like the new small GM? I even think I'm still seeing largo co. layoffs and chain store closings, but I haven't been writing them down. Sears, I think just closed six stores. JC Penny went to "low prices all the time." I know there are some car sales, but that's only because we've got an average age on the road over 11 years.
And I'm not embracing taking anything out of any calculation... I didn't mean to be so specific, more just that there's not broad fundamental support for the numbers.
Consumer spending is still falling, housing still falling, I don't think there's any question but that unemployment is still rising, although we won't know for a while, and the population has changed, credit markets are broken... it's just not good in any way. They seem to consistently fluff things up during the furst quarter each year and by June is "Surprise." Disappointment again, surprises economists.
Ceridian-UCLA Pulse of Commerce Index... the diesel fuel index... down in Jan and year over year. Gold and Silver rising.
And to your point about velocity and such, there is of course no question where the money is and that the velocity of it is falling. But counting on international sales and continuing down this path ends with a 70 percent top tax rate. I actually no longer believe that GDP is the right way to measure our economic performance. Financial sector is too large a share of corporate profits and money doesn't move from there either.
One way or the other, I just can't find a way to make the 13,000 mean anything but a crash ahead. Of course, it is an election year so who knows, but it's just the calm before the storm of another leg down.
I don't necessarily think it is wrong, to only look at Q4 and make assumptions, however, using a broader approach has its benefits. If you remember the 4th quarter, you will recall a huge amount of people coming out and predicting another imminent recession. If that wasn't enough to get people to close their wallets ...
Yes, large companies are still laying off excess workers. However, start-up companies are looking to hire, and some of the large companies are starting to gear up as well.
Jobs may be coming if we can get out of our own way.
http://abcnews.go.com/WNT/video/us-bridges-roads-built-chinese-firms-14594513?tab=9482930%3Fion%3D1206853&playlist=14594944
Or even the Keystone pipeline story. Miles and miles of steel pipeline from the best steelmill's in India? Say it is not so, Congressmen who want this debacle passed. 78% sourced in North America ... not even close.
There are jobs coming, but we have to get out of our own way.
I'll stop with the growth for fear of vomiting to much polyanna.
However, If you look company by company you will see the winners and losers coming out. Companies like AMR who have shown Year after year how inept they are at running an airlines, and companies like HP and sprint, which are in the same boat are shrinking. Losing market and shedding jobs.
Companies like IBM and Apple are growing huge. As are Mcdonalds PNC Bank, and a whole lot more. All hiring.
http://abcnews.go.com/Business/wireStory/economy-grew-faster-pace-end-2011-15815596#.T07WwN0QJkA
I dont 'make much of Dow 13000 either. It is just a metric amongst many metrics to measure the health of an economy. Maybe prices for stocks are getting to lofty for the period, but they usually revert to a mean over the long haul.
As far as GDP, I never understood using this data as a measure of economic health. Or growth for that matter. If the shipping raw material to Asia for finished products to be sold cheap here is a driver of the economy, then the whole scheme needs to be reworked.
We are or soon will be a net exporter of fuel. We are converting diesel engines to Nat gas, yet Diesel fuel is rising .05 a month? something is wrong with that calculation too.