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The US is Entering a Recession In the Worst State in the Post WWI Period... Right As the Fed Realizes It's Out of Ammo

Phoenix Capital Research's picture




 

 

Most of my recent analysis has pertained to Europe.

 

However, on the other side of the pond, the US economy is showing major signs of deterioration.  The jobs data, even after the BLS massages it, is awful.  Secondly, 1Q12 GDP estimates have been revised lower. We’ve also seen the two consecutive bad Philly Fed surveys, including the fact that the average workweek has shortened for two months now. We’re also seeing a drop in the Empire Manufacturing index.

 

In addition to this, we’ve seen the following companies cut their forecasts for 2012: Pall (PLL), Nucor (NUE), Ryder Systems (R), Proctor & Gamble (PG), Cardinal Health (CAH), Texas Instruments (TXN), Starbucks (SBUX), Autodesk (ADSK), FedEx (FDX), Jabil Circuit (JBL), Bed, Bath & Beyond (BBBY), and Adobe Systems (ADBE).

 

Many of these are economic bell-weathers. And anyone in the financial space can tell you, companies only lower their forecasts if things are going to get a lot worse (executives are highly incentivized to maintain positive outlooks for fear of their company’s shares collapsing on downgrades).

 

In simple terms, we’re getting many signals that the US economy may in fact be slipping into a second recession in the context of a greater DE-pression. Once it’s confirmed that we’re back in recessionary territory (we already are, but it won’t be confirmed by Government officials until after the US Presidential election) then this will mark:

 

  1. The first time in the post-war period that the US has entered a recession in which industrial production failed to exceed its previous peak:

 

 

 

  1. The first time the US entered a recession when average unemployment duration was already at record highs:

 

 

  1. Moreover, the civilian employment-population ratio is at levels not seen since the ’70-’80 (meaning that fewer and fewer Americans are in the workforce).

 

 

  1. And a recession in which food stamp usage is already near record highs:

 

 

To make matters worse, all of this is happening at a time when the US Federal Reserve, which has been the life-support for the US economy (for better or for worse), is finally discovering that its policies and theories don’t actually apply to the real world.

 

Fed Wrestles With How Best to Bridge U.S. Credit Divide

 

Fed officials have been frustrated in the past year that low interest rate policies haven't reached enough Americans to spur stronger growth, the way economics textbooks say low rates should.

 

By reducing interest rates—the cost of credit—the Fed encourages household spending, business investment and hiring, in addition to reducing the burden of past debts.

 

But the economy hasn't been working according to script.

 

http://online.wsj.com/article/SB10001424052702303505504577403970826823032.html?mod=googlenews_wsj

 

This confirms what I’ve been saying for months: the Fed has realized that the consequences of QE (higher cost of living) outweigh the benefits. This is why the Fed only decided to extend its Operation Twist program during its June FOMC: the political climate in the US will not tolerate a large-scale move by the Fed unless a major bank collapses or some kind of systemic risk hits.

 

This means… that the primary prop underneath the US stock market and financial system (namely Fed intervention) is slowly being removed. What follows will not be pretty and smart investors should be taking steps now to prepare in advance.

 

If you’ve yet to take steps to prepare for this, I can show you how: my Surviving a Crisis Four Times Worse Than 2008 report is chock full of information on how to not only survive but thrive during the months to come.

 

Within its nine pages I explain precisely how the Second Round of the Crisis will unfold, where it will hit hardest, and the best means of profiting from it (the very investments my clients used to make triple digit returns in 2008).

 

Best of all, this report is 100% FREE. To pick up your copy today simply go to: http://www.gainspainscapital.com and click on the OUR FREE REPORTS tab.

 

Good Investing!

 

Graham Summers

 

PS. We also feature four other reports ALL devoted to helping you protect yourself, your portfolio, and your loved ones from the Second Round of the Great Crisis. Whether it’s my proprietary Crash Indicator which has caught every crash in the last 25 years, or how to stockpile food (where to get it, what to buy, and how to store it) our reports cover this information in great detail.

 

And ALL of this is available for FREE under the OUR FREE REPORTS tab at: http://www.gainspainscapital.com

 

 

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Mon, 07/09/2012 - 07:00 | 2598166 XtraBullish
XtraBullish's picture

I really have a difficult time taking this "analysis" seriously when every post is a trailer for a newsletter pitch. Graham has been screaming "The Sky is Falling" since 2009 at S&P 666 and it is only double that level today. Hands of a broken clock?

Sun, 07/08/2012 - 14:40 | 2596527 porrannor
porrannor's picture

You are making a good point, I would like to see a true chart of the industrial production in this country. We all are hard pressed to find anything made in USA. Industrial Production my foot.....

 

Sun, 07/08/2012 - 14:29 | 2596513 bigkahuna
bigkahuna's picture

I could be mistaken, but have not these dow/nasdaq components been guiding lower for at least a few years now? Then they barely beat their lowered projections and algos buy up the stocks on the headlines? Man it is all a big casino trap. 

Sun, 07/08/2012 - 14:30 | 2596517 bigkahuna
bigkahuna's picture

Oh, my apologies to legit casinos.

Sun, 07/08/2012 - 13:56 | 2596474 Leraconteur
Leraconteur's picture

While some of his assertions are wrong - IP has not exceed prior recession levels before entering a new recession, several times since 1945 - the overall tenor is grim. If the USA is heading into "another recession" then SNAP will just move up more. This will strain the budget deficit to -$2,000 Bn and beyond. Job participation is at 1978 levels and duration of UE is horrific.

Obamacare and other new taxes due to arrive in January will make this a fait accompli.

Sun, 07/08/2012 - 13:38 | 2596451 The Reich
The Reich's picture

You must have given the word "analysis" a new meaning.

Sun, 07/08/2012 - 13:38 | 2596449 Snakeeyes
Snakeeyes's picture

Agree with Phoenix Capital's analysis.

1. Fed jas lost any control. Money velociites are dying.

http://confoundedinterest.wordpress.com/2012/07/02/fed-having-trouble-stimulating-growth-or-inflation-multipliers-and-velocities-are-stalling/

2. Job market has not improved since June 2010. Only disability, food stamps and part-time employment have increased. A DEPENDENCY recovery.

http://confoundedinterest.wordpress.com/2012/07/06/summertime-blues-u6-unemployment-rises-to-14-9-nonfarm-payrolls-grow-only-80k/

3. Obama is RAISING taxes amid a slowdown violating the Laffer Curve.

http://confoundedinterest.wordpress.com/2012/07/02/pmi-falls-below-50-a-warning-shot-and-administration-is-raising-taxes-ignoring-the-laffer-curve/

4. US and Eurozone GDP is weak!

http://confoundedinterest.wordpress.com/2012/06/28/the-molasses-recovery-us-and-eurozone-gdp-growth-slow-as-molasses-in-winterime/

Obama, like Hollande in France, is a true believer in Socialism and wealth redistrubtion, even if it kills the economy,

Sun, 07/08/2012 - 13:38 | 2596448 DosZap
DosZap's picture

I've heard pundits state that this ins't a "Depression like in the 1930's;

No, its far worse, take away those SNAP cards, and foodstamps, you WILL see the lines,guaranteed.

Sun, 07/08/2012 - 14:52 | 2596552 RiverRoad
RiverRoad's picture

So true.  This time TPTB have calibrated the trickle-down perfectly.

Sun, 07/08/2012 - 13:06 | 2596414 Jack Sheet
Jack Sheet's picture

If you want real skinny on QE3 read Jim Rickards' tweets rather than this amateur.

Sun, 07/08/2012 - 12:56 | 2596401 ebworthen
ebworthen's picture

What is counted in industrial production; soda and potato chips?

How could our "industrial" production have gone up post 1990 when we started offshoring everything to China?

We can't even make a can opener anymore.

They must be counting MBS and CDS.

 

 

Sun, 07/08/2012 - 17:57 | 2596949 ekm
ekm's picture

Finally. thx a lot.

No wonder there is no employment. If we produce nothing how can we get employed?

Sun, 07/08/2012 - 12:51 | 2596395 max2205
max2205's picture

Your too much. IP hasn't peaked but you say it has. Food stamps has peaked (for now) but you say it hasn't.

Tyler, this guy is a waste of your space.

Let me blog technicals for 3 months.

Sun, 07/08/2012 - 12:50 | 2596389 God Bless The V...
God Bless The Virtuous's picture

Look, this is a simple, although often disregarded principle.

There is no more room or time to take on any more of this communist / progressive dreck before we are all called upon as Americans to decide, once and for all, do we want more BIG government INTRUSION ala Obummer, or do we go back to the laws of God and a constitution worth the paper it is written on?

QE and the calls from the scumbags who wrought all this misery, think Bob Rubin / Paul Krugman / Goolesbee / Rohmer and all the rest of the 1990's stuck in a time capsule hold overs from slick Willy's days!

This is all the culmination of an EVIL experiment in PROGRESSIVISM that started with the true RACIST of American Presidents,

Woodrow Wilson!

The stock market is most likely to plunge into the fall and if it looks like we get a new (thinking and anti communist planning president) along with both houses, (needed to repeal Obummer Care) then you can look foward to a rip your face off RALLY after the election.

But make no mistake, the loss of creditability, that this imbecilic goof ball minion of Saul Alinsky has stained our republic with, will take generations to over come!

We must find it in OURSELVES!

Each and every INDIVIDUAL, must stand up, dispel this PROGRESSIVE wet dream for what it is and pledge to the republic and each other something greater than themselves!

We are Americans!

We are the strongest, greatest people this planet has ever known!

There is a shining beacon of hope, it resides on a hill, and God looks over it!

The only way we survive this onslaught of "Radical Transformation" is to cast off the CHAINS Obama of all people has entangled the republic in and call this socialist / communist / progressive experiment for what it was!

One MASSIVE failure in the country and her history!

We humbly ask the people of this mighty country to forgive and come together, to learn what happens when a sliver tounged oratator, call's for an empty promise with horrible outcomes such as "Hope and Change",

just what the hell was h&c anyway?

This is all about you!

The individual!

What will YOU do?

Let us not fail at this challenge before us because we chose to sit down!

 

May the good lord watch over this fragile little experiment in freedom / man's self rule we lovingly call America!

Sun, 07/08/2012 - 15:31 | 2596619 Overfed
Overfed's picture

What do you recommend? Vote for Robomney?

Now that Ron Paul is pretty well out of the running, we're fucked. Buy ammo, plant a garden, build a chicken coup, get a water filter.

Sun, 07/08/2012 - 12:44 | 2596374 DavosSherman
DavosSherman's picture

Out of ammo?

When the Ctrl and the P key fall of Moron Bernanke's keyboard let me know.  The system is built on ever expanding money being loaned into existance.  Ctrp-P to infinity. 

Sun, 07/08/2012 - 12:25 | 2596352 roadhazard
roadhazard's picture

What do you mean, "second recession."  We never left the first.

Sun, 07/08/2012 - 12:52 | 2596399 GOLDTEETHSILVER...
GOLDTEETHSILVERFILLINGS's picture

FOLLOW THE YELLOW BRICK ROAD...

Sun, 07/08/2012 - 12:19 | 2596342 ekm
ekm's picture

In my past life, looking at what would be the most conspicuous fact that triggered the communism collapse in Eastern Europe?

The answer: FOOD STAMPS.

US economy is quite bad, really bad, pretty bad.

Sun, 07/08/2012 - 12:11 | 2596325 Bugsquasher
Bugsquasher's picture

AutoDesk? Really? Auto desk has not been a leader in design software for a decade now.  It's a dog. Even it "MechanicalDesktop" was too little too late after SolidWorks and Pro-E had come to dominate the 3D design market.

Sun, 07/08/2012 - 12:03 | 2596300 bugs_
bugs_'s picture

All they did was defer what should have happened in 2001.  They bankrupted the world and future generations so that they could buy themselves a decade.  Sad.

Sun, 07/08/2012 - 11:58 | 2596292 BigJim
BigJim's picture
 Right As the Fed Realizes It's Out of Ammo

Silly Graham!

Ben's barely got started.

Sun, 07/08/2012 - 12:46 | 2596384 vast-dom
vast-dom's picture

Graham why not get on over to Bruce Kasting's post and rob him such that you may have someting of substance to inject into your "free" newsletters. And btw how are those leprechaun's of yours that can get you that $350/oz of gold you were trying to peddle last year? zzz

Sun, 07/08/2012 - 11:47 | 2596269 Brennen81
Brennen81's picture

Can anyone comment on if they think the investment letter they promote in these posts are worth the $$$  ?????

Sun, 07/08/2012 - 13:02 | 2596409 Jack Sheet
Jack Sheet's picture

Graham will make you a small fortune.... If you start out with a large one.

Sun, 07/08/2012 - 11:39 | 2596258 Doode
Doode's picture

Food stamps chart is very deceptive and should not be done this way. They made 25 as the base to make 46 look like a huge increase. In reality it is not that bad considering the severity of the crisis. Sensationalism is part of the problem we cannot fix anything in this country.

Sun, 07/08/2012 - 17:16 | 2596817 deez nutz
deez nutz's picture

In reality it is not that bad considering the severity of the crisis.

46 MILLION people: that would make them the 28 LARGEST country on the planet!!! 

Wow DOODE you must be an overpaid government fuktard!! (do you hang out with Max the civil monkey?)

Sun, 07/08/2012 - 15:48 | 2596659 malek
malek's picture

You really need to work on your spinning a bit.

A better approach might be "Look, the number of food stamp recipients is topping out, everything is great!!!"

Sun, 07/08/2012 - 14:52 | 2596553 HoofHearted
HoofHearted's picture

Hey doode, check out all the other charts too. How many of them start with different bases? Look at the workforce participation, for instance...good of you to remember your freshman stats course, but maybe you should look at the raw numbers like most of us do. It isn't pretty, no matter how you try to graph it.

Don't believe everything you see is well taken. But this also splits both ways...

Sun, 07/08/2012 - 13:22 | 2596432 sluggo
sluggo's picture

I understand your point about the base of 25MM people on food stamps, but nevertheless, the number of people receiving SNAP etc has increased by 20MM over the last 6 years!  Not a good sign.  I've heard pundits state that this ins't a "Depression like in the 1930's; where are the food lines?"  I'm thinking that a line of 46MM people would stretch across the country at least once!  Not good.

Sun, 07/08/2012 - 13:20 | 2596429 sluggo
sluggo's picture

I understand your point about the base of 25MM people on food stamps, but nevertheless, the number of people receiving SNAP etc has increased by 20MM over the last 6 years!  Not a good sign.  I've heard pundits state that this ins't a "Depression like in the 1930's; where are the food lines?"  I'm thinking that a line of 46MM people would stretch across the country at least once!  Not good.

Sun, 07/08/2012 - 12:04 | 2596304 Heroic Couplet
Heroic Couplet's picture

Heh, good catch. I can think of 2 billion dollar corporations that are not traded on wall street and don't give an eff about wall street. The supposedly mom and pop businesses that are the source of "hiring" in the US are not traded on wall street, so shut wall street down.

As for food, I would be the Walton family are just greedy enough that they would route their banking business through credit unions in a heartbeat. So let wall street collapse and let the banks collapse. Good riddance.

Sun, 07/08/2012 - 15:04 | 2596571 RiverRoad
RiverRoad's picture

The Walton family this country really needs to recognize is the one John-Boy belonged to.  There's a re-run the country could use right now.

Sun, 07/08/2012 - 12:03 | 2596302 steelrules
steelrules's picture

Sure 15% of 314 million is not so bad.

Sun, 07/08/2012 - 11:29 | 2596243 rsnoble
rsnoble's picture

Post war?  We are at war.  And in a bigger "pre-war".

We're not heading into a recession. We're in one.  In fact I consider it a modern day depression. Sad thing is it can get a lot worse.  Yep.....don't count on the gov't to take care of you they already spent all the money on bombs.  

Sun, 07/08/2012 - 10:53 | 2596176 GeneMarchbanks
GeneMarchbanks's picture

Hmmmm...

my Surviving a Crisis Four Times Worse Than 2008 report is chock full of information on how to not only survive but thrive during the months to come.

Hucksterism is always in a bull market, huh Graham?

Sun, 07/08/2012 - 14:11 | 2596498 tmosley
tmosley's picture

The very notion of a person being compensated for their work rustles your jimmies, does it?

Sun, 07/08/2012 - 13:35 | 2596445 DosZap
DosZap's picture

Fed officials have been frustrated in the past year that low interest rate policies haven't reached enough Americans to spur stronger growth, the way economics textbooks say low rates should

This is nonsensical,how in hades do normal and old ways work, when 25% of the workforce has NO jobs, and NO chance of finding a replacement?.

Interest rates for borrowers at a tenth of a basis point, could not jump start that which has been destroyed.

IF you have no job,no money, and banks that will not lend to people who want to replace equipment, and add workers,how the hell do you get that 25% back to work?.

Answer: You Don't.

Sun, 07/08/2012 - 13:00 | 2596407 Jack Sheet
Jack Sheet's picture

and the company list includes Robotrader's favourite stocks...

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