recovery

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)"

For everyone anxious to read a comprehensive update (of sketchy credibility, but better than nothing) on the Fukushima situation, a progress report out of Tepco, and the current status of the firm's "roadmap to recovery" (seems to be a catchphrase these days), Tepco has just released a progress status of the "Roadmap towards Restoration from the Accident at Fukushima Daiichi Nuclear Power Station." From the release: "With regard to the accident at Fukushima Daiichi Nuclear Power Station due to the Tohoku-Chihou-Taiheiyo-Oki Earthquake occurred on Friday, March 11th, 2011, we are currently making our utmost effort to bring the situation under control, and on April 17th, we put together a road  map towards restoration from the accident. Today, as a month has passed since we presented the roadmap towards restoration, we would like to present the status of the progress." And the by now "too little too late" apologies: "We would like to deeply apologize again for the grave inconvenience and anxiety that the broad public has been suffering due to the accident at the Fukushima Daiichi Nuclear Power Station. We will continue to make every endeavor to bring the situation under control." How about providing the public with a true and honest update of what is really happening?

When a month ago the CEO of Wal Mart Americas told the world to "prepare for serious inflation", the Chairman laughed in his face, saying it was nothing a 15 minutes Treasury Call sell order can't fix (granted net of a few billions in commissions for JPM). 4 weeks later the Chairman is no longer laughing, having been forced to hike up his inflation expectations while trimming (not for the last time) his economic outlook. "U.S. consumers face "serious" inflation in the months ahead for
clothing, food and other products, the head of Wal-Mart's U.S.
operations warned Wednesday talking to USA Today.
And if Wal-Mart which is at the very bottom of commoditized consumer
retail, and at the very peak of avoiding reexporting of US inflation by
way of China is concerned, it may be time to panic, or at least cancel
those plane tickets to Zimbabwe, which is soon coming to us." In  light of that perhaps today's words of caution from Wal Mart CEO Mike Duke will be taken a tad more seriously (yes, even with the $50 billion in "squatters rent" that the deadbeats spend on iPads instead of paying their mortgage: that money is rapidly ending). Warning is as follows: "Wal-Mart's core shoppers are running out of money much faster than a
year ago due to rising gasoline prices, and the retail giant is worried. "We're seeing core consumers under a lot of pressure," Duke said at an event in New York. "There's no doubt that rising fuel prices are having an impact." Tell that to Printocchio please.

A regular commentator on BoomBustBlog has been attempting to make the case for a housing recovery based upon rising employment metrics. One of his primary arguments was rising hourly earnings. I thought I would take this time to point out that average hourly earnings can rise due to the fact that less people are working. The aggregate employment in the US has literally fell off of a cliff. Since you know that I love pictures, let’s do this graphically…

Stepping back from this, you really can’t help but notice how stupid the whole “stock wealth effect” ideology is. Setting aside the fact that MOST of the gains stocks have produced since 2009 are due to US Dollar devaluation, it strikes me as odd that someone would think they were richer because their stock portfolio was up… while the cost of just about everything has ALSO gone up tremendously. For instance, since March 2009, stocks have doubled. However, oil has nearly TRIPLED in price.

Every major country is experiencing price inflation as a result of monetary inflation and it is starting to impact their economies. US Ex-Im prices and trade indicate that we are experiencing price inflation, regardless what the CPI says, and that it is weakening the economy.

The CMBS market gives us an inside look at the credit quality of many CRE loans which are the key to recovery. This article tells you why it's important.

During the Great Recession plenty of money was made betting against the consumer. In 2010, the number of non-business bankruptcy filings grew by 8.8% to 1.5 million. While this number may seem high, it is significantly lower than the 31.5% jump in 2009. In the shadow of bankruptcy lead defaults lies Portfolio Recovery Associates, Inc. (NASDAQ: PRAA). With a market cap of $1.4 billion, PRAA is the leading receivables management company. Read more to see how you can cash in on their ability to collect.

Punchline from Dudley's Puerto Rick speech just hitting the wires: "We must not be overly optimistic about the growth outlook. The coast is not completely clear—the healing process in the aftermath of the crisis takes time and there are still several areas of vulnerability and weakness. In particular, housing activity remains unusually weak and home prices have begun to soften again in many parts of the country. State and local government finances remain under stress, and this is likely to lead to further spending cuts, tax increases, or job losses in this sector that will offset at least a part of the federal fiscal stimulus. To sum up, economic conditions have improved in the past year. Yet, the recovery is still tenuous. And, we are still far from the mark with regard to the Fed's dual mandate. In particular, the unemployment rate is much too high." Word count of iPad: zero.