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What We’re Looking For To Go Splat! Part 1
- Bond
- Bureau of Labor Statistics
- Consumer Credit
- default
- Eastern Europe
- Emergency Unemployment Compensation
- ETC
- fixed
- Germany
- Greece
- Home Equity
- Initial Jobless Claims
- International Monetary Fund
- Ireland
- Italy
- Personal Consumption
- Recession
- recovery
- Reuters
- Sovereign Debt
- State Unemployment
- TARP
- Trichet
- Unemployment
- United Kingdom
- Vigilantes
We have started picking new companies for forensic
analysis, along with the ongoing study of the Pan-European Debt Crisis.
Below you will find a sneak peak of what we have unearthed but first,
the obligatory romp through recent news…
analysis, along with the ongoing study of the Pan-European Debt Crisis.
Below you will find a sneak peak of what we have unearthed but first,
the obligatory romp through recent news…
Bankrupt Consumers LOVE iPads: WSJ
- Consumers are filing for Chapter 7 bankruptcy more than ever,
choosing to liquidate their assets and be free of their debtors over
signing debt repayment plans as encouraged under Chapter 13 bankruptcy - Personal bankruptcies reached 1.41 million last year, up nearly a
third from 2008 (but the recession is over, don’t worry – this
particular stat is a non-issue in a jobless, V shaped recovery) - Regulations that sought to keep consumers from liquidating at the
expense of keeping some debt are not working, as the consumer is clearly
rejecting the opportunity cost of having any debt
Consumers Deleverage: Reuters
- Consumer credit unexpectedly took a sharp turn lower, and revolving
credit fell at a 13% annual rate - Consumers are throwing away credit cards, yet retail sales data
continues to rise, watch pending homes data on Monday for further
development.
Those companies that serve and rely on these very same consumers’
ability to spend are quite sensitive to the macro environment. Notice, I
said the companies, not necessarily the companies’ securities – at
least not yet. So, what does the macro/fundamental outlook look like?
Let’s glance at personal consumption over the 12 years or so…
Notice that the only real recovery is in the
volatile energy sector, and that is not discretionary! Automobiles,
clothing, furnishing, etc. are looking yucky!
This is an interesting development, for unemployment (real
unemployment that is) is still rampant. The federal government is
effectively funding and financing deficit state unemployment rolls (see
below for more detail). With record bankruptcies, deleveraging
consumers, and rampant unemployment combined with drastic drops in
consumer expenditures, guess what retail stocks are doing??? Yep, you
guessed it.
According toretail stocks, the consumer is BOOMING! Credit issues are non-existent!
They aren’t drowning in debt (that is both the vendors and the
consumers), and employment is maxed out at an all time high. Hey, we
can’t even spell Bankruptcy, and consumers are releveraging versus
deleveraging since the banks are giving out all of those ultra low rate
credit cards like candy! After all, if there is anything that the banks
want to do now it is increase there credit card exposure at the same
time they are allowing these Ipad-aholics to max out home equity lines
in order to buy more worthless
stuff consumer retail products!
Are
the Effects of Unemployment About To Shoot Through the Roof? I
wrote this piece late last year, and thus far it appears to be on point.
…The Bureau of Labor Statistics reported
the total number of unemployed at 15.6 million and the unemployment rate
at 10% in Dec 2010. With serious doubts being raised about the reported
figures of the insured unemployed that forms a substantial portion of
total unemployed (nearly 69% in Dec 2010, based on reported figures),
the total unemployment figures reported by the government is most
likely severely understated.
The grave unemployment situation not only
undermines the economic health and recovery hopes, but is also acting
as a major source of financial strain on the Fed’s books.
The increased pressure on the Fed books
can be largely explained when we look into UI programs that are
currently being administered by the government. There are two major UI
programs – Regular state programs and Emergency Unemployment
Compensation (EUC). While the former has to be funded through tax
collection by the state (with any deficit financed by the Fed
through loans), the latter is 100% funded by the Fed. EUC is a
Federal, temporary extension of unemployment compensation for unemployed
individuals who have already collected all regular state benefits for
which they were eligible. The program was started in June 2008 and was
due to expire in December, 2009. The claims under the program have risen
at a phenomenal rate and now accounts for nearly 50% of the total
insured unemployed claims. Thus, the Fed has been financing the
extension of UI benefits of those which are no longer covered under the
regular state programs. As per the last reported figures as of Dec 19,
2009, while the claims under the regular state programs have come down due
to the expiration of claims, the same was more than offset by
the massive jump in insured unemployed under the federal EUC program. The
claims under the regular state programs were down 4.3% (y-o-y) while
the claims under EUC were up nearly 200% which led to a nearly 51%
increase in total insured unemployed. Insured unemployed are
not able to get jobs and with claims expiring under the regular state
programs, they are increasingly applying to the Federal’s EUC program
for extended benefits.
Looking at the initial job claims under
the regular state programs, while the markets rejoiced the decline in
seasonally adjusted figure, the non-seasonally adjusted figures (which
are the actual claims) continue to inch up. For the week ended Jan 02,
2010, the initial jobless claims (NSA) increased 88,000 (w-o-w) to reach
645,571. Looking at the two year trend of the seasonal adjustment does
call into question the validity and accuracy of the adjustments, no?
With the total number of insured
unemployed (under the state and federal programs combined) continuing to
increase as well as no respite coming from the initial jobless claims
(looking at the real figures which are not seasonally adjusted), the
unemployment situation is far from improving. Further, with serious
questions being raised about the validity of the reported number of
insured unemployed, the gravity of the situation is definitely
underrated. The Fed is pumping in enormous sums of money to underpin the
problem – an amount that may rival the TARP. However, with claims
expiring under the regular UI state programs and the temporary aid
provided by EUC expected to taper in the coming months, unemployment is
going to increasingly weigh on aggregate demand and further delay the
economic recovery.
Many of the retailers that we looked at are strapped for cash, cash
flow sparse and/or heavily indebted. We expect to see a roiling in the
fixed income markets, starting out of Europe any minute now.
Spain public finances projections_033010- advertisements -
Great work. Love reading your stuff
http://research.stlouisfed.org/fred2/series/UEMP27OV?cid=12
There is probably a pretty strong connection between this and the foreclosure rate, but I'm having a damned difficult time tracking down graphs regarding increase/decrease in the rate of foreclosure. Any tips?
I'm not aware of a reliable public source. You may have to pay money for it, or at least the raw data. Try the mortgage bankers association mbaa.org or economy.com. Economy.com is owned by moodys. Mbaa would probably be cheaper. You might find what you're looking for in their teaser sections of their websites, if they have any.
The MSM probably has charts somewhere, but won't give you reliable recent data, and hey, it's the MSM, so probably about as good as wikipedia.
The FDIC has some data on foreclosures, as do other gubmint agencies such as the BEA (http://www.bea.gov/) and fhfa (http://www.fhfa.gov), but it's not likely to be that reliable, IMHO.
Now you're starting to make sense.
There is no media in the US of A, only propaganda networks.
One day I turned on the radio: on NPR, all I heard was propaganda from Cato Institute, American Enterprise Institute and Heritage Foundation; on CNN, the same; on former Air America programs, pretty much the same (I don't have the stomach to listen to Foxtard).
I did hear a report on unemployment from Moody's, who lies about AAA ratings from Monday to Thursday, but evidently should be believed on unemployment on Fridays.....
+1. LOL
I'm seeing the same paradox discussed by many here. Some things don't add up. How about the underground economy? In good times, it's generally estimated at 25% of reported national income. As people start hurting and the government becomes more Stalinist, what would you expect?
How about that, Riggie? How can we get a handle on "informal transactions"?
How about that, Riggie? How can we get a handle on "informal transactions"?
Riggie?????
Informal transactions??????
So you're the one whose been hiding in the cave during the shadow banking event horizon?
The entire economy consists of informal transactions, dood!
Or are you the only one who is aware of what takes place at the Fed????
Get a clue, dood....
Some people still believe blogs are only the province of spoiled 10 year olds and drunks. Wonder why???
I for one, am very very unhappy with how new insured claims actually can depict unemployment reality.
What if the number drops? For a prolonged recession there is only so much capacity for sheding of labor before businesses become unoperational. Staff cannot go to zero and still keep the lights on. The effect of consistantly high initial claims could mean that unemployment has moved from belt-tightening to bankruptcy. In terms of enacting effective legislation, this is a very different type of job loss. A different type of economic problem.
Jobs are created from the judicious use of capital. Especially when growth depends on understanding the effective use of tax on labor.
Mark Beck
I know the next bubble! I know the next bubble!
It's fat guys in SUVs. Yeah....the fat guys will be the primary food and protein source....the SUVs for scrap metal....
Exactly. This is not merely the loss of some jobs--this is where it goes critical. For example, not far from where I live, the Numi auto plant closed in Fremont, CA. The last auto plant in CA, losing a couple thousand jobs. It's not only those lost jobs (whose skills in machining/tool & die will move away or be lost entirely by not being passed on), it's now the non-use and possible decay or dispersement of the tools and physical plant that is the killer. That plant is huge--to try and reconstruct (or even refurbish) something of that size would require a massive investment of infrastructure that it will be (over time) less and less likely to happen, and we slip into a dark age of sorts.
Exactly. They are not creating jobs; they are creating revolt.
Their hope is to kick the can past November. And if they do the only recourse for US citizens becomes increasingly proactive and decreasingly peaceful.
Make no mistake about it though. They are invoking a revolt.
Many people are in denial. They seek escape from a dreary looking future. People hate facing reality. Kinda like knowing something is wrong with your healthbut not going to the doctor to confirm reality. People escape to ipads, food(eating out), casinos, movies etc...short term feel good stuff that won't change long term reality.
Did ya hear the news? Home starts are up! Lumber futures up!
Everyones reality is now dependent on the government/fed feeding money to prolong the system either transparently, or now more so, indirect proxies. What investment professional wants to face reality? Nobody does. Look at Greece, they are still ignoring reality to a large part. Rearranging deck chairs on the titanic, the stringed quartet playing til the last moment. It's human nature.
It's musical chairs, when will the music stop and how many chairs will be left? the trillion dollar question. Just like an earlier post about all the potential energy in a bunch of snow on the hillside, waiting for a catalyst to get it all going in a powerful avalanche.
ABC News today: “New housing sales through the roof” and not one word about the effect of this month’s expiration of Federal tax credits that stimulated housing.
And no mention that new home sales are still down 70% from their peak in July 2005, and economists tell Yahoo: “They will sink back to the winter’s dismal levels after the tax credit runs out.” Says Paul Ashworth, senior U.S. economist at Capital Economics: “I expect we’ll see a very sharp drop back.”
None of this on ABC.
Over and over the rulers try to invent a recovery where none exists. Back and forth the indexes amble upward and upward, and still the economy doesn’t move. Where, oh where, is the truth? It’s here in the details of Reggie’s massive research on unemployment, consumption, financials, credit, energy, home equity and all the rest. Reggie provides the details of the lie.
But left on the floor, after the day is done, are the dead from whom the bloodsuckers have sucked out the economic life—legitimate investors, savers, the elderly on pensions and insurance proceeds, wage earners, legitimate home “owners,” recent graduates and job seekers and hard-working boomers ready to retire on their devaluing Social Security, only to face the scythe of Dr. Emanuel’s Grim Reaper Curve should they need medical care.
Well said JR and I'll appologize for a comment a while back insinuating you were shilling for those bloodsuckers (I really don't think it was that pointed). I have enjoyed your posts.
I see a lot of folks out and about as well shopping and whatnot, that's just our culture, the question is whether they're spending and to what degree. If you look at harder-to-manipulate figures such as sales tax revenues, the real story emerges.
Regarding the Euro and Yen issues, do you guys see a flight to the USD impending? Not that this would necessarily occur in a free/open market, but is that the general manipulation trend that seems to be emerging?
easiest short squeeze for the big boys. i was thinking same thing the other day. long term this is the easiest short.
I was at Home Depot last night..in Central NY. I was there from 5:30 to 8:00 .. fixing up a 2400 sq ft house my wife and I bought for $130k ($122k post credit) and it was as if we had our own privite shopping experience.
VERY few customers last nigh.
I had three Home Depot employees greet me. I turned into a competition of which guy knew inventory I was looking for better.
Since I have been shopping at that store for 8 years and I didn't recognize any of them I actually knew product location better than all three.
Being a good sport I stopped and spent some time with them.
Funny the last post is a home depot post, because my story is almost the same. I was at home depot in Whittier California. It's about 8-12 miles east of Downtown Los Angeles. It was about 2pm so not really the peak hours but still, I used to work at home depot when I was 18-19 yrs old in a predominantly hispanic citylike whittier and almost same distant to downtown la, El Monte, and it blew my mind to see how empty it was. Although there was hardly 3 cashiers working the whole store (in my day we never had less than 5 usually more) SO when I went to the cashier I asked the youn girl working there if the store was usually this dead. She said in the mornings it sometimes gets busy because of the contractors and "sometimes" on the weekends, but yeah it's usually pretty slow. I lived in Downtown LA these past 4 years and that is one city that has actually grown. (I know sounds weird) but we still have the big new condo buildings left empty after completion do to bankruptcy/foreclosure but in the end the median income was still at 99k last I checked and the population has actually grown 10-20%. But we're talking small population of 45k residents. So in these parts of the Los Angeles everyone seems to think the recovery is for real and it's here to stay. I just moved back to my hometown (20 miles east of dowtown) suburb middle class/lower middle class. It's a whole different ball game out here. Best buy seems to be very crowded sometimes but if you take into consideration that Circuit CIty that was less than 3 miles away and the good guys that was about .5 miles away no longer exists, then it makes sense. A city of 150k loses 2 big box retailers of course Best Buy is gonna pick up some slack.
Sorry for my gramatical and writing errors. I'm not the most conventionally educated 29 yr old, specially in the english/writing department. But tell you what, sitting with MBAs and PHDs sometimes makes me feel like I'm a rocket scientist/nobel prize winning economist. But I have been self employed ever since I stopped working at Best Buy which was 6 months after I left Home Depot. So I've forced myself tro wise up over the years and have given myself a true education with a lot of hard work, discovery, reserach, and trial and error in my own business. I have a girlfriend who works at BNY Mellon as an analysts and she can't believe that I'm not an MBA let alone only a HS diploma. I tell her to read my writings and she will understand. ( Oh yeah I have no writings)
Thanks for the great post and an honest heads up. I can't spell either. That's why I wear this bag over my head.
Muchas Gracias
Your description of LA could fit every major city in the US of A.
And still they prattle on about a recovery....
Thank you for useful anecdotal reoport. Keep reading and writing. Read up on the 1930's.
I wouldn't necessarily expect Home Depot to be busy on weekday nights. Their weekday buyers are mostly contractors, and they typically buy in the morning.
Congrats on your first home. And remember to take your bowling ball to home depot. :)
great stuff reg, bill buckner in his newsletter 'the privateer' foretold the unfolding events about a year ago or so. so far he has been dead on. his archives are free . if what he said comes true then we are about to witness a plunge that will rival anything we have seen in 2000 years. long gold and silver. and beans and bullets.
what do you mean? Everything is fine, we are in a recovery..
LALALALALALALALA DODODODODODODO LAAATTTTT DADADADADA
Oh Shi$ there going to catch me on the computer, gotta run.
Signed,
Mental Patient.
All that unemployment and their prospects is depressing.
Makes one wonder whether there will be any economic activity left to speak of after they tax and spend everything to a DEAD STOP. There is of course a point where further stimulus results in a net nothing (or less...) in private sector GDP growth...have they, in continuing to prop up both the deadbeat consumer and the redundant worker, reached that point?
'we pretend to work and they pretend to pay us', ring a bell.
We pretend to vote, they pretend to notice.
I know you're right, but this endless fantasy melt up is getting very wearing.
I'm sure the recovery in energy goods and services is all in the high-paying green jobs sector, part of the new green economy. Maybe those green shoots are really there but nobody can see them.
/s
Nice work. If you were a climate scientist, you'd be their worst nightmare.
Actually, it is not really an economic recovery but probably a reflection of higher energy prices.
Exactly! And as everyone with a brain here realizes, any recovery is mathematically impossible.
I would agree. The scale on that chart appears to be measuring actual expenditures, but if it were adjusted by expenditure per unit, the curve would likely flatline.
I read the analyses and look at the charts that tell me this is all a charade, but one look at store parking lots and lines at the doors of popular restaurants tells me that consumer spending is back with a vengence. "It's only temporary" might have been a valid explanation for this buying spree three months ago, but how do we explain it now?
I'm guessing that part of what we're seeing is significant pent-up demand from people who cut back hard last year. Purchases of "psuedo-necessities" like clothing, replacement appliances, deferred home repairs and the like that have been put off since late 2008.
Millions of people suddenly living mortgage free. This has to end some time, and it's going to hurt.
Television and kool-aid man...
Next time you see one of those lines, ask a random number of them if they've heard of ZH
I'm guessing it's localized. Some states and municipalities, while still broke, have more sturdy job sectors and consumer spending. I see the same thing in my area, though it tends to rise and fall. Some weekends everything is packed, other times I wonder how restaurants are still in business. Sadly, Mal-Wart parking lots are always full.
I think the best hypothesis so far is that homeowners have newfound wealth by not paying their mortgages. You may not be able to get a HELOC, but who needs it when you can raise capital that you already have? For those who are upside down, and still have jobs, the temptation to spend their monthly mortgage on cheap trinkets is palpable.
"I'm guessing it's localized."
Geez, are you ever in another universe!!!!
Trying looking at all the data and at all the states.
Fantasy finance sector has wiped out the tax base. Can't you even grasp the easy stuff???
Dood! DO YOU KNOW what the economic engine is????
Do you know what drives the American economy????
Guys like you have difficulty operating in a multi-variable reality.
In my neck of the woods CA, I see lots of parking lots full of cars too but when I go into the stores I see people just walking around looking at things, not too many people at the cash registers.
My guess is these are the unemployed getting their daily excersise. Who could sit in the house all day every day?
Also, the restraunts around here are real busy during the first half of the month then traffic dies off during the last half. Just like clockwork. When the tax refunds were comming in the mail I saw this cycle disapear. It showed back- up this month so the tax refund money must be all gone.
Strategic default whereby underwater mortgagors cease payment on mortgages in order to service their credit cards.
you see crowds of shoppers huh..I see empty stores ...closed business...home prices falling ..
many relatives UE.
Empty stores --> crowds at the stores that are open
Akin to the packed airline flights now that they only make one flight per day on each route.
I can vouch for the airline effect. Southwest used to have 6-8 nonstop flights a day between Seattle and San Jose. Now there are 3 - one in the morning, one in the afternoon, and one in the evening. It's smart from the airlines point-of-view but the overall ridership has declined rather than increased.
you got that right. I hope it's medication for some peoples sake.
We are definately back in the age of insanity.
I live in a piddly little town (pop 50K) in the middle of nowhere (zip 81502). Our local economy was devastated when natural gas prices collapsed and jumbo mortgages were impossible to fund. For about a year it looked like something out of the Great Depression with all the trimmings. But that was '08-'09, and now in mid 2010 I see a different story for consumer spending. I don't believe this renewed spending can be explained as the result of strategic mortgage defaults -- it is actual optimism.