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There Are No "Tailwinds"
Submitted by Jeffrey Snider via Alhambra Investment Partners,
With the Chinese manufacturing indications “unexpectedly” disappointing over the weekend it was absolutely no surprise that US estimates of income and especially spending would as well. These overall, broader figures align closely with other indications of a dangerously weak household sector, very much explaining why the rest of the world is screaming about impending contraction.
For all that intuitive sense and logical consistency, the media and their appointed credentialed economists are talking about a totally different world. While there was acknowledgement of a “less-than-stellar” December, somehow there remains a preponderance of “tailwinds” in all commentary.
Despite ending 2014 on a weak note, lower gasoline prices and a firming labor market are expected to provide a huge tailwind to consumer spending in the first quarter.
Households have so far used much of the extra income from cheap gasoline to pay down debt and boost savings, according to economists. Gasoline prices have plunged 43 percent since June, according to U.S. government data.
The second paragraph quoted above directly contradicts the first’s blatant cheerleading, as lower gas prices have not been used for spending yet so it is completely unclear (aside from ideology) as to why that would suddenly and sharply change. As it is, any increase in spending is due in no small part to healthcare, which is clearly crowding out other more efficient activity. The major revisions to the savings rate demonstrated this zero sum existence, and now in December does no favors to those looking for a gas price “boost.”
The other part about the “firming labor market” providing another and even more potent lift I just don’t get. I understand that the Establishment Survey says that jobs have become plentiful, exciting economists, but every other broad economic account about income and spending are more than suggesting the opposite conclusion. The context is unambiguous, meaning that any analysis of “tailwinds” is far too exclusive to be even slightly useful.
Even wages and salaries, which have been marginally better in 2014 than 2013, show nothing of the tremendous acceleration that typically (without fail, except in this cycle) accompanies a true recovery. Again, relativity in a narrow context is impractical, and in this case very much misleading.
Even setting all that aside, if 2014 was the best year for payroll expansion since 1999 then the household economy in 2014 should have at least a passing resemblance to 1999. As you can probably guess by just the charts above, it doesn’t – not even close.
By every major measure of income and spending, both nominal and adjusted (badly) for some calculated level of “inflation”, the economy of 2014 is absolutely nothing like that of 1999. The numerical count of job gains in the Establishment Survey last year might be of similar magnitude (not counting for population), but so what? If there are jobs in this “cycle” they are nothing like previous jobs and Americans are acting that out in actual and diminished economic activity (as China will tell you).
But what should really obliterate this talk of “tailwinds” is where 2014’s household economy does actually relate – uncomfortably so.
Rather than suggest an economy like that in 1999, everything shown above resembles far too closely the pre-recession year of 2007. In fact, in nominal terms, 2014’s results were actually worse than 2007, and it was only a smaller calculated inflation rate that kept these measures equal. If actual and experienced price changes in 2014 were similar to those in 2007, which there is anecdotal evidence for, then in every case 2014 wasn’t just a little more than half of 2009 it was worse than even 2007.
We can also include 2001 as a close comparison. Apart from wages and salaries, the level of DPI, real and nominal, as well as spending levels are far too equitable with the year 2001 to be of much help toward the optimistic outlook.
That means that the economy in 2014 was not in any meaningful manner even close to that of 1999, instead an almost exact copy of what we saw in the pre-recession year of 2007 (which included one month inside the Great Recession itself) and the fully recessionary year of 2001 (the dot-com recession lay entirely within that calendar year). It bears repeating that the Chinese (and the rest of the global supply chain as central banks everywhere are suddenly turning to “stimulus” through new rounds of rate cuts) would wholly agree with that assessment.
The economy being talked about in the media just doesn’t exist, no matter how you view the unemployment rate. There is no spending because there is no income(marginally deficient). Instead, what we see is instability where these low levels of activity and true wealth creation persist. There are no “tailwinds” to be found here, only confusion about the relative state of progress. Going from really bad to less bad is not recovery, just another fact of an unstable economy plodding its way toward the next, and eventual, dislocation. This is very much consistent instead with a smaller overall economy conspicuously absent of sufficient wealth creation; i.e., replete with redistribution instead.
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I agree no tailwinds....stock market will trade sideways all year and will end up a bit at the end.
http://3.bp.blogspot.com/-DE0zCjMZSso/UF2N6yZsncI/AAAAAAAADHA/rO7ARg5Fda...
Yep, Dow goes up 300 points because of rising oil, yet today when oil drops the Dow trades sideways.
Good News = stocks soar
Bad News = stocks trade sideways
REALLY Bad News = Fed will not raise rates = stocks soar
Any news = Doesn't fucking matter when central banks around the world are printing money to criminally manipulate stock markets.
No tailwinds? That is funny, every time I pass gas I create "Tailwind!!!"....
Or am I hearing that there is not going to be a gas shortage? Hmmm.
back in 2006 i asked two "experts" [real estate agents both with at least 20yrs of experience] about the RE market.
(obvious to me we were in a serious bubble)
both said ~ same -
"oh, prices will plateau for a year or two so fundamentals can catch up ... then onward and upward"
how'd that work out?
There are no experts, only vested interests.
It seems that for everything we would consider buying there is no readily available source of information. Sales and marketing ARE the source, and none of them are without bias, especially today, when every sale is food on the table.
US enters a recession no later than Q1 2015
the stars are aligned
Nah, it's good to go. Cleanest dirty shirt and all.
Even though my above statement is the most retarded cop out ever created and makes no sense at all. There are plenty of fucktards who will say this and believe it and drive the market higher, as well as the dollar.
You are MSnbc material./s
Hold out for a washroom key. I hear the outhouse is getting a little over full.
6 years 1 month between end of 2001 recession (november 2001) and beginning of last one (december 2007)
current "recovery" is 5 years 8 months
tick tock tick tock ...
Dude, we will never have an official recesion ever agin, get used to it. You and I will go broke but the economy and stock market will be strong for infinity.
You're completely wrong on both counts
stock market high because of 1) record high corporate profits 2) record stock buybacks
historically, corporate profits 6% of GDP current around 11%
both coming back to earth ... sans parachute
Fundamentals don't matter. Fucking CLEANEST DIRTY SHIRT bro.
When the price of oil is less than its marginal cost, I'd be careful about using the word "infinity."
I remember hearing the exact same thing in Q1 2014. Forgive me if I don't hold my breath.
not from me
core capital goods orders negative 4 months in row ... do you think january (with energy sector collapsing) will reverse trend?
WE NEVER LEFT THE DEPRESSION OF 2009!
Sheesh.
You are a hater. Everything is under control and fixed
Is this all we get for 9 trillion?
Any "recovery" was bought with pretend credit and willfull ignorance.
Everyone of our trading partners knows we are good for it, cleanest dirty shirt. We can keep printing forever with no real negative effects. We have never defaulted before and never will. Our debt is a good as gold.
no Obama is too lucky for that. He will give us the mother of all depression once we realize that the $10 Trillion give aways they have been giving away are GONE...to some billionaire bankers offshore slush fund for the next useful idiot
It's all about trading and investor perception, not reality.
BS, sound bytes and hype to keep the game going.
As long as the algos, traders and sheeple believe it, it's all that matters.
the economy, aka the stock market, is fine
that is all
I wonder if Obama's 'you didn't build that' comment was a purposeful 'blunder'. He doesn't want anyone building anything, and telling people who have sweated buckets, often with their progress retarded by government, that they didn't build their businesses surely doesn't encourage them to try harder, and probably doesn't encourage others to try in the first place.
With a run of fiat from conspicuously uber-valued stawks , where the hell will the next bubble(s) be formed ? Beats the shit out of me.
When the govt talks about economic TAILWINDS it's refering to the fed and the govt statisticians blowing smoke up your tail.
that tail wind has a dick on it. Nothing anount Trillion pieces of paper won't cure
I see major headwinds with that GDP miss, avg. hourly earnings drop, shitty ISM, shitty jobs numbers, shitty earnings, and huge F*cking inventory build in December.
Chew on that your feckin retread/retarded MSM water carriers for ZOD...
Yen, quit teasing, how do you really feel?
The so called 'markets' will plunge into the next staged 'crisis' whenever the central Banksters decide to pull the rug out again.....could be tomorrow, might not be for many months, no one but them knows when.
"This is very much consistent instead with a smaller overall economy conspicuously absent of sufficient wealth creation; i.e., replete with redistribution instead."
I like this phrasing. It points out nicely the form of this "recovery". It has been pure redistribution. When redistribution masqerades as "growth" and printing masquerades as wealth, the downward trends in every one of the graphs presented here are the result. It's not that complicated.
my biggest concern the last few days = the fundamental guys who leaned on "strong fundamentals" for driving markets higher the last few years have been COMPLETELY de-bunked the last 5-7 trading sessions. earnings have been horrific (i believe 87% so far have guided lower), the strong US $$$ is being citied by ALL the multinationals as a killer (MRK this morning said its going to lose $2 billion next year due to USD currency exposure ALONE). so according to their math, stocks should be getting killed. they sold off briefly but then what happened? happy talk out of several fed members and bullshit lying out of europe of an "extend & pretend strategy" for greece. these guys test the algos with negative verbage and when the markets sold-off, they did a 180 and all of a sudden the market shoots back up 500 points. yeah, fundamentals.
CAT ceo was PLEADING to the fed thru CNBC NOT to raise rates, and just this morning jack welch said "the fed would be CRAZY to start raising rates now".
so i ask the question "when the fuck is it a good time to start raising rates?"
these fucktards have NO CLUE - NONE as to what the fuck is really going on here & to what end the extent of their financial engineering is bringing us to. are we supposed to be on ZIRP forever so these CEOs can have their dual-wet dream of a cheap USD & the ability to when they miss on earnings to just fire a bunch of people, borrow $$$ at 0, and buy back their own stock + up their dividend to they can pad their own stats.
bottom-line is this: NOBODY wants to be responsible for pulling the plug on this party because the higher you go, the further you fall. right now, the SPY are trading 204.5 last and the prior high before the 2013 breakout was 160.00 - that means, we have 21.5% to the downside JUST TO GET US TO THE HIGHEST HIGH before we can even START to find out WHERE normal trading SHOULD be.
price discovery is the single most important component to any capital market and we have not had & i do not see the balls on most to allow that to re-set. the pain will be viscious but its only the start of what we need to do.
oh, and as for the "great rotation" that we never hear about anymore. just wait until they have to raise rates because of whatever reason it may be; there will be a great rotation alright - out of dividend stocks that EVERY PM is hiding in for yield and into bonds on any backing-up in rates. mis-pricing of risk is the single most dangerous thing that can be done & we've been doing it here on steriods for the last 6+ years. way to go fed.
strong usd hurting exports and fx treatment on overseas earnings ... couple that with collapse in energy sector ... and subprime auto loans souring
lower earnings will lead to layoffs and (further) capex cuts ... vicious cycle at hand
.
but helping EU and Japan who must be hanging on by their fingernails
where is the chart of billionaire's stock increases and banker bonuses....you will see some real gains there.
Maybe, but paper gains are no real gains. The american citizens are overly concerned by the development of share prices. This is not an important yardstick. I prefer to look at average income and net asset figures. They are disastrous for the US which is about to approach BRICS level.
Talking head on Fox said the other morning the gas was down, it was time for the consumer to start spending and gain confidence in this economy. The dipshits on a stick actually used the talking point that consumers had the money but were not spending due to a confidence problem. Hey fuckheads, the consumer is tapped out, no jobs equals no money. Middle class is officially extinct. Unless there is a massive shift in economic priorities away from this bread and circus bullshit people are using to get elected there will never be a resurrection of the middle class. It's over. Game over. get it!
If you adjust for forged CPI, forged GDP (to include revenues of illegal activities) and overly expanded debt the US economy has been in recession already for an extended period. This is reflected in dismal data regarding average family income, average family direct and indirect debt and average net assets. It is more than amazing that so many Americans still believe in the story of positive GDP growth although all the figures have been forged and the forgery is continously monitored and documented for instance on shadowstat.com. Obviously the number of internet users in the US has been forged as well.
Some of the "taliwind" is being used by consumers to de-lever. And that will have longer term benefits, since wages are never going to keep up with things like credit card interest rates.
Is a "taliwind" a confidence booster produced from those flowers in Afghanistan by the Taliban?
what about headwinds? Are there any headwinds?
It is all about confidence. Have you noticed that the continuing drought in the west has all but disapeared from the msm? That January was the driest ever for California? Gone is the talk of higher produce prices and farms being left high and dry. The economy is weak and the gov knows it. It is refreshing to see that that the main populice is not buying the propaganda. Go to any news website and find an article about how great the economy is and read the comment section. The muppets aren't buying it.
and yet, obama has a 50% approval rating. apparently half the population is enjoying life rightnow.
Or the MSM-produced hopium.
Did an internet search on the continuing drought, San Francisco for the first time ever since 1850, had no precipitation. Good article showing the Sierra snowpack from the first of January to the end of January.
http://www.weather.com/news/news/california-record-dry-january-san-franc...
The bottom bouncing Anglo-economy is a giant sucking sound pulling civilization down. The Ecomunism ideology with its zero sum game imodel and narcissistic selfishness produces exactly what it portends.
When will we begin testing corporate and government leaders using the MMPI and PAI tests to uncover pathologies before they are allowed to exercise power. It takes two to test!
Plenty of tailwinds if you count the anal eructions caused by market indigestion.
There is always a possible Tail wind in either controlling the ability to use Monetary Policy or Fiscal Policy to channel funding in to certain sectors or industries or in infrastructure. Congressional Socialism is what we live under now. Congress can pass all kinds of social programs like fixing social security, fixing MEDICARE, putting ceilings on Health Care Costs or Executive Wages or CAPEX... Congress could attempt to fix Pension Shortfalls or Retirement Systems so that Elderly spent more money.
- Political Will for CON-gress to fix something? Yes.
- Congress will screw something up soon.
- Will congress fix anything... not likely
- Congress is most characterized by Status Quo for Main Street, and Corporate Activism for the Elites
- The Presidency is most characterized by War, Police Powers, Spying, Drone Strikes, Torture, Rendition, MIC Expansion (See his Budget for 2016)
BTW we clearly have had a Socialist Government:
- Clayton Antitrust Act 1914
- Railway Labor Act 1926
- Social Security 1935
- Labor Management Relations Act of 1947
- Contract Work Hours Standards Act 1962
- Equal Pay Act of 1963
- Civil Rights Act of 1964
- Economic Opportunity Act of 1964
- Food Stamp Act of 1964
- Medicare passed 1965
- Medicaid passed 1965
- Voting Rights Act of 1965
- Higher Education Act of 1965
- Immigration and Nationality Act of 1965
- Motor Vehicle Safety Act of 1966
- Child Safety Act of 1966
- Age Discrimination in Employment Act (ADEA) of 1967
- Truth-in-Lending Act of 1968
- Land Sales Disclosure Act of 1968
- Bilingual Education Act of 1968
- Think Medicaid expanded in 1968?
- Occupational Safety and Health Act of 1970
- Migrant and Seasonal Agricultural Worker Protection Act (MSPA), passed in 1983,
- FLSA amendment increased the minimum wage to $5.15 an hour 1996
- Fair Minimum Wage Act of 2007
---
And clearly the Lobbyist have won the following for our Zaibatsu, Vichy-DC, Zio-MIC Complex:
1964 - Gulf of Tonkin, Congress gives up War Powers, Legislative Powers, and Budget Powers
1973 - War Powers Resolution (Allows 60 days combat/war without congressional declaration)
1978 - Bankruptcy Reform Act of 1978,
1980 - Depository Institutions (J. Carter, followed by S&L Crisis, 5000 convictions, RTC)
1981 - Executive Order 12287, (R. Reagan, removed price controls on Petrol)
1984 - Caribbean Basin Initiative (Free Imports to USA)
1992 - Energy Policy Act (H.W. Bush)
1994 - NAFTA, Deregulation of Trade, 3 Nations (W. Clinton)
1995 - Community Reinvestment Act, the Clinton Admin urged flexibility,
1995 - HUD advocated greater involvement of state and local organizations
1996 - Energy (W. Clinton, followed by ENRON Scandal)
1996 - Telecommunications Act (W. Clinton, cross ownership)
1996 - Start of a Period of Accounting Fraud in USA which continues today
1997 - M2 Money Velocity Top
1998 - Clinton's Kosovo War (over 60 Days)
1998 - Brooksly Born Rejected on her concerns on OTC Derivatives
1998 - Derivatives expanded and were not regulated
1998 - Citicorp & Travelers Insurance Merger
1999 - Gramm–Leach–Bliley Act (Phil Gramm, W. Clinton, followed by 2008 Financial Crisis)
1999 - bombing campaign in Kosovo (W. Clinton, over 60 days)
2000 - Commodity Futures Modernization Act of 2000 (P. Gramm, W. Clinton, derivatives)
2002 - McCain–Feingold Act (G.W. Bush, Campaign Finance, soft money unlimited)
2005 - Energy Policy Act (G.W. Bush, subsidies, excluded clean air Water acts)
2005 - Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA).
2005 - CAFTA-DR Ratified, 2006 El Salvador, Honduras, Nicaragua, Guatemala
2008 - 2014 QE & LIRP/ZIRP (B. Bernanke, J. Yellen, B Obama)
2009 - 2014 Continuing Resolutions in which Congress gives up Budget Powers
2010 - Citizens United v. Federal Election Commission (money is free speech for corps)
2011 - US combat in Libya (B Obama, over 60 days)
2014 - lift ban on crude oil exports (B Obama, Commodities Deregulation)
+1000
Thanks earleflorida.
Let me add:
That instead of bailing out TBTF/TBTJ we could ask for a state of Justice and Accounting for Accounting Control Fraud, Banking Fraud, and Financial Fraud instead of serving power & the people in power who give us money, contributions to campaigns or Lobby Money:
Government is always doing things for reasons of preserving power, status, influence... even if it means welcoming back former Nazis. And look at the TARP Bailout, Future Plans for Bail Ins in Europe & USA, and look at the Waivers for Investigations & Prosecutions of TBTF Executives. They never wanted to see another Keating Five or Lincoln Savings & Loan... it was too damaging to Politicians and made Wealthy Powerful People Upset.
https://en.wikipedia.org/wiki/Keating_Five
https://en.wikipedia.org/wiki/Resolution_Trust_Corporation
https://en.wikipedia.org/wiki/Savings_and_loan_crisis
- Between 1980 and 1994 more than 1,600 banks insured by the FDIC were closed or received FDIC financial assistance.[37]
- Between 1989 and mid-1995, the Resolution Trust Corporation closed or otherwise resolved 747 thrifts with total assets of $394 billion.[1]
- 5000 Executives we convicted in the S&L Crisis
Epic post. I regret that I have but one greeny to give.
Thanks Disc Jockey.
"Going from really bad to less bad is not recovery, just another fact of an unstable economy plodding its way toward the next, and eventual, dislocation."
Perfectly said. Not 'healing'. Not a 'slow but steady recovery'. Not 'these things take time'. No. Careening wildly up & down and back & forth where confusion reigns supreme and Lies are the order of the day.
What we are seeing every day with the action of stock and commodity markets, the release of the economic numbers from the administration, the opinions of the pundits and experts and university professors, the fanciful and starry-eyed stories in the MSM, and the blue sky polls of the American consumer is nothing more than