Recession

When reading the otherwise rosy stories in the mainstream media, the most glaringly simplistic and attention grabbing subsegments of which continue to proclaim the recession over, while conveniently ignoring that despite $4 trillion in monetary and fiscal stimuli underemployment is at 17%, foodstamp recipients are at all time highs (but who cares about that social stratum), discretionary purchases are continuing to be funded primarily from millions of delinquent homeowners who refuse to pay their mortgage (now on average between 18 and 24 months behind), companies are refusing to hire, capex spending is at all time lows, banks are hoarding cash for the imminent perfect MBS putback storm, commodity price inflation is threatening to collapse profit and net income margins, half of Europe is locked out from capital markets, rampant Chinese inflation is threatening to recreate Tianenman square, investors are pulling cash from markets for 29 weeks in a row, hardship withdrawals from 401(k)s surging, and the muni mess is one political decision from an avalanche of city and state defaults, one may be excused to have a comparable simplistic perspective of the economy. After all stocks are up. Which of course is precisely the response that Bernanke is hoping to elicit from these same simplistic interpreters of economic and market data, who are next supposed to take money procured from selling newsletters and other top and bottom-line declining products, and buy (Chinese) trinkets they don't need. It is these same people who will also conveniently ignore the sad reality that America's small business find themselves increasingly in: and for the most vivid example of this is the latest Reuters report which informs that small business are now calling of Christmas en mass. "The 2010 holiday season represents the worst
slump since the firm began polling 22 years ago, she said. Of 103
leading businesses queried, those holding a celebration of any kind fell
to 79 percent, down from 81 percent both last year and the year before,
during the height of the economic recession." Obviously Wall Street is not among those polled: the country's bankers are preparing to spend over $140 billion in compensation this year. Good luck booking a restaurant, club or lounge in New York in the next month.

The top 20% are prospering and spending money; the bottom 80% are not, but thanks to vast wealth disparity, the top slice of households can keep consumer spending aloft. This provides an illusion of "recovery" that masks the insecurity and decline of the bottom 80%. There is statistical and anecdotal evidence supporting both a "we never left recession" and "the economy is recovering" interpretation. The key to making sense of the conflicting data is to understand that there are Two Americas. Roughly speaking, we can divide the U.S. economy into "Wall Street"--the financialized part of the economy which encompasses the FIRE (finance, insurance and real estate) economy and its bloated partner in predation, the Federal government--and "Main Street," the looted, overtaxed remainder of the "real economy" which isn't a Federally supported corporate cartel (i.e. the military-industrial sector, the "healthcare"/sickcare sector, Big Agribusiness, etc.)

But not yet as bad as the great 1349 crash in Florence.

Fan, meet shit: "Dagong has downgraded the local and foreign currency long term sovereign credit rating of the United States of America (hereinafter referred to as “United States” ) from “AA” to “A+“, which reflects its deteriorating debt repayment capability and drastic decline of the government’s intention of debt repayment. The serious defects in the United States economic development and management model will lead to the long-term recession of its national economy, fundamentally lowering the national solvency. The new round of quantitative easing monetary policy adopted by the Federal Reserve has brought about an obvious trend of depreciation of the U.S. dollar, and the continuation and deepening of credit crisis in the U.S. Such a move entirely encroaches on the interests of the creditors, indicating the decline of the U.S. government’s intention of debt repayment. Analysis shows that the crisis confronting the U.S. cannot be ultimately resolved through currency depreciation. On the contrary, it is likely that an overall crisis might be triggered by the U.S. government’s policy to continuously depreciate the U.S. dollar against the will of creditors."

The NBER tried to pull a fast one on America a few weeks back when out of the blue it concluded that the recession ended in June 2009. Alas, Google Trends shows otherwise. The attached chart demonstrates the average use of the terms "food stamps", "I need a job", "unemployment claim" and "government assistance" via google trends. Either Americans are really clueless and are completely unable to get the memo that it is now all clear to spend, spend, spend, or the BLS, as John Lohman has suggested, aka the US version of the Ministry of Truth has infiltrated the corpulent and proud NBER Ph.D.s flagbearers.

After declining in August by a solid 8%, September consumer bankruptcy filings once again are on the rise, with the monthly total hitting 130,329, 4.4% higher than the prior month. Overall, YTD bankruptcies of 1,046,449 are 11% higher than compared to the same period last year, as America revels in its newly found post-recession reality by going straight to bankruptcy go and not passing go. As Dow Jones reports, "the bankruptcy filings so far in 2010 represent the highest total since 2005" and are on track to hit a record 1.6 million by the end of the year. Can someone please forward this data over to the nice Ph.D.'s over at the NBER to whom timing recessions is now nothing but a joke.

Let’s be honest. Forget recessions, forget even Depressions, the US is an empire in decline.

You can literally see it crumbling right in front of you. Just start looking at how people live, eat, and act on a day to day basis. Look at how our Government runs itself, how it manages our affairs, how it spends our tax Dollars. Look at how our justice system works, who it protects and who it punishes.

It’s all out there, right in the open for you to see. You don’t need an expert degree or some kind of advanced education. It’s OBVIOUS to anyone who bothers looking around.

The fact we don’t admit it doesn’t mean it’s not true.

Some funny quotes in the latest weekly ABC Consumer Comfort Index poll, which incidentally dropped from -43 to -46, just inches away from the 2010 lows, but more importantly, just inches away from the lows seen throughout the entire depression, as consumer sentiment has gone nowhere fast in the past two years: "Recession Ends, Nobody Notices." Indeed, as the chart below shows, ABC's weekly poll of about 1,000 random people shows nothing at all good for the economy, which, oh yes, is now out of the recession, but not the depression. And for technicians out there, the reading of 46 dropped just below the 52 week average of -45.98. Joking aside, the report found that: "This week 89 percent of Americans rate the economy
negatively, 75 percent say it’s a bad time to spend money and 55 percent
rate their own finances negatively." Surely these are the Green shoots that forced Larry Summers to realize that destroying the Harvard endowment is a far less dangerous job than continuing to bring ruin and pestilence to all of America.

The NBER has finally announced the most worthless and overdue piece of data, namely that somehow, miraculously, the US recession that started in December of 2007 ended in June of 2009. We have yet to hear when the distinguished Ph.D.-bearing shamans of Keynesianism at the NBER will convene to decide when the Depression that started in December of 2007 will end. Our estimate is sometime in the mid 2020s, long after the Dow hit 36,000 as news of total nuclear annihilation was priced in by WOPR. From the NBER: "The Business Cycle Dating Committee of the National Bureau of Economic
Research met yesterday by conference call. At its meeting, the committee
determined that a trough in business activity occurred in the U.S.
economy in June 2009. The trough marks the end of the recession that
began in December 2007 and the beginning of an expansion. The recession
lasted 18 months, which makes it the longest of any recession since
World War II. Previously the longest postwar recessions were those of
1973-75 and 1981-82, both of which lasted 16 months." Somehow we think the 17% of America's labor pool that is not fully employed will beg to differ with this assessment. But at least bankers will be able to justify their 2010 record bonuses.

With the market still drunk with hopium and grotesque stupidity from last week, after surging triple digits on an NFP number which was exactly as expected (returning strikers added 10,000 workers and the Birth-Death model, when accurately measured, contributed a net 17,000 jobs, so strip out these two effects and we actually end up with +40,000, which was bang on the consensus estimate) here is another reality check from David Rosenberg for all those who may be confused and believe that buying the "dips" or the market is in any way a prudent decision, when all it does is begs for someone to pull the rug from under the feet of speculators who believe that momentum and an implied correlation of 1 is indicative of improving fundamentals. Additionally, as nobody else seems to enjoy touching the topic, here is another observation on why we continue to live in a depression.

One of the most peculiar observations of this depression started in December 2007 is that while the total US population has increased by 6.8 million from 303.3 million to just over 310 million in July 2010, over the same 32 month period, the civilian labor force has declined from 153.9 million to 153.6 million. This makes zero sense, as all those aging into working age, or immigrating into the US need to find some job or some other paid activity (either legally or illegally). But let's assume that due to discouragement with economic conditions people simply refuse to look for jobs. The reality is that eventually all those people will come storming into the job market, once the economy recovers sufficiently. Which is why we make an estimate of what the "fair value" of the civilian labor pool is based on the historical average participation rate of 50.4% (as a percentage of total population). Backing into the cumulative population growth by this estimate, means that as of July 2010, the labor force has really grown by 3.4 million, once the one-time adjustment of a "recession" is eliminated (and after all that's what all modern economist claim right - that recessions are merely one-time blips on the road to perpetual Keynesian growth). In other words, the cumulative differential between the labor force as reported, and as calculated has hit an all time record of 3.7 million: this is a number that has to be added to the 7.6 million directly tabulated unemployed to get a sense of just how many jobs have been lost assuming a reversion to the mean for the US economy. In other words, after eliminating the statistical voodoo of the BEA and the Census Bureau, the US has lost just over 11.2 million jobs since the start of the recession.

Since the beginning of the recession/depression there have been over 7.6 million total job losses (not just private jobs, which is all that the government is suddenly focusing on. What next: emphasizing the dramatic surge in janitors and trash collectors?). So which occupations are the biggest winners and losers over the past 33 months? Curiously, the split in job losses is spread about evenly between manufacturing and service jobs, with the top 2 biggest absolute losers are construction and manufacturing occupations. Things are not better in services either, as the bulk of professional segments have lost hundreds of thousands, with two exceptions: healthcare and education. Of course, the one sector that has never seen cumulative job losses in the recession is the government - for state and federal employees the recession has not only ended, but it never started.

Arguably the one most definitive market top ticking activity of the past month, in addition of course to Tim Geithner's absolutely disastrous "Welcome to the Recovery Pamphlet" issued literally hours before the wave of economic downgrades of US GDP by Wall Street began in earnest, was Mark Zandi and Alan Blinder's even more laughable administrative job cover letter titled "How We Ended The Great Recession" (yes, gentlemen, we remember). Which is why we read with great fascination that not even a month after the paper was released, Alan Blinder told Bloomberg that "Things seem to be losing momentum. The lending part of the financial system doesn’t seem to be curing itself." Actually, Alan, if that is your justification for why the momentum is being lost, you are an idiot - the lending part, or the supply side, is perfectly cured: it is the demand aspect which proud Ph.D.-bearing economists such as yourself always ignore - yes, people, the medium and small businesses, and virtually everyone else, who makes the economy tick (not Wall Street), don't need the bank's steenking money - not at 20%, not at 0.002%, if they don't know whether they will have a job tomorrow, or if upon waking up their stocks and 401(k) won't be worth 50% what they were the night before. And not to be left alone, Mark Zandi, the other member of the permaclown duo, told Bloomberg TV that he now puts the chance of a double-dip recession at 1 in 3. "If you’d ask me 4-8 weeks ago, I would have said 1 in 4, 12 weeks ago, 1 in 5. So it is rising uncomfortably high." How about 15.8 weeks ago: was the chance 1 in 69? What is it with these economists who need to scientificate every bullshit concept of their worthless occupation? Why quantify the merely abstract? Do economists have such a great mathematician penis envy, that they have to cloak their infinite lack of understanding in irrelevant numbers? The fact that this man a month ago said things are all good, and never realized that America had never emerged from the recession, is all you need to know just how much credibility any and every person working for Moody's has. But we knew that already. And just because a Moody's economist sees the only hope left before the country as even more QE, it merely shows that when QE finally does strike (which it will) it will be the end game for America, and its currency. At least we now know that in the meantime Zandi has blown any chance he may have had getting a job with the administration.

Sick and tired of CNBC "interviews" in which the speaker is given 15 seconds inbetween commercials to explain why the economy is in the toilet, before another talking head from the dodecabox appears and starts spouting painfully ridiculous things? So are we. Which is why we refuse to link to David Rosenberg's earlier presence on CNBC, and instead we present Rosie's following 26 minute interview with the WSJ which is a must watch for all who want to listen to exiled Merrill Lyncher express a coherent realistic thought before some CNBC associate producer screams "cut to commercial for incontinence pills." And, true to form, Rosie starts off in style: "If you don't believe there's going to be a double dip, it's because the first recession never ended. If there is going to be a double dip, the odds are certainly higher than 50-50." For those who follow Rosie's daily letters via Gluskin Sheff (which would be all of our readers), the insights won't be particularly new, but it is always great to hear a rational and sensible human discuss things as he sees them, not as his trading book demands he sees them.