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Guest Post: Mother Nature's Bail Out Coming To An End

Tyler Durden's picture





 

Submitted by Lance Robert from SteetTalk Advisors

Mother Nature's Bail Out Coming To An End

manufacturing-warmweathereffect-041712We have been reporting since December about the potential impact of the weather (Retail Sales and Employment) on the economic numbers.  Those impacts ranged not only from borrowing from the future growth but also by skewing the underlying data due to how seasonal adjustment formulas work. 

The chart is a composite of the Chicago, Richmond, New York, Philadelphia, Dallas and Kansas Federal Reserve regions plus the ISM Manufacturing and Non-Manufacturing Index.  These reports all showed continued strength through the winter months as the warmest winter in 65 years allowed manufacturing to operate at higher levels than normal.  However, those small increases were magnified by the seasonal adjustments that were added to account for normal seasonal weakness when individuals can't make it to work.  Unfortunately, the "sugar coating" of the weather adjustments as the seasonal weather patterns return to normalcy will expose the bitter center.  We have already seen it accross the manufacturing reports and indications point to continued weakness ahead.

A second impact of the warmer seasonal weather is that it borrowed from future growth.  Housing starts today dropped like a stone even as we enter into what should normally be a very strong time of the year for home building.  Normally, March should be the beginning of a ramp up for building now that workers can start returning to work and building can resume with better weather working into the backlog built up during the winter.  The problem is that there is no backlog to fill.

Warmer weather has also impacted the employment data.  With a lack of inclement weather that would normally keep individuals from getting to work combined with 4.47 million employees in first 3 months of 2012 - the employment data in recent months has been much stronger than we would have seen during a normal winter season.  It is very likely in coming months that we will see a near 50% contraction in the employment reports as the seasonal adjustments begin to subtract jobs from a weak employment environment. 

Of course, while we have been discussing this for the past several months, the media ballyhooed the "stronger" numbers during the winter period and dismissed the weather impact entirely.  Now that more than 70% of recent economic reports have missed estimates they are quickly blaming the weather as the reason.

The Fed and the Administration should be on their knees and giving thanks for the blessings they have received for the economy over the past 9 months.  First, falling oil prices last summer gave individuals an effective $60 billion tax cut.  Then during the winter where normally heaters are turned up to stave off the wintery blasts the balmy winter added roughly $30 billion to consumer's wallets due to decreased utility costs.  Those impacts gave individuals more dollars to spend and when combined with seasonal adjustments it gave the illusion of a strongly recovering economy.

With "Operation Twist" now rapidly coming to an end and the Fed apparently in a trap of rising inflation I am not sure what the next "support" for the economy will be.  My expectation continues to be that the economy will continue to run at a sub-par growth rate though the end of 2012 and that we could see a recession by the end of 2012 or by mid-2013.  Of course, that is assuming we are boosted by further rounds of artificial intervention by the Fed or Mother Nature. 

 


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Tue, 04/17/2012 - 12:19 | Link to Comment pods
pods's picture

Can we please just start calling this a depression?

If we cannot avoid another "recession" unless the FED injects like 10% of GDP per year, is that NOT a depression?

pods

Tue, 04/17/2012 - 12:23 | Link to Comment LawsofPhysics
LawsofPhysics's picture

come on now.  Calling it a depression means that politicians of all stripes over the last 30+ years who got us here would have to admit failure and open the door to prosecution.  Okay, the last bit is the hopium talking.

Tue, 04/17/2012 - 12:26 | Link to Comment Dr. Engali
Dr. Engali's picture

That goes against the official centrally planned story. We are in the midst of a booming economy with a mid cycle slow down.

Tue, 04/17/2012 - 12:42 | Link to Comment EscapeKey
EscapeKey's picture

You sound like an infomercial.

Tue, 04/17/2012 - 12:35 | Link to Comment mayhem_korner
mayhem_korner's picture

 

 

Even "depression" is a misnomer, as it presumes a return to the prior state.  So what should we call a depression from which no recovery is in the offing?

a)  Hair of the Keynes

b)  The Alinsky-Soetoro Effect

c)  Fiscal Darwinism

d)  100 Years of the Fed

Tue, 04/17/2012 - 12:38 | Link to Comment insanelysane
insanelysane's picture

first you have an agricultural economy, and then a manufacturing economy, and then a service economy, and then (by printing endless amounts of fiat) a jobless economy.  This is no depression, it is the new normal economy, adjust your economic models and theories accordingly.

Tue, 04/17/2012 - 12:47 | Link to Comment LawsofPhysics
LawsofPhysics's picture

don't forget the financial sector, over 35% of GDP and growing.  Long paper-pushing fucknuts.  What happens when the agricultural community no longer accepts the paper that the financial sector prints?  Where have we seen this before?  can you say Wiemar? I knew you could.  Ask a farmer about being "corzined".  Stupid fucks.

Tue, 04/17/2012 - 13:27 | Link to Comment myshadow
myshadow's picture

35%, by what measure?

http://www.huffingtonpost.com/2011/12/15/financial-sector-economy_n_1151...

'The findings -- which, indicate that the financial sector accounts for 8.4 percent of the country's GDP, a greater share than five years ago and one of the highest percentages of the past half century, according to The Wall Street Journal -- may come as unwelcome news for anyone who believes that an outsized financial industry doing too much with too many people's money led the country to financial crisis.

As of March 2011, the financial industry was generating 29 percent of all profits in America -- not quite at 2001's record level of 46 percent, but well above the norm for most of the 20th century, when the financial sector never accounted for more than 20 percent of national profits.'

Tue, 04/17/2012 - 13:38 | Link to Comment LawsofPhysics
LawsofPhysics's picture

The huffington post?!?!?  LOL!!!!  Here are some key words for you; shadow banking, hedge funds, repos, treasury auctions,  mutual fund fees...  LOL,  venture capital...  LOL...

LOLOLOLOLOLLOLOL!!!!

Either way, how does an industry, that (according to you) generates ONLY 8.4 % of GDP, JUSTIFY fucking 29% OF THE PROFITS?

FAIL.

Crash the system and let's find out precisely what the value of everyone's labor really is.

Tue, 04/17/2012 - 14:48 | Link to Comment myshadow
myshadow's picture

All I asked for is where you came up with the 35% number. 

So you burst into a pack of text responses to laughter?  Flaming is hardly a response.

It isn't according to ME, and I was, and am suspect, of the 8.4%=29% of profits, number and, yes, it is hard to justify.  So I wouldn't.  This was the line that was sent to the muppets, that is quoted at huffpo. 

It is what I came up with first when I did a search around the veracity of the 35% figure.

I actually tend to agree with the premise of what you originally posted, but before I would argue it to others, and take it as real to myself, I'd like to be able to back it up with something one can reference as a real accurate citation.  I am abundantly aware of the aforementiond list, still, you don't have the numbers.  It was all I asked for.

 

Tue, 04/17/2012 - 15:22 | Link to Comment Clycntct
Clycntct's picture

I agree with your pointed questions.

 Perhaps it would create some functioning departments in the federal government if those could be obtained.

But I think this picture could best be the  encapsulated view of the answer.

http://www.michaelmatthews.com/images/US_National_Debt_Chart_2012.gif

 

Tue, 04/17/2012 - 12:46 | Link to Comment Rainman
Rainman's picture

just goes to show that grand larceny is adaptable to all conditions

Tue, 04/17/2012 - 12:38 | Link to Comment cossack55
cossack55's picture

All the above, certainly C.

Tue, 04/17/2012 - 12:40 | Link to Comment Flakmeister
Flakmeister's picture

Well a good part of this shitshow is due to getting into wars costing at least $2 trillion while cutting taxes.....

but I go with

e) Oil's well that Peaks well....

Tue, 04/17/2012 - 13:13 | Link to Comment Ponzified Plebe
Ponzified Plebe's picture

Mayhem,

 

Call it whatever you want to, but the new economic normal doesn't really change untill the baby-boomers have the common decency to start dying off in droves.

Tue, 04/17/2012 - 12:23 | Link to Comment francis_sawyer
francis_sawyer's picture

With "Operation Twist" now rapidly coming to an end and the Fed apparently in a trap of rising inflation I am not sure what the next "support" for the economy will be

~~~

Maybe he's never heard of the CTRL+P button... Oh well, I guess there's still time to learn...

Tue, 04/17/2012 - 12:25 | Link to Comment cossack55
cossack55's picture

Oh, there is certainly some intervention coming from Mother Nature, only it will be graded on the Richter Scale not some BLS BS.

Tue, 04/17/2012 - 12:27 | Link to Comment blunderdog
blunderdog's picture

We can resolve all these issues by just creating an exchange to trade weather futures.  Then everyone would be able to properly hedge based on their concerns.

Tue, 04/17/2012 - 12:32 | Link to Comment DormRoom
DormRoom's picture

The only exit is total systemic collapse.  Greenspan 'rescued' the economy by lowering the interest after the dot com bubble, which led to a housing bubble not only in the US, but the globe.

 

Now all the Central Banks are 'rescuing' the economy by QE, and ZIRP, but the structural flaws remain (Triffin Dilemma, Failed Monetary Union in the EU, demographic shifts, and trade deficits in Japan, Huge income inequality & malinvestments in China)

 

This means that every nation is all in.  So expect a systemic collapse within the next 7-15 years.  With every Central Bank all in there is no line of escape.

Tue, 04/17/2012 - 12:32 | Link to Comment cossack55
cossack55's picture

Slow boat to Iceland

Tue, 04/17/2012 - 12:33 | Link to Comment Flakmeister
Flakmeister's picture

The wheel is going to turn full circle....

I wonder if the BLS/FED records show that drought is a net stimulus to the economy....

Tue, 04/17/2012 - 12:34 | Link to Comment cossack55
cossack55's picture

You may also wish to pose that question to the BoE.

Tue, 04/17/2012 - 12:38 | Link to Comment Mr Lennon Hendrix
Mr Lennon Hendrix's picture

The BoJ....

Tue, 04/17/2012 - 12:34 | Link to Comment sitenine
sitenine's picture

Mother Nature. My ass! It is called weather modification. You want to believe that RECORD warm weather last winter, which coincided with an economic imperative for warm weather, is just some cosmic coincidence? Right... This war encompasses ALL; your money, your freedom, your children, your MIND! No amount of cheating, law breaking, lieing, or straight-up murder is out of bounceds for these out of control globalist fucks! /rant

Tue, 04/17/2012 - 12:34 | Link to Comment cossack55
cossack55's picture

/rant

When does your rant begin?

Sat, 04/21/2012 - 01:27 | Link to Comment sitenine
sitenine's picture

August 15, 1971

Tue, 04/17/2012 - 12:42 | Link to Comment mayhem_korner
mayhem_korner's picture

This war encompasses ALL; your money, your freedom, your children, your MIND!

 

Agreed.  The economy is the veil...this is a grand battle over individual sovereignty (what was supposed to be the American ideal).

Tue, 04/17/2012 - 12:35 | Link to Comment Global Hunter
Global Hunter's picture

We may have a recession by the end of 2012?  Really?  That's your opinion?  Really?  Meanwhile back in the real world we're in a goddam depression and those of us that are aware of it are making drastic cuts to our lifestyles, expectations and preparing.  The worst part of this DEPRESSION for me personally is that 2 people close to me have enlisted in the army the last couple of weeks and I know how TPTB will ultimately deal with depression and it involves a lot of violence and death.

A few nights ago I sobbed all night thinking about those close to me being sent off as cannon fodder so that we can try to stave off a so called recession.  Fuck you and your goddam recessions, when people are chosing to enlist in armies because they feel they have no other options, you chose to focus on "recessions" and "sub par growth rates"?  Fuck you Lance!

Tue, 04/17/2012 - 12:37 | Link to Comment cossack55
cossack55's picture

Now thats a rant I can get behind.  Well said, sir.

Tue, 04/17/2012 - 12:39 | Link to Comment Deep79
Deep79's picture

thats the problem with all these "Money Managers", They live in a different world.

 

 

Tue, 04/17/2012 - 12:39 | Link to Comment mayhem_korner
mayhem_korner's picture

 

 

Supporting the economy is ancillary to the Fed's foremost concern at present: keeping Treasury yields from reflecting reality.

Tue, 04/17/2012 - 12:41 | Link to Comment SheepDog-One
SheepDog-One's picture

$2.60 cent gas, over $1 higher than just the year before was an effective $60 billion 'tax cut'? Oh, well maybe in this delusional money managers mind, but everyone else was still paying near record highs for gas out here in the real world.

Tue, 04/17/2012 - 12:41 | Link to Comment insanelysane
insanelysane's picture

I don't know why everyone is so worried, I am sure Japan will help us out.  A $50 trillion should buy us another decade.

Tue, 04/17/2012 - 12:42 | Link to Comment Newsboy
Newsboy's picture

Instead of bickering over "recession" or "depression", I suggest that we all free ourselves from these artificially constricted parameters, and look at the real approaching tsunami, a species-wide "selection event".

Tue, 04/17/2012 - 13:23 | Link to Comment Ponzified Plebe
Ponzified Plebe's picture

Apocalypse is a dish best served cold.

Tue, 04/17/2012 - 15:03 | Link to Comment pods
pods's picture

As opposed to Long Pig.

Tue, 04/17/2012 - 12:46 | Link to Comment buzzsaw99
buzzsaw99's picture

If people are so stupid that they buy more than usual useless shit because the heating bill was slightly lower then they deserve what's coming next.

Tue, 04/17/2012 - 12:52 | Link to Comment SheepDog-One
SheepDog-One's picture

Apparently most americans really are this stupid. 

Tue, 04/17/2012 - 12:46 | Link to Comment yogibear
yogibear's picture

We have raised our prices by 30%. Will raise them again another double digits.

Tue, 04/17/2012 - 12:55 | Link to Comment sabra1
sabra1's picture

at least all this warm weather won't bring drought, massive storm cells, and nice warm oceans to herald in record hurricanes!

Tue, 04/17/2012 - 13:08 | Link to Comment Silveramada
Silveramada's picture

every possible number(unemployement/real estate/industrial cap. exc exc) show that we are at the same level or worst compared to the Great Depression and they call this recovery? CRACK/DEBT addiction at its finest...

 

Tue, 04/17/2012 - 13:10 | Link to Comment TooBearish
TooBearish's picture

Nope - FED no mandated to target the weather at .25% as well and since they can do anything expect the summer to be mild to extend and pretend this thing into the election....

Tue, 04/17/2012 - 13:25 | Link to Comment Son of Loki
Son of Loki's picture

Rep. John Mica, R-Fla., chairman of the Transportation and Infrastructure Committee, said that while the GSA's wasteful spending in Las Vegas is "appalling," it is only the tip of the iceberg.

 

http://usnews.msnbc.msn.com/_news/2012/04/17/11245389-gsa-grilled-over-a...

 

More Gub'ment spending...more waste...will they get the GSA hooker bill from Las Vegas? Or is that included in the spend fest of over $800k of taxpayer monies?

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