recovery

We view the proposed restructuring as one that would amount to a "distressed exchange" under our criteria because, based on public statements by European policymakers, the debt exchange or rollover is likely to result in losses for commercial creditors, and the objective of the debt exchange/rollover is to reduce the risk of a near-term debt payment default. Under our criteria, we characterize a distressed borrower as one that would--in the absence of debt relief--fail to pay its debt on time and in full.  While no exact date has been announced to initiate Greece's debt restructuring, we understand that it will commence in September 2011 at the earliest. Our recovery rating of '4' for Greece remains unchanged, indicating an estimated 30%-50% recovery of principal by bondholders.

Today the IMF released its complete Article IV Consultation report, focusing on US economic development and policies. While there are 70 pages or so of textual fluff (it comes from the IMF after all), where the report excels is in presenting the complete picture of the "bipolar recovery" in the United States, in about 50 or so charts, which is a recovery for some and an outright recession if not depression for most. Furthermore, the report corroborates that when it comes to the economy, the US "recovery" has been one of two stories 7 quarters following the business cycle trough: a contraction in virtually all key non-business segments, including real GDP components, fixed investments, and the business sector, and a flourishing renaissance for the business sector and for financial firms, profits and financial conditions. In other words, from the very beginning the whole purpose of the orchestrated recovery was one and one only: not to improve the general economic situation, but to pander to corporations and to the wealthiest. It is no wonder that rumors of social disobedience and discontent are getting ever louder: by now even the most average American has understood that the administration has betrayed them. However, we do not want to delve in the ethics of it all. Others will do that. Instead, here are all the charts that tell the story of America's recovery. Or, more specifically, lack thereof as the case may be and is.

The The more disturbing jobs numbers are coming from the long-term unemployment.  A year after the official end of the recession, more than two million Americans have been out of work for 99 weeks or longer.  Some call the long-term unemployment the newest form of workforce discrimination as employers tend to favor job candidates already have a job.  

First of all, Money McBags has to apologize for this column’s lack of timeliness but ever since he has gone to....

Recovery Charts by www.thetrader.se

After the last week’s good “window dressing” equities performance, it is time to reconsider some facts on the Economy. Our short term targets in SPX have been reached, since bouncing off the 200 day moving average. We should start hitting some resistance levels shortly (1320). The dull summer months might even provide some kind of consolidation/trading range, where volatilities come off, and present a nice set up for the autumn collapse we think will happen.

From www.thetrader.se

So much for the Japanese renaissance which somehow is supposed to lead to a surge in Q3 US GDP growth. Following yesterday's surprisingly strong factory production growth rate of +5.7% (the second highest in history), every economist (and Joe LaVorgna), was already shifting their strawman from declining energy costs (which are now back to early June levels courtesy of the IEA idiocy), to Japan as the last bastion of growth. Alas, the just released Tankan quarterly index of large manufacturer confidence has confirmed that the rumors of Japan's economic reincarnation have been greatly exaggerated after it dropped by the most since the Lehman collapse, plunging from +6 in March to -9, well below the economist (and Joe LaVorgna) consensus of -7. From Bloomberg: "Forecasts by Panasonic Corp. (6752) and Hitachi Ltd. for weaker earnings have added to signs of depressed demand. Monetary tightening by Asian economies grappling with inflation means that Japanese companies also can’t count on customers within the region for boosting sales. “The global economy is starting to slow, heightening uncertainties about its future direction,” Ryutaro Kono, chief economist at BNP Paribas in Tokyo, said before the report. “The downside risks to China and other emerging economies seem to be on the rise." In other words, the global economic growth is impacting Japan, and it is not the Japanese slowdown that is impairing some mythical global growth story. Of course, by the time the economist (and Joe LaVorgna) pool figures this out, QE 3 will be well on its way.

Recession and/or brink of collapse?

We have not recovered from the Great Recession and thus our current economic stagnation is less a new event than a continuation of the original collapse. The basis for the so-called “recovery” was a rise in GDP, that measure of what we have spent in the economy. It’s a fairly useless bit of data.

Indeed, this 2009-2011 recovery and cyclical bull market has been as artificial as the 2003-07 expansion. That last one was fuelled by financial engineering in the financial sector. This one is being underpinned by unprecedented government intrusion in the credit markets. As of this quarter, your government has replaced the private sector as the largest source of outstanding mortgage market and consumer-related credit (see front page of the Investor's Business Daily). So not only is the U.S.A. turning Japanese in many respects, it is also now resembling China where the government also redirects the flow of private sector credit. When we said capitalism went on a sabbatical three years ago, we didn't expect this to be a permanent vacation.

Ask a fund manager with $5 billion in assets under management (AUM) if the economy is recovering and they will say yes. They will say this soft patch is transitory, it is a function of Japan and the revolution in MENA (Middle East and Northern Africa). They will tell you Greece is contained. They will tell you housing is bottoming. They will tell you stocks are cheap. Do they believe that? Aside from group think I certainly hope not but if the group says that red shirt you are wearing is in fact blue well dammit that shirt is blue. No one believes they are a lemming, that they are part of the herd. The word sheeple does not include them. Then why does history always show the majority to be wrong? As the market rolls over investors are beginning to question the color of that shirt. Perhaps it is red after all. The Federal Reserve has a horrible record at economic forecasting, absolutely horrid yet with each new forecast we are expected to believe "this time it is different." With each passing day more data tells us they are wrong yet again. As investors we must be diligent in our work, diligent in understanding the issues. We must think for ourselves, beyond the noise, beyond the pressure to conform.

That average monthly benefit of $133.24 for 44.199 million people will help with the purchase of one third of a very edible iPad. Food stamp participation chart presented without further commentary.

Another indicator of what the US "recovery" looks like come courtesy of the Chicago Fed National Activity Index. As can be seen in the chart below, one can only wonder just what recovery the US would have if it did not spend $3 trillion to kickstart the virtuous (or better make that virtual) economic cycle when it did. And by the looks of facts (and not Tim Geithner spin), the downward inflection point has now arrived. Next up: another $1-1.5 trillion in monetary stimulus, although admittedly in a form that may be slightly different from the LSAPs we have all grown used to love and expect each and every day at 11:00 am EST.

2 Young 2 Die and other important matters on yet another Friday afternoon before the shit could hit the fan three day weekend...

Asked about the fate of the economic "recovery", which incidentally is nothing more than a $2 trillion dollar dilution-funded blip on the depressionary downtrend commenced in December 2007, Greg Peters, the head of fixed income research, at Morgan Stanley, the firm whose other fixed income strategist Jim Caron will now have been proven wrong three years in a row following his annual broadly bullish call for a jump in rates (not based on bearish considerations such as those postulated by Bill Gross... bullish), tells Tom Keene that the recovery is "Too Young To Die." Yep. That's the justification. Alas there was no mention that the 98 year old ponzi scheme perpetrated by the Fed since 1913 is now "Too Obvious To All." And when that fails, many of the same people who get paid huge sums of recycled taxpayer money to come up with catchy four word slogans while spouting flawed economic projections will suddenly find themselves "Too Pitchforked To Fly Away (To Non Extradition Countries)"