Back in May, I penned a missive entitled "If You Don't Like It, Change It" which discussed the pending changes to the GDP calculation by the Bureau of Economic Analysis (BEA). To wit:
"Now, for all of you playing the home version of "Nail That GDP Number," it was just a couple of years ago that the BEA decided that the economy was not growing fast enough and "tweaked" the GDP calculation and added in "intellectual property." Those adjustments boosted GDP by some $500 million.
The problem with adding "intellectual property" is that the cost of a new cancer drug treatment, a Hollywood movie or a new hit song is already included in the value of product brought to market. In other words, since production is what drives economic growth, that value is captured in the quarterly analysis of business investment, spending, etc.
However, since those tweaks did not boost the economic growth rate as much as was hoped, the BEA has now wondered if maybe their statistical modeling is wrong and will be making adjustments once again to boost economic output in the U.S."
The chart below shows both sets of adjustments to real, inflation-adjusted, GDP. As you will notice, despite the BEA's previous adjustment, GDP growth was substantially weaker in subsequent years. However, you will also notice that the first two-quarters have seen a rather strong uptick in growth.
The latest adjustments to GDP changed the first quarter growth rate from a -0.9% to a positive 0.6% with the second quarter rising strongly to 2.3%. The problem is that the upward revisions to economic growth for the first half of this year does not particularly "jive" with what is happening in the "real economy."
While the BEA is suggesting that previous weakness in the economy was simply due to "residual adjustments" lingering in the data, that does not explain the weakness in other areas of the economy.
The comedian Jeff Foxworthy used to have a bit in his stand-up routine called "You Might Be A Redneck If..."
Being from Texas I can personally attest to, unfortunately, having witnessed several of his comments. However, within the context of this missive and to illustrate my point, the following set of charts follow a similar theme:
"The Economy Probably Sucks If..."
Wages for 80% of workers are on the decline...
Core Durable Goods Orders are falling....
Core-Capex Orders are plunging...
(Note: Paul McCulley, the former legendary economist from PIMCO, used the following 3-month average of the annual change in core capex orders as a preferred indicator of the broader economy and how it would fare in the next few quarters ahead.)
Consumer Spending (almost 70% of the economy) is crumbling...
"What do General Motors, JPMorgan Chase, Microsoft, IBM, Proctor & Gamble, Citigroup, Johnson & Johnson, Coca-Cola, Oracle, and Caterpillar all have in common?
1) They are among a long list of S&P 500 companies with negative year-over-year revenue growth.
2) They are not in the Energy sector.
With 80% of companies already reported, S&P 500 sales are on pace to decline (year-over-year) by 3.1%, the second consecutive quarter of negative growth."
Economic confidence (driven by Main Street) is decreasing...
While the majority of the media jumps on individual headline data points to support hopes of an ongoing economic revival, there is mounting evidence that suggests differently. In the short-term economics have very little to do with the direction of the market, and as such, are not helpful in portfolio management. However, in the long-term, economics and fundamentals do matter, and they tend to matter a lot.
As with the Federal Reserve, the economists that operate in the "ivory towers" of academia fail to grasp the disconnect between economic theory and Main Street reality. Just as with the idea that lower oil prices would drive consumption, economic theory continues to miss the clues of a heavily leveraged, low-wage growth and underemployed population.
What the data does suggest is while the BEA can change the methodology for calculating economic growth, a change in the "math" does not change the "reality."
Where is Jack Lew. I thought we were suppose to discuss increasing the DEFICIT. Surely we will need 19 trillion plus to make it through the elections and then let the new admin. raise to 20 trillion as the economy collapses.
Fixing the shitty economic growth is easy. If the government just says inflation is negative enough, then they can turn the eventual downtick in nominal GDP to areal GDP increase.
QUOTE: "The problem is that the upward revisions to economic growth for the first half of this year does not particularly "jive" with what is happening in the "real economy." "- End
Great observation Sherlock; the old number doesn't "jive" either and the majority of consumer spending is from ObamaCareLess and shrink-inflation at the grocery and that number will increase by double digits in 2016 and so the confidence declines; happy times! Got Christ?
For wall street....up is down and down is up...our economy is like an airplane flying on this rule..at some point it is going to have a rough landing...might even crash
Your economy is probably in trouble if the country elects an unqualified gay commie Kenyan Muslim choom-head with a home-made birth certificate as president.
At least these charts verify what my eyes are observing on a daily basis:
Young people dressed in animal costumes dancing around roadside with signs pointing at the adjacent strip mall saying "We buy gold".
McMansions that used to have immaculate yards and landcaping, now having weeds in all of the flower beds and maybe a shingle ot two missing from the roof.
Roads that jar my teeth.
Gleaming high rise office buildings with prominent "For Sale" billboards erected on their now-raggedy front greenbelt, and weeds growing in last year's mulch where there used to by colorful annuals.
Strip malls half or fully vacant, with the only tenants being party stores, nail salons, tattoo parlors, and pawn shops. The ghetto has come to suburbia.
Vacant factories rotting in the sun.
"Industrial malls" with 9 out of ten buildings vacant.
Large shopping malls surrounded by rusting fencing with 8-ft thistles growing up through the ashphalt parking areas.
Lots of houses obviously vacant and untended, but mysteriously sporting no "For Sale" sign out front.
Lots of vacant houses with "For Sale" signs out front.
Lots of signs in front of houses saying "We'll pay cash for your house".
Lots of houses with "For Rent" signs in front of them in areas where houses were never before rented out.
All food retailers throughout suburbia prominently displaying banners proclaiming "We accept EBT cards".
Lots of 15 or 20 year-old cars on the road.
Just about everybody dressed like bums in clothing that looks like hand-me-downs or something purchased at the Salvation Army store.
I don't think there is really an precedent for this. Exactly how long does it take for the richest country the world has ever known to exhaust all of its savings and defer all of its capital expenditures in a quietly desperate attempt to fill the gap between current income and current expenses in a truly horrendous economic contraction before max effort no longer maintains the outward illusion of ongoing prosperity?
If GDP, adjusted for the true 7-8% average inflation rate since 2008, shows a true annual decrease of 5%/yr., and if actual production is somewhere in the neighborhood of 65% of what it was in 2008, and if a lot of that "production" includes a historically record high number for the "financial sector" which actually produces nothing of value, and another big chunk represents online vehicles producing nothing but advertising, exactly how deep is the shit we are wading into?
How long will people keep believing the "everything is great" meme and disbelieving their own lying eyes?
Quote: "With 80% of companies already reported, S&P 500 sales are on pace to decline (year-over-year) by 3.1%, the second consecutive quarter of negative growth."
Really can't expect nor wish for anything better than negative growth on an overpopulated planet. Only reason that "negative growth" is a negative concept is because fractional reserve banking can't afford interest payments without growth. Whatever else happens in the impending financial crisis that everybody in this forum is talking about, fractional reserve banking has to go or the current impending crisis looks like a dress rehearsal for the next crisis. Circa 2025?
Quote: "With 80% of companies already reported, S&P 500 sales are on pace to decline (year-over-year) by 3.1%, the second consecutive quarter of negative growth."
Really can't expect nor wish for anything better than negative growth on an overpopulated planet. Only reason that "negative growth" is a negative concept is because fractional reserve banking can't afford interest payments without growth. Whatever else happens in the impending financial crisis that everybody in this forum is talking about, fractional reserve banking has to go or the current impending crisis looks like a dress rehearsal for the next crisis. Circa 2025?
Quote: "With 80% of companies already reported, S&P 500 sales are on pace to decline (year-over-year) by 3.1%, the second consecutive quarter of negative growth."
Really can't expect nor wish for anything better than negative growth on an overpopulated planet. Only reason that "negative growth" is a negative concept is because fractional reserve banking can't afford interest payments without growth. Whatever else happens in the impending financial crisis that everybody in this forum is talking about, fractional reserve banking has to go or the current impending crisis looks like a dress rehearsal for the next crisis. Circa 2025?
The economy does not suck if Old Yeller says so.
We're an empire now, and when we act, we create our own reality
"The data will conform"
September is not a good month to raise interest rates.
Neither is April, June, August, January, March, December, July, February, October, May, or November.
Or any day ending in y
except sundae
WE ARE AMERICA!!! WE CAN DO ANYTHING!!!! DON'T YOU REMEMBER WHEN WE BEAT THE RUSSKIES IN OLYMPIC HOCKEY?!!!
And invented the Frisbee !!
Merca! Fuck yeah!
And lawn darts!
Only in murica!
There are more hookers on the street.....ECON 101
in life, if it doesn't fit, you make it fit.
There's a very fine line between being too early to a trade and being wrong. Fortunately for me I can say that i was just early to the trade.
Where is Jack Lew. I thought we were suppose to discuss increasing the DEFICIT. Surely we will need 19 trillion plus to make it through the elections and then let the new admin. raise to 20 trillion as the economy collapses.
Garbage in = Garbage out.
The garbage in is on purpose, of course.
+100 for the G.I.G.O ......................comment
Fixing the shitty economic growth is easy. If the government just says inflation is negative enough, then they can turn the eventual downtick in nominal GDP to areal GDP increase.
GDP = Gross Deceptive Product.
Liars figure, figures lie.
Nice article Lance
If you smoked during your wedding ceremony, you might be a redneck.
If you use the gasstation squeegee to clean your whole car, you might...
Just buy back more shares and give the CEO a raise....
QUOTE: "The problem is that the upward revisions to economic growth for the first half of this year does not particularly "jive" with what is happening in the "real economy." "- End
Great observation Sherlock; the old number doesn't "jive" either and the majority of consumer spending is from ObamaCareLess and shrink-inflation at the grocery and that number will increase by double digits in 2016 and so the confidence declines; happy times! Got Christ?
For wall street....up is down and down is up...our economy is like an airplane flying on this rule..at some point it is going to have a rough landing...might even crash
Food stamps? Participation rate? ZIRP?
Your economy is probably in trouble if the country elects an unqualified gay commie Kenyan Muslim choom-head with a home-made birth certificate as president.
At least these charts verify what my eyes are observing on a daily basis:
Young people dressed in animal costumes dancing around roadside with signs pointing at the adjacent strip mall saying "We buy gold".
McMansions that used to have immaculate yards and landcaping, now having weeds in all of the flower beds and maybe a shingle ot two missing from the roof.
Roads that jar my teeth.
Gleaming high rise office buildings with prominent "For Sale" billboards erected on their now-raggedy front greenbelt, and weeds growing in last year's mulch where there used to by colorful annuals.
Strip malls half or fully vacant, with the only tenants being party stores, nail salons, tattoo parlors, and pawn shops. The ghetto has come to suburbia.
Vacant factories rotting in the sun.
"Industrial malls" with 9 out of ten buildings vacant.
Large shopping malls surrounded by rusting fencing with 8-ft thistles growing up through the ashphalt parking areas.
Lots of houses obviously vacant and untended, but mysteriously sporting no "For Sale" sign out front.
Lots of vacant houses with "For Sale" signs out front.
Lots of signs in front of houses saying "We'll pay cash for your house".
Lots of houses with "For Rent" signs in front of them in areas where houses were never before rented out.
All food retailers throughout suburbia prominently displaying banners proclaiming "We accept EBT cards".
Lots of 15 or 20 year-old cars on the road.
Just about everybody dressed like bums in clothing that looks like hand-me-downs or something purchased at the Salvation Army store.
I don't think there is really an precedent for this. Exactly how long does it take for the richest country the world has ever known to exhaust all of its savings and defer all of its capital expenditures in a quietly desperate attempt to fill the gap between current income and current expenses in a truly horrendous economic contraction before max effort no longer maintains the outward illusion of ongoing prosperity?
If GDP, adjusted for the true 7-8% average inflation rate since 2008, shows a true annual decrease of 5%/yr., and if actual production is somewhere in the neighborhood of 65% of what it was in 2008, and if a lot of that "production" includes a historically record high number for the "financial sector" which actually produces nothing of value, and another big chunk represents online vehicles producing nothing but advertising, exactly how deep is the shit we are wading into?
How long will people keep believing the "everything is great" meme and disbelieving their own lying eyes?
The Bureau of Egotistical Assholes (BEA) is matched only by the Bureau of Lying Shitheads (BLS) in their "massaging" of key data points.
Quote: "With 80% of companies already reported, S&P 500 sales are on pace to decline (year-over-year) by 3.1%, the second consecutive quarter of negative growth."
Really can't expect nor wish for anything better than negative growth on an overpopulated planet. Only reason that "negative growth" is a negative concept is because fractional reserve banking can't afford interest payments without growth. Whatever else happens in the impending financial crisis that everybody in this forum is talking about, fractional reserve banking has to go or the current impending crisis looks like a dress rehearsal for the next crisis. Circa 2025?
Quote: "With 80% of companies already reported, S&P 500 sales are on pace to decline (year-over-year) by 3.1%, the second consecutive quarter of negative growth."
Really can't expect nor wish for anything better than negative growth on an overpopulated planet. Only reason that "negative growth" is a negative concept is because fractional reserve banking can't afford interest payments without growth. Whatever else happens in the impending financial crisis that everybody in this forum is talking about, fractional reserve banking has to go or the current impending crisis looks like a dress rehearsal for the next crisis. Circa 2025?
Quote: "With 80% of companies already reported, S&P 500 sales are on pace to decline (year-over-year) by 3.1%, the second consecutive quarter of negative growth."
Really can't expect nor wish for anything better than negative growth on an overpopulated planet. Only reason that "negative growth" is a negative concept is because fractional reserve banking can't afford interest payments without growth. Whatever else happens in the impending financial crisis that everybody in this forum is talking about, fractional reserve banking has to go or the current impending crisis looks like a dress rehearsal for the next crisis. Circa 2025?