While investors are drinking the Obama Administration's Kool-Aid and popping champagne corks over the slew of optimistic earnings reports and guidance, the economy continues to quietly deteriorate. This morning we were treated to another disappointment: durable goods. Add to that the ongoing weakness in real estate and sub-par retail sales and it's hard to understand the unbridled optimism that has suddenly gripped the markets.
Not that economic statistics are a good barometer of future market prices. Like earnings, they are backward looking and generally have ZERO predictive value. Markets typically turn well before the economy and corporate earnings. So, what's my beef?
The main problem with these economic data is that they are occurring in the middle of a so called "recovery" and one that began more than a year ago. At this stage, we should be seeing growth in employment, sales, economic output and an increase in taking on credit. None of those are happening.
Durable Goods came in well below expectations. The always wrong consensus had them rising about a percent. They declined by a percent.
Housing starts peaked in the 2005-2006 period at above 2 million units. From there, they dropped to about 500,000 at the bottom of the financial meltdown of 2008-2009. Since then, they have merely bounced around the lows. No material recovery in more than a year. We have not experienced the current low levels in decades.
June real retail sales rose at a 3.7% year-to-year pace, down from May’s revised 4.8% and from the first quarter's growth rate of 6.6%.
According to ShadowStats, adjusted for inflation, retail sales in May and June fell at an annualized pace of 7.6%. Compared to the peak in 2008, retail sales are still down 10%. If that pattern continues into the current quarter, a contraction in real third-quarter 2010 GDP would be a good bet.
What makes the economic sluggishness so worrisome is that it comes after the orgy-like expenditures and bailouts from the Obama Administration and near-zero interest rates. The Federal Reserve is pretty much out of bullets. The Obama Administration is out of bullets. Can you imagine how difficult economic conditions might become now that all the stimulative measures have already filtered through?
On Friday, the first estimate of Gross Domestic Product will be reported. Consensus estimates are for a 3.5% advance. That number would seem way too optimistic and sets up the market for a major surprise.
Don't get me wrong. Rising corporate earnings are great. They prove that corporate America can make the necessary adjustments to cope with the very harsh economic conditions. A victory for capitalism. But, if we are about to enter the "second-dip", tomorrow's earnings will come under renewed pressure. So, using this one data point in the absence of context will prove quite misleading and cause investors to make poor decisions.
Marko's Take
Showing posts with label Obama Administration. Show all posts
Showing posts with label Obama Administration. Show all posts
Wednesday, July 28, 2010
Monday, July 26, 2010
Obama Fires Another CEO
News reports of British Petroleum's (BP) CEO Tony Hayward being fired circulated the newswires over the weekend. As of this writing, BP has not yet made it official.
I've been wondering under what authority our President believes he has this power or moral authority.
Hayward is the latest in a pretty high level list of CEO's and executives to cross the increasingly authoritative Obama Administration. If Hayward is truly out, he joins General Motors's (GM) Rick Waggoner and Lehman Brothers' Richard Fuld. Fuld was not technically fired, but Lehman was allowed to go bankrupt, which eliminated Fuld's existance.
Of course, our president has spared EVERYONE at his pet firm, Goldman Sachs (GS), aka "Government Sachs". So what if they were central to the ruination of the global economy? They admitted no wrongdoing. Why jump to conclusions?
Let's not forget the "shotgun wedding" of Bank of America and Merrill Lynch. Was Kenneth Lewis pressured to acquire Merrill? Nah! Lewis clearly WANTED to overpay.
Don't get me wrong. All of these executives had a lot to answer for. However, these matters were best addressed by the companies' respective board of directors and shareholders, not by presidential dictum.
My question concerns exactly what gives our President either legal authority, moral authority or the basic qualifications to be making these uni-lateral decisions.
President Obama has NEVER held a private sector job. President Obama despises capitalism. President Obama has NEVER run a company, nor created a single job except at government expense. What makes him qualified to stuff his political views down corporate America's throat?
It's easy to demonize these companies. NO company in the America exists to benefit either consumers or environmentals or regulators. Their mission is to benefit shareholders. The interest of shareholders may be at odds with a political agenda. If you want social responsibility, better you turn to the many 501c3s.
If we extrapolate, we can conclude that NO CEO has any job security. If you run a company involved in tobacco, alcohol, fast foods, munitions, gaming, pharmaceuticals, finance, banking, or just about anything else, you are at grave risk. If you kowtow to Obama, your shareholders will be upset. If you protect your shareholders, Obama will be upset. Sounds like a pretty bad recipe to me.
Of course, if you're a racist, like Sherry Sherrod, you get an apology. Last Wednesday, White House Press Secretary Robert Gibbs apologized to Shirley Sherrod, fired the day before from her job as Georgia Director of Rural Development for the Department of Agriculture. Ms. Sherrod's blatantly racist comments would have gotten virtually anyone else run out of town. Trust our President. He can separate right and wrong.
You get Obamacare whether you want it or not. Never mind that he exempted Congress and himself from the legislation that was touted as so good for America. Oh, and you're not paying enough in taxes. Just because your small business is the only driver of the economy. Pay more in taxes and let Uncle Sam spend the money that they believe was never yours in the first place. Only by their good graces do they allow you to keep any of it. Be grateful.
The press told us that Richard Nixon was an imperial president. I don't recall Nixon firing CEO's. Nor Reagan, nor Kennedy, nor Johnson, nor Ford, nor Carter nor Clinton nor either Bush. In fact, has ANY CEO being fired by a sitting president? Isn't the private sector supposed to be PRIVATE?
Obama has a legal background. Has he read the Constiution?
Marko's Take
I've been wondering under what authority our President believes he has this power or moral authority.
Hayward is the latest in a pretty high level list of CEO's and executives to cross the increasingly authoritative Obama Administration. If Hayward is truly out, he joins General Motors's (GM) Rick Waggoner and Lehman Brothers' Richard Fuld. Fuld was not technically fired, but Lehman was allowed to go bankrupt, which eliminated Fuld's existance.
Of course, our president has spared EVERYONE at his pet firm, Goldman Sachs (GS), aka "Government Sachs". So what if they were central to the ruination of the global economy? They admitted no wrongdoing. Why jump to conclusions?
Let's not forget the "shotgun wedding" of Bank of America and Merrill Lynch. Was Kenneth Lewis pressured to acquire Merrill? Nah! Lewis clearly WANTED to overpay.
Don't get me wrong. All of these executives had a lot to answer for. However, these matters were best addressed by the companies' respective board of directors and shareholders, not by presidential dictum.
My question concerns exactly what gives our President either legal authority, moral authority or the basic qualifications to be making these uni-lateral decisions.
President Obama has NEVER held a private sector job. President Obama despises capitalism. President Obama has NEVER run a company, nor created a single job except at government expense. What makes him qualified to stuff his political views down corporate America's throat?
It's easy to demonize these companies. NO company in the America exists to benefit either consumers or environmentals or regulators. Their mission is to benefit shareholders. The interest of shareholders may be at odds with a political agenda. If you want social responsibility, better you turn to the many 501c3s.
If we extrapolate, we can conclude that NO CEO has any job security. If you run a company involved in tobacco, alcohol, fast foods, munitions, gaming, pharmaceuticals, finance, banking, or just about anything else, you are at grave risk. If you kowtow to Obama, your shareholders will be upset. If you protect your shareholders, Obama will be upset. Sounds like a pretty bad recipe to me.
Of course, if you're a racist, like Sherry Sherrod, you get an apology. Last Wednesday, White House Press Secretary Robert Gibbs apologized to Shirley Sherrod, fired the day before from her job as Georgia Director of Rural Development for the Department of Agriculture. Ms. Sherrod's blatantly racist comments would have gotten virtually anyone else run out of town. Trust our President. He can separate right and wrong.
You get Obamacare whether you want it or not. Never mind that he exempted Congress and himself from the legislation that was touted as so good for America. Oh, and you're not paying enough in taxes. Just because your small business is the only driver of the economy. Pay more in taxes and let Uncle Sam spend the money that they believe was never yours in the first place. Only by their good graces do they allow you to keep any of it. Be grateful.
The press told us that Richard Nixon was an imperial president. I don't recall Nixon firing CEO's. Nor Reagan, nor Kennedy, nor Johnson, nor Ford, nor Carter nor Clinton nor either Bush. In fact, has ANY CEO being fired by a sitting president? Isn't the private sector supposed to be PRIVATE?
Obama has a legal background. Has he read the Constiution?
Marko's Take
Friday, June 25, 2010
Obama's Latest Folly: Financial Reform
It simply amazes me that politicians believe that any problem can be fixed by more regulation. Uncle Sam is right in the middle of the Federal National Mortgage Corporation (Fannie Mae, or FNM) and Federal Home Loan Mortgage Corporation (Freddie Mac, or FRE) fiascos. Senator Chris Dodd (D-CT) and Representative Barney Frank (D-MA), both beneficiaries of lavish campaign contributions, made sure that these two entities could operate in the most favorable possible business environment, that is, before their help led to the two firms' demise.
Then, of course, we have the cushy relationship between Goldman Sachs, aka "Government Sachs" (GS), and the entire Obama Administration. Gotta be something in it for them!
The Securities and Exchange Corporation (SEC) completely ignored warnings about Bernie Madoff. So now that we've established the government's expertise at regulating various aspects of investing, the answer is to regulate MORE??
Let's not forget the Federal Reserve (Fed). Keeping interest rates way too low and for too long directly led to the twin asset bubbles: real estate and tech stocks. The solution? Keep interest rates even lower and for longer! See the logic?
The Financial Reform Bill was passed this morning. The Obama Administration pushed hard for this legislation to "protect the consumers" that it has, thus far, been completely unable to do. This is how governments think: create a problem, then justify even more intervention to solve the very problem they created. Think we have too much debt? Issue MORE of it! Regulations failing to do their job? Create more bureaucracy and more regulations! Simple.
Major provisions of the bill include:
New regulatory authority for federal officials to seize and break up large troubled financial firms without taxpayer bail-outs in cases where the firm's collapse could destabilize the financial system. U.S. Department of Treasury would supply funds to cover the up-front costs of winding down the failed firm, but the government would have to put a "repayment plan" in place. Regulators would recoup any losses incurred from the wind-down afterwards by assessing fees on financial firms with more than $50 billion in assets.
The establishing of a new, 10-member Financial Stability Oversight Council, comprising existing regulators charged with monitoring and addressing system-wide risks to the nation's financial stability. Let me guess. Members of the council will be alumni of Government Sachs?
The so called "Volcker Rule" would curb propriety trading by the largest financial firms, though banks could make small investments in hedge and private-equity funds. Of course, we should all expect "Government Sachs" to be exempted. If they can't insider trade ahead of their clients, how are they going to make money? Lend? Nahhh!
Derivatives would be subject to comprehensive regulation, especially in the over-the-counter market, including the trading of the products and the companies that sell them. However, the riskiest derivative trading operations would have to be spun-off into affiliates.
A new Consumer Financial Protection Bureau within the Federal Reserve will be created, with rulemaking and some enforcement power over banks and non-banks that offer consumer financial products or services such as credit cards, mortgages and other loans. The new entity will be staffed by alumni of "Government Sachs". (Sarcasm intentional!)
The bill would also provide for a complete "sham" overview of the Fed, by mandating a one-time audit of all of the Fed's emergency lending programs from the financial crisis. The Fed also would disclose, with a two-year lag, details of loans it makes to banks through its discount window as well as open market transactions - activity the Fed currently doesn't disclose. I'm holding my breath. (Sarcasm intentional!)
The legislation would set new size- and risk-based capital standards, including a prohibition on large bank holding companies treating trust-preferred securities as Tier 1 capital, a key measure of a bank's strength. Since former capital requirements were set by Uncle Sam, naturally the new standards are likely to be just as effective. (Sarcasm intentional!)
Larger banks would be subject to a special assessment to raise up to $19 billion to offset the cost of the bill. The fee would apply to financial institutions with more than $50 billion in assets and hedge funds with more than $10 billion in assets, with entities deemed high-risk paying more than safer ones.
Let's not forget the credit-rating agencies! The bill would establish a new quasi-government entity designed to address conflicts of interest inherent in the credit-rating business after the SEC studies the matter. It would also allow investors to sue credit-rating firms for a "knowing or reckless" failure to conduct a reasonable investigation, a lower liability standard than the firms were lobbying to get. Never mind that no one actually CARES what the Standard & Poor's and Moody's think. We MUST regulate them!
What will be the effect of this bill? Simple! Whatever the bill was designed to accomplish, expect the opposite. We can expect less systemic liquidity, a renewed credit crunch and either a obscenely profitable banking sector, or one that goes out of business! The good news? More employment, power and bonuses for all our friends at "Government Sachs"!
Marko's Take
Then, of course, we have the cushy relationship between Goldman Sachs, aka "Government Sachs" (GS), and the entire Obama Administration. Gotta be something in it for them!
The Securities and Exchange Corporation (SEC) completely ignored warnings about Bernie Madoff. So now that we've established the government's expertise at regulating various aspects of investing, the answer is to regulate MORE??
Let's not forget the Federal Reserve (Fed). Keeping interest rates way too low and for too long directly led to the twin asset bubbles: real estate and tech stocks. The solution? Keep interest rates even lower and for longer! See the logic?
The Financial Reform Bill was passed this morning. The Obama Administration pushed hard for this legislation to "protect the consumers" that it has, thus far, been completely unable to do. This is how governments think: create a problem, then justify even more intervention to solve the very problem they created. Think we have too much debt? Issue MORE of it! Regulations failing to do their job? Create more bureaucracy and more regulations! Simple.
Major provisions of the bill include:
New regulatory authority for federal officials to seize and break up large troubled financial firms without taxpayer bail-outs in cases where the firm's collapse could destabilize the financial system. U.S. Department of Treasury would supply funds to cover the up-front costs of winding down the failed firm, but the government would have to put a "repayment plan" in place. Regulators would recoup any losses incurred from the wind-down afterwards by assessing fees on financial firms with more than $50 billion in assets.
The establishing of a new, 10-member Financial Stability Oversight Council, comprising existing regulators charged with monitoring and addressing system-wide risks to the nation's financial stability. Let me guess. Members of the council will be alumni of Government Sachs?
The so called "Volcker Rule" would curb propriety trading by the largest financial firms, though banks could make small investments in hedge and private-equity funds. Of course, we should all expect "Government Sachs" to be exempted. If they can't insider trade ahead of their clients, how are they going to make money? Lend? Nahhh!
Derivatives would be subject to comprehensive regulation, especially in the over-the-counter market, including the trading of the products and the companies that sell them. However, the riskiest derivative trading operations would have to be spun-off into affiliates.
A new Consumer Financial Protection Bureau within the Federal Reserve will be created, with rulemaking and some enforcement power over banks and non-banks that offer consumer financial products or services such as credit cards, mortgages and other loans. The new entity will be staffed by alumni of "Government Sachs". (Sarcasm intentional!)
The bill would also provide for a complete "sham" overview of the Fed, by mandating a one-time audit of all of the Fed's emergency lending programs from the financial crisis. The Fed also would disclose, with a two-year lag, details of loans it makes to banks through its discount window as well as open market transactions - activity the Fed currently doesn't disclose. I'm holding my breath. (Sarcasm intentional!)
The legislation would set new size- and risk-based capital standards, including a prohibition on large bank holding companies treating trust-preferred securities as Tier 1 capital, a key measure of a bank's strength. Since former capital requirements were set by Uncle Sam, naturally the new standards are likely to be just as effective. (Sarcasm intentional!)
Larger banks would be subject to a special assessment to raise up to $19 billion to offset the cost of the bill. The fee would apply to financial institutions with more than $50 billion in assets and hedge funds with more than $10 billion in assets, with entities deemed high-risk paying more than safer ones.
Let's not forget the credit-rating agencies! The bill would establish a new quasi-government entity designed to address conflicts of interest inherent in the credit-rating business after the SEC studies the matter. It would also allow investors to sue credit-rating firms for a "knowing or reckless" failure to conduct a reasonable investigation, a lower liability standard than the firms were lobbying to get. Never mind that no one actually CARES what the Standard & Poor's and Moody's think. We MUST regulate them!
What will be the effect of this bill? Simple! Whatever the bill was designed to accomplish, expect the opposite. We can expect less systemic liquidity, a renewed credit crunch and either a obscenely profitable banking sector, or one that goes out of business! The good news? More employment, power and bonuses for all our friends at "Government Sachs"!
Marko's Take
Friday, June 18, 2010
Gold Begins Historic March To $2000
Major fortunes are about to be made and lost. As Gold gapped through the $1,250 level this morning, the final hurdle to the imminent hyper-bolic growth phase was crossed.
Many investors find it psychologically intimidating to purchase an asset making all-time highs, but history is full of examples of huge wealth creation from doing exactly that. When the Dow Jones Industrial Average (Dow) crossed the seemingly insurmountable 1,000 barrier in 1982, it was met with widespread disbelief. Yet, that proved to be one of the greatest buying opportunities ever for stocks. Oops!
The primary reason for this stumbling block is that investors are told to "buy low" and "sell high". Kinda hard to do when an asset has never been higher. Of course, following that logic, one would have missed every single bull market in history. Oops!
Former Federal Reserve chairman Alan Greenspan warned about "irrational exuberance" in 1996 with the Dow at about 6,500 and Nasdaq at 1,000. A few short years later, the Dow doubled and the Nasdaq rose 5-fold! Despite issuing that warning, Mr. Greenspan embarked on reckless monetary policy which led to the twin bubbles of tech stocks and real estate. Oops!
You can expect a drumbeat of "experts" telling you that Gold is in a bubble, that the fundamentals don't warrant higher prices and the regurgitation of that idiotic argument that the yellow metal has no intrinsic value. But, instead of hating the nay-sayers, like Kitco's Jon Nadler, we should stop and tip our hats to them. Their mindless drivel serves to keep sentiment from getting too bullish too quickly and, in so doing, adds life to the market. Hey Jon, how's that $800 per ounce forecast looking? Oops!
And of course, let's send some thanks to good old Robert Prechter, chief proponent of the completely useless Elliot Wave Theory, for his ongoing prediction of a crash to $400 dollar per ounce, or so. Prechter, as far as I can tell, has made ONE and only one, correct prediction in his entire life. He did warn of the 1987 market crash, which got him major notoriety. He hasn't been right since. Oops!
Bull markets are famous for extending far longer than anyone possibly believes. Who'd have thought that dot coms, with barely any revenues, let alone profits, would ultimately achieve multi-billion dollar market capitalizations only to be followed by a round-trip to zero? Oops!
Let's not forget current FED chairman, Ben Bernanke. Time and time again, he has said that he doesn't understand why Gold is so high given tame inflation. Psst, Ben, markets ANTICIPATE!
Looking forward, here's what every investor needs to know:
1. Prognosticators and technicians will be calling market tops all the way. They will be repeatedly wrong.
2. Gold's role as the "canary in the coal mine" will be talked down by all the financial geniuses of the Obama Administration. They will be repeatedly wrong.
3. Efforts to suppress the price the Gold will be increased in variety of market-interfering ways. They will be repeatedly wrong.
4. "Experts" will increasingly tell us that Gold is in a bubble and that investors are risking the type of wipe-outs that occurred in both real estate and tech stocks. The comparisons to tech stocks are completely invalid, since mining companies are producing record profits. They will be repeatedly wrong.
We have long maintained the posture that Gold is heading for $2,000 an ounce later this year on its way to an ultimate top of $5,000 or so. Investors smart enough, lucky enough or brave enough to place a substantial portion of their assets in either the bullion itself, or in junior precious metals mining stocks, will be in a far better position to ride out the coming financial storm.
It's not too late. In fact, the party is just about to begin.
Marko's Take
Many investors find it psychologically intimidating to purchase an asset making all-time highs, but history is full of examples of huge wealth creation from doing exactly that. When the Dow Jones Industrial Average (Dow) crossed the seemingly insurmountable 1,000 barrier in 1982, it was met with widespread disbelief. Yet, that proved to be one of the greatest buying opportunities ever for stocks. Oops!
The primary reason for this stumbling block is that investors are told to "buy low" and "sell high". Kinda hard to do when an asset has never been higher. Of course, following that logic, one would have missed every single bull market in history. Oops!
Former Federal Reserve chairman Alan Greenspan warned about "irrational exuberance" in 1996 with the Dow at about 6,500 and Nasdaq at 1,000. A few short years later, the Dow doubled and the Nasdaq rose 5-fold! Despite issuing that warning, Mr. Greenspan embarked on reckless monetary policy which led to the twin bubbles of tech stocks and real estate. Oops!
You can expect a drumbeat of "experts" telling you that Gold is in a bubble, that the fundamentals don't warrant higher prices and the regurgitation of that idiotic argument that the yellow metal has no intrinsic value. But, instead of hating the nay-sayers, like Kitco's Jon Nadler, we should stop and tip our hats to them. Their mindless drivel serves to keep sentiment from getting too bullish too quickly and, in so doing, adds life to the market. Hey Jon, how's that $800 per ounce forecast looking? Oops!
And of course, let's send some thanks to good old Robert Prechter, chief proponent of the completely useless Elliot Wave Theory, for his ongoing prediction of a crash to $400 dollar per ounce, or so. Prechter, as far as I can tell, has made ONE and only one, correct prediction in his entire life. He did warn of the 1987 market crash, which got him major notoriety. He hasn't been right since. Oops!
Bull markets are famous for extending far longer than anyone possibly believes. Who'd have thought that dot coms, with barely any revenues, let alone profits, would ultimately achieve multi-billion dollar market capitalizations only to be followed by a round-trip to zero? Oops!
Let's not forget current FED chairman, Ben Bernanke. Time and time again, he has said that he doesn't understand why Gold is so high given tame inflation. Psst, Ben, markets ANTICIPATE!
Looking forward, here's what every investor needs to know:
1. Prognosticators and technicians will be calling market tops all the way. They will be repeatedly wrong.
2. Gold's role as the "canary in the coal mine" will be talked down by all the financial geniuses of the Obama Administration. They will be repeatedly wrong.
3. Efforts to suppress the price the Gold will be increased in variety of market-interfering ways. They will be repeatedly wrong.
4. "Experts" will increasingly tell us that Gold is in a bubble and that investors are risking the type of wipe-outs that occurred in both real estate and tech stocks. The comparisons to tech stocks are completely invalid, since mining companies are producing record profits. They will be repeatedly wrong.
We have long maintained the posture that Gold is heading for $2,000 an ounce later this year on its way to an ultimate top of $5,000 or so. Investors smart enough, lucky enough or brave enough to place a substantial portion of their assets in either the bullion itself, or in junior precious metals mining stocks, will be in a far better position to ride out the coming financial storm.
It's not too late. In fact, the party is just about to begin.
Marko's Take
Monday, June 14, 2010
Euro-Zone Trapped In Vicious Cycle
What should a country do that has WAY too much debt and WAY too little economic growth? If it spends money it doesn't have to generate economic stimulus, it worsens its deficit and adds to the risk of default. If it embarks on austerity, thereby reducing spending, it imperils economic growth, which worsens its deficit and adds to the risk of default. Talk about being between "Ba-Rock and a hard place"!
The increasingly struggling Euro-Zone nations and the U.S. have taken diametrically different paths to addressing their economic and financial problems. After the passage of the huge International Monetary Fund (IMF) led rescue, European Union (EU) nations are each passing significant budget cuts to bring their gaping budget deficits under control.
The United States is taking the opposite approach. With policy makers fearing a re-newed slip into the second dip of this "Double-Dip Hyper-inflationary Depression", the Obama Administration is putting the final touches on a new $200 billion stimulus package. In addition, because of the desperate situation of so many municipalities, another $50 billion is being considered to save the jobs of teachers, police and firemen, whose jobs are being cut to balance city and state budgets.
In Europe, austerity is being reluctantly accepted by Greece, Italy, Portugal, Spain, Ireland, Germany, Great Britain, Hungary, Romania, the Netherlands and Iceland, as well as others. The only major exception has been France. In each case, austerity comes at the cost of future economic growth. The reduced presence of government will trim about 0.5-1.0% off from future economic growth, but satisfies the conditions laid out by the IMF. This identical approach, imposed on Argentina in 2001, failed miserably.
The United States is desperate to jump-start the employment situation, which has yet to show much signs of reversing, unless of course, we as a nation, decide that having an army of census workers is a good use of limited government funds. After having spent some $2 trillion on various bailouts and stimulus, all we have to show for it are roughly 400,000 new civil servants, a budget deficit of $1.5 trillion and rising, more than 8 million jobs lost in the last two years and rising personal backruptcies.
How long will it be before some nation tries that tried and true approach of starting a military war? It worked to bring the world out of the "Great Depression", perhaps it can work again. Sadly, the world is running out of peaceful options.
A better solution is the combination of both approaches. The austerity programs in Europe target the overblown government sectors and trade unions, who have enjoyed an un-deserved free ride for decades. No nation can have a large part of its citizenry living off a diminishing pool of productive workers. Ultimately, the productive ones will balk at the higher taxes imposed on them combined with the use of funds to support those that are living on the dole. A recipe for class war?
Government spending needs to be targeted at areas that produce Gross Domestic Product (GDP) and employment NOT on transfer payments to people who are not motivated to add to society. The biggest reason for problems with budgets is runaway entitlement spending on those who receive from others yet produce nothing. In exchange for any govenment handouts, the recipients need to do something to earn their keep such as repairing our nation's crumbling infrastucture or performing community service. Subsidizing sloth. or dependenc, merely generates much more of it.
Countries can simultaneously reduce spending and get more out of less if they prioritize it correctly. We need to be cognizant of how much GDP each dollar of spending creates, and emphasize those activities. If spending merely transfesr money from the productive to the un-productive, it should be phased out over time, and ultimately, entirely eliminated.
The choice of policies does NOT have to be either/or. Unfortunately, it is highly doubtful that government will ever get smart about spending OUR money.
Marko's Take
Some links we like and hope that you visit: http://www.lemetropolecafe.com/, http://www.aegeancapital.com/, http://marketviews.tv/, http://www.goldpennystocks.com/, and, of course, our incredibly informative and entertaining You Tube channel at http://www.youtube.com/markostaketv.
The increasingly struggling Euro-Zone nations and the U.S. have taken diametrically different paths to addressing their economic and financial problems. After the passage of the huge International Monetary Fund (IMF) led rescue, European Union (EU) nations are each passing significant budget cuts to bring their gaping budget deficits under control.
The United States is taking the opposite approach. With policy makers fearing a re-newed slip into the second dip of this "Double-Dip Hyper-inflationary Depression", the Obama Administration is putting the final touches on a new $200 billion stimulus package. In addition, because of the desperate situation of so many municipalities, another $50 billion is being considered to save the jobs of teachers, police and firemen, whose jobs are being cut to balance city and state budgets.
In Europe, austerity is being reluctantly accepted by Greece, Italy, Portugal, Spain, Ireland, Germany, Great Britain, Hungary, Romania, the Netherlands and Iceland, as well as others. The only major exception has been France. In each case, austerity comes at the cost of future economic growth. The reduced presence of government will trim about 0.5-1.0% off from future economic growth, but satisfies the conditions laid out by the IMF. This identical approach, imposed on Argentina in 2001, failed miserably.
The United States is desperate to jump-start the employment situation, which has yet to show much signs of reversing, unless of course, we as a nation, decide that having an army of census workers is a good use of limited government funds. After having spent some $2 trillion on various bailouts and stimulus, all we have to show for it are roughly 400,000 new civil servants, a budget deficit of $1.5 trillion and rising, more than 8 million jobs lost in the last two years and rising personal backruptcies.
How long will it be before some nation tries that tried and true approach of starting a military war? It worked to bring the world out of the "Great Depression", perhaps it can work again. Sadly, the world is running out of peaceful options.
A better solution is the combination of both approaches. The austerity programs in Europe target the overblown government sectors and trade unions, who have enjoyed an un-deserved free ride for decades. No nation can have a large part of its citizenry living off a diminishing pool of productive workers. Ultimately, the productive ones will balk at the higher taxes imposed on them combined with the use of funds to support those that are living on the dole. A recipe for class war?
Government spending needs to be targeted at areas that produce Gross Domestic Product (GDP) and employment NOT on transfer payments to people who are not motivated to add to society. The biggest reason for problems with budgets is runaway entitlement spending on those who receive from others yet produce nothing. In exchange for any govenment handouts, the recipients need to do something to earn their keep such as repairing our nation's crumbling infrastucture or performing community service. Subsidizing sloth. or dependenc, merely generates much more of it.
Countries can simultaneously reduce spending and get more out of less if they prioritize it correctly. We need to be cognizant of how much GDP each dollar of spending creates, and emphasize those activities. If spending merely transfesr money from the productive to the un-productive, it should be phased out over time, and ultimately, entirely eliminated.
The choice of policies does NOT have to be either/or. Unfortunately, it is highly doubtful that government will ever get smart about spending OUR money.
Marko's Take
Some links we like and hope that you visit: http://www.lemetropolecafe.com/, http://www.aegeancapital.com/, http://marketviews.tv/, http://www.goldpennystocks.com/, and, of course, our incredibly informative and entertaining You Tube channel at http://www.youtube.com/markostaketv.
Saturday, June 12, 2010
Showdown With Iran Looms Closer
Last Wednesday, the U.N. Security Council approved a resolution for a fourth round of sanctions against Iran, which includes prohibiting Tehran from buying heavy weapons, tightening financial transactions with Iranian banks and new cargo inspections.
The main thrust of the sanctions is against military purchases, trade and financial transactions carried out by the Islamic Revolutionary Guards Corps, which controls the nuclear program and has taken a more central role in running the country and the economy.
It also authorizes nations to conduct maritime inspections of vessels suspected of transporting prohibited items for Iran and adds 40 entities to a list of people and groups subject to travel restrictions and financial sanctions.
The resolution followed five months of strenuous negotiations between the United States, Britain, France, Germany, China and Russia. With 12 votes in favor, it received the poorest support in the 15-nation council of the four Iran sanctions resolutions adopted since 2006. Turkey and Brazil voted no, while Lebanon abstained.
After vehemently opposing sanctions, Russia appears to be taking a tougher line with Iran. Officials said yesterday that Moscow would comply strictly with the new UN sanctions and signalled that a deal to supply Iran with air-defense missiles was now off.
Predictably, Iranian President Mahmoud Ahmadinejad said Israel was "doomed" and singled out U.S. President Barack Obama for derision, blaming Washington for orchestrating the sanctions.
The Obama Administration has hailed the sanctions as a key diplomatic victory despite having its proposals watered down in order to gain Chinese support and only garnering 12 votes. Domestically, however, the administration is reportedly working with Congress to ease restrictions. According to the L.A. Times, administration officials have begun negotiations with congressional leaders, who are working on versions of House and Senate bills that would punish companies that sell refined petroleum products to Iran or help the country's oil industry.
Unlike the U.N. measures, congressional action would pertain only to U.S. policies and agencies and would not be binding on other countries. Other countries and groups of nations are also considering additional measures.
For its part, Tehran has completely dismissed the sanctions. For months, President Mahmoud Ahmadinejad has warned that Iran would respond aggressively, even militarily against U.S. and Isaeali interests in the region. Any military action by Iran would undoubtedly be targeted at disrupting oil supplies through the Straits of Hormuz, an outcome the world hopes desperately to avoid.
Saudi Arabia, no friend of Israel, views Iran as the bigger threat. Sources in the Gulf say that Riyadh has agreed to allow Israel to use a narrow corridor of its airspace in the north of the country to shorten the distance for a potential bombing run on Iran.
Sources in Saudi Arabia say it is common knowledge within defense circles in the kingdom that an arrangement is in place if Israel decides to launch a raid. Despite the tension between the two governments, they share a mutual loathing of the regime in Tehran and a common fear of Iran’s nuclear ambitions.
The 4 main targets for any raid on Iran would be the uranium enrichment facilities at Natanz and Qom, the gas storage development at Isfahan and the heavy-water reactor at Arak. Secondary targets include the lightwater reactor at Bushehr, which could produce weapons-grade plutonium when complete.
Israeli officials refused to comment on details for a possible raid on Iran, which Prime Minister Binyamin Netanyahu, categorically refuses to rule out. Asked about the possibility of a Saudi flight path for Israeli bombers, Aharaon Zeevi Farkash, who headed military intelligence until 2006 and has been involved in war games simulating a strike on Iran, said: “I know that Saudi Arabia is even more afraid than Israel of an Iranian nuclear capacity.”
It looks like "show time" in the Middle East is at hand. In the last several years, Tehran has built an impressive aresenal of advanced Russian-made weapons which make Iran no pushover, even with a massive military presence by the U.S. across the border in Iraq, as well as the potent military capability of Israel.
Should any military action ensue, its economic effects may be life-changing for the entire planet. Disrupting oil flow will not be that difficult, with severe repercussions for the world. For investors, companies engaged in the production of energy outside of the Middle East ought to be huge beneficiaries. In addition, the uncertainty caused by any altercation ought to be explosively bullish for Gold.
Marko's Take
If you're looking for some great investing information at a reasonable price, we would like to suggest that you check out the following sites: http://www.lemetropolecafe.com/, http://www.aegeancapital.com/, http://www.marketviews.tv/, http://www.goldpennystocks.com/, and, of course, our FREE and, oh so informative You Tube channel at http://www.youtube.com/markostaketv.
The main thrust of the sanctions is against military purchases, trade and financial transactions carried out by the Islamic Revolutionary Guards Corps, which controls the nuclear program and has taken a more central role in running the country and the economy.
It also authorizes nations to conduct maritime inspections of vessels suspected of transporting prohibited items for Iran and adds 40 entities to a list of people and groups subject to travel restrictions and financial sanctions.
The resolution followed five months of strenuous negotiations between the United States, Britain, France, Germany, China and Russia. With 12 votes in favor, it received the poorest support in the 15-nation council of the four Iran sanctions resolutions adopted since 2006. Turkey and Brazil voted no, while Lebanon abstained.
After vehemently opposing sanctions, Russia appears to be taking a tougher line with Iran. Officials said yesterday that Moscow would comply strictly with the new UN sanctions and signalled that a deal to supply Iran with air-defense missiles was now off.
Predictably, Iranian President Mahmoud Ahmadinejad said Israel was "doomed" and singled out U.S. President Barack Obama for derision, blaming Washington for orchestrating the sanctions.
The Obama Administration has hailed the sanctions as a key diplomatic victory despite having its proposals watered down in order to gain Chinese support and only garnering 12 votes. Domestically, however, the administration is reportedly working with Congress to ease restrictions. According to the L.A. Times, administration officials have begun negotiations with congressional leaders, who are working on versions of House and Senate bills that would punish companies that sell refined petroleum products to Iran or help the country's oil industry.
Unlike the U.N. measures, congressional action would pertain only to U.S. policies and agencies and would not be binding on other countries. Other countries and groups of nations are also considering additional measures.
For its part, Tehran has completely dismissed the sanctions. For months, President Mahmoud Ahmadinejad has warned that Iran would respond aggressively, even militarily against U.S. and Isaeali interests in the region. Any military action by Iran would undoubtedly be targeted at disrupting oil supplies through the Straits of Hormuz, an outcome the world hopes desperately to avoid.
Saudi Arabia, no friend of Israel, views Iran as the bigger threat. Sources in the Gulf say that Riyadh has agreed to allow Israel to use a narrow corridor of its airspace in the north of the country to shorten the distance for a potential bombing run on Iran.
Sources in Saudi Arabia say it is common knowledge within defense circles in the kingdom that an arrangement is in place if Israel decides to launch a raid. Despite the tension between the two governments, they share a mutual loathing of the regime in Tehran and a common fear of Iran’s nuclear ambitions.
The 4 main targets for any raid on Iran would be the uranium enrichment facilities at Natanz and Qom, the gas storage development at Isfahan and the heavy-water reactor at Arak. Secondary targets include the lightwater reactor at Bushehr, which could produce weapons-grade plutonium when complete.
Israeli officials refused to comment on details for a possible raid on Iran, which Prime Minister Binyamin Netanyahu, categorically refuses to rule out. Asked about the possibility of a Saudi flight path for Israeli bombers, Aharaon Zeevi Farkash, who headed military intelligence until 2006 and has been involved in war games simulating a strike on Iran, said: “I know that Saudi Arabia is even more afraid than Israel of an Iranian nuclear capacity.”
It looks like "show time" in the Middle East is at hand. In the last several years, Tehran has built an impressive aresenal of advanced Russian-made weapons which make Iran no pushover, even with a massive military presence by the U.S. across the border in Iraq, as well as the potent military capability of Israel.
Should any military action ensue, its economic effects may be life-changing for the entire planet. Disrupting oil flow will not be that difficult, with severe repercussions for the world. For investors, companies engaged in the production of energy outside of the Middle East ought to be huge beneficiaries. In addition, the uncertainty caused by any altercation ought to be explosively bullish for Gold.
Marko's Take
If you're looking for some great investing information at a reasonable price, we would like to suggest that you check out the following sites: http://www.lemetropolecafe.com/, http://www.aegeancapital.com/, http://www.marketviews.tv/, http://www.goldpennystocks.com/, and, of course, our FREE and, oh so informative You Tube channel at http://www.youtube.com/markostaketv.
Thursday, June 3, 2010
Oil Spill Exploited For Political Gains
The tragedy in the Gulf of Mexico is bad enough. The reaction, or OVER-reaction by the political community, is the real crime.
Let's take an objective look at the situation. The worst oil spill in history has been nothing short of an ecological disaster. First, was the death of the 11 platform workers when the well exploded. Then came the destruction of wildlife, whose cost is immeasurable. What should the Obama Adminstration do?
Punish British Petroleum (BP)? The marketplace has already taken care of it. Currently trading at $38 per share, BP has lost nearly $100 billion dollars in market capitalization since news broke of the spill in just a few weeks. The stock has lost more than 40% of its value. Could any penalties imposed by Washington do anything more than merely pandering to all the constituents calling for BP's death?
Add to that the tremendous public relations hit that BP is taking, and, for that matter, the entire oil industry. It's easy to hate oil companies. In the view of the public, oil companies make obscene profits, manipulate energy prices, block the creation of alternative fuels and enter into deals with governments that sponsor terrorism.
Oil companies are owned by shareholders like you and me. So, punishing them just places economic costs on a different set of constituents. Of course they are after profits. So, are the shareholders. So am I. So are you. They have never claimed to be altruistic any more than Big-Pharma, the auto companies or the financial sector.
The other response has been to call for severe restrictions on offshore drilling. What would that accomplish? Higher energy prices and higher profits for all the OTHER oil companies! Less supply for Americans. More dependence on the Middle East. Bad approach.
But, we have to do SOMETHING! Really? Why? Uncle Sam can't cap the well. Uncle Sam has been a miserable failure when it comes to interfering in the energy business. Remember the "Windfall Profits Tax"? That was an unmitigated policy disaster which only drove oil prices higher and led to the famous gasoline lines in the 1970's.
Politicians everywhere are using the public outcry to gain political footing by creating a policy issue where none exists. It's politically popular to wring your hands and claim that things should have been handled differently. How would you have prevented this, Mr. Senator? Mr. President? Mr. Candidate?
The liability for the damage, which will easily run into the tens of billions, clearly belongs primarily to BP and Transocean Ltd. (RIG). Since the explosion on Transocean's platform on April 20, the company has lost nearly HALF its value, or $15 billion.
Undoubtedly, each of these companies carries insurance which will be employed to cover some portion or the majority of the costs.
Regulate future oil drilling activity? Not necessary. The entire oil industry has taken a hit. Even stalwarts such as ExxonMobil (XOM) have suffered massive losses in value in anticipation of a much less friendly business environment. XOM's market value has dropped by 10% or about $30 billion. If one were to factor in the entire oil industry including drillers, the losses would certainly exceed an additional $100 billion.
Clearly, any company NOT involved is working overtime to make sure a similar disaster does not occur in one of their wells. The last thing any oil company wants right now is to be responsible for some other disaster while the world's microscope is analyzing every step they take.
There is no place for public policy here, despite the cry for penalties, regulations and restrictions. The marketplace has imposed HUGE penalties, as has the forum of public opinion. We can either choose, as a society, to encourage more oil supplies at the cost of an occasional disaster, or we can reduce the probability of this kind of problem by imposing massive costs on society. Oil is highly combustible, therefore, we can not possibly eliminate the risk in this industry any more than we can eliminate traffic deaths by imposing more penalties on the automobile manufacturers.
No solution to this situation exists. You want more nuclear? Prepare for the occasional reactor radiation leak. You want less production of oil here? Prepare to be more beholden to Saudi Arabia and other nations that sponsor terrorism.
What we have to understand is that life comes with trade-offs. These can't be legislated away despite the self-serving proclamations of our elected officials and those that seek to be elected. Cry about it, but don't make it worse by over-reacting. Let the market take care of it.
Marko's Take
Our 7-Step solution to fixing the ponzi scheme called Social Security is now available on You Tube. Entitled "Social In-Security: The Solution", the video can be accessed by clicking here http://www.youtube.com/markostaketv#p/u/0/7Rl6XtobFpE.
Let's take an objective look at the situation. The worst oil spill in history has been nothing short of an ecological disaster. First, was the death of the 11 platform workers when the well exploded. Then came the destruction of wildlife, whose cost is immeasurable. What should the Obama Adminstration do?
Punish British Petroleum (BP)? The marketplace has already taken care of it. Currently trading at $38 per share, BP has lost nearly $100 billion dollars in market capitalization since news broke of the spill in just a few weeks. The stock has lost more than 40% of its value. Could any penalties imposed by Washington do anything more than merely pandering to all the constituents calling for BP's death?
Add to that the tremendous public relations hit that BP is taking, and, for that matter, the entire oil industry. It's easy to hate oil companies. In the view of the public, oil companies make obscene profits, manipulate energy prices, block the creation of alternative fuels and enter into deals with governments that sponsor terrorism.
Oil companies are owned by shareholders like you and me. So, punishing them just places economic costs on a different set of constituents. Of course they are after profits. So, are the shareholders. So am I. So are you. They have never claimed to be altruistic any more than Big-Pharma, the auto companies or the financial sector.
The other response has been to call for severe restrictions on offshore drilling. What would that accomplish? Higher energy prices and higher profits for all the OTHER oil companies! Less supply for Americans. More dependence on the Middle East. Bad approach.
But, we have to do SOMETHING! Really? Why? Uncle Sam can't cap the well. Uncle Sam has been a miserable failure when it comes to interfering in the energy business. Remember the "Windfall Profits Tax"? That was an unmitigated policy disaster which only drove oil prices higher and led to the famous gasoline lines in the 1970's.
Politicians everywhere are using the public outcry to gain political footing by creating a policy issue where none exists. It's politically popular to wring your hands and claim that things should have been handled differently. How would you have prevented this, Mr. Senator? Mr. President? Mr. Candidate?
The liability for the damage, which will easily run into the tens of billions, clearly belongs primarily to BP and Transocean Ltd. (RIG). Since the explosion on Transocean's platform on April 20, the company has lost nearly HALF its value, or $15 billion.
Undoubtedly, each of these companies carries insurance which will be employed to cover some portion or the majority of the costs.
Regulate future oil drilling activity? Not necessary. The entire oil industry has taken a hit. Even stalwarts such as ExxonMobil (XOM) have suffered massive losses in value in anticipation of a much less friendly business environment. XOM's market value has dropped by 10% or about $30 billion. If one were to factor in the entire oil industry including drillers, the losses would certainly exceed an additional $100 billion.
Clearly, any company NOT involved is working overtime to make sure a similar disaster does not occur in one of their wells. The last thing any oil company wants right now is to be responsible for some other disaster while the world's microscope is analyzing every step they take.
There is no place for public policy here, despite the cry for penalties, regulations and restrictions. The marketplace has imposed HUGE penalties, as has the forum of public opinion. We can either choose, as a society, to encourage more oil supplies at the cost of an occasional disaster, or we can reduce the probability of this kind of problem by imposing massive costs on society. Oil is highly combustible, therefore, we can not possibly eliminate the risk in this industry any more than we can eliminate traffic deaths by imposing more penalties on the automobile manufacturers.
No solution to this situation exists. You want more nuclear? Prepare for the occasional reactor radiation leak. You want less production of oil here? Prepare to be more beholden to Saudi Arabia and other nations that sponsor terrorism.
What we have to understand is that life comes with trade-offs. These can't be legislated away despite the self-serving proclamations of our elected officials and those that seek to be elected. Cry about it, but don't make it worse by over-reacting. Let the market take care of it.
Marko's Take
Our 7-Step solution to fixing the ponzi scheme called Social Security is now available on You Tube. Entitled "Social In-Security: The Solution", the video can be accessed by clicking here http://www.youtube.com/markostaketv#p/u/0/7Rl6XtobFpE.
Thursday, May 27, 2010
Plunging Money Supply Has Ominous Implications
The lifeblood of the world financial system is money. When there's more of it sloshing around, times are typically good unless there TOO much of it, causing inflation. Econometric studies have shown that of the 10 components of the Index Of Leading Economic Indicators (LEI), 2 are the most predictive of future economic activity: growth in the Money Supply and changes in the Stock Market.
It can be argued, quite convincingly, that the Stock Market is itself is highly dependent on growth in money. In fact, it's possible, that ALL 10 components of the LEI are driven by growth in money.
The money supply is SCREAMING! Is anyone out there listening?
The broadest measure of money, called M3, is contracting at an accelerating rate that now rivals the average decline seen from 1929 to 1933, despite near zero interest rates and the biggest fiscal orgy in history.
The M3 figures - which include a broad range of bank accounts and are tracked by monetarists for warning signals about the direction of the US economy a year or so in advance - began shrinking last summer. The pace has since quickened.
The stock of money fell from $14.2 trillion to $13.9 trillion in the three months to April, amounting to an annual rate of contraction of 9.6%. The assets of insitutional money market funds fell at a 37% rate, the sharpest drop ever. While a rising money supply does not always translate into boom times, a FALLING M3 has historically ALWAYS been followed by an economic contraction and a falling stock market.
Record stimulus spending has been an utter failure in triggering job growth and has barely produced any economic recovery. First quarter Gross Domestic Product (GDP) was revised lower to 3% from 3.2% this morning. The economy has lost more than 8 million jobs since the downturn began.
The Obama Administratio has an entirely different explanation for the failure of stimulus measures to produce the hoped for results. They are opting instead for further doses of Keynesian spending, despite warnings from the IMF that the gross public debt of the US will reach 97% of GDP next year and 110% by 2015.
Larry Summers, President Barack Obama’s top economic adviser, has asked Congress to approve another $200 billion stimulus package to produce economic growth.
Federal Reserve head Ben Bernanke no longer pays attention to the M3 data. The bank stopped publishing the data five years ago, considering it too erratic to be of much value.
Mr. Bernanke has conveniently forgotten that double-digit growth of M3 during the US housing bubble gave clear warnings that the boom was out of control. The sudden slowdown in M3 in early to mid-2008 - just as the Fed talked of raising rates - gave a very clear warning that the economy and stock markets were about to go into freefall.
The White House appears to have reversed course just weeks after Mr Obama vowed to rein in a budget deficit of $1.5 trillion (9.4% of GDP) this year and set up a commission to target cuts. Mr. Obama, clearly a reader of "Marko's Take", has now understood that the second dip of this Double-Dip Hyperinflationary Depression is imminent.
The dominant voices in US policy-making, Nobel laureates Paul Krugman and Joe Stiglitz, as well as Mr Summers and Fed chair Ben Bernanke are all Keynesians who reject monetary theory and have an extreme distaste to any mention of the quantity of money. Once they read "Marko's Take", perhaps they ought to open up their copies of "The Monetary History of the United States" by Milton Friedman and Anna Schwartz.
The die is cast. The crash in M3 has ominous implications. It means the second dip is imminent, the stock market will have trouble and on the plus side, interest rates will NOT rise for a long time.
Marko's Take
Interested in ideas on how to fix Social Security? "Social In-Security: The Solution" will be posted in the next 24-48 hours. To familiarize yourself with the ponzi scheme called Social Security, please check out our video entitled "Social In-Security: The Problem" by clicking here http://www.youtube.com/markostaketv#p/u/0/twFn9XyP2rI.
It can be argued, quite convincingly, that the Stock Market is itself is highly dependent on growth in money. In fact, it's possible, that ALL 10 components of the LEI are driven by growth in money.
The money supply is SCREAMING! Is anyone out there listening?
The broadest measure of money, called M3, is contracting at an accelerating rate that now rivals the average decline seen from 1929 to 1933, despite near zero interest rates and the biggest fiscal orgy in history.
The M3 figures - which include a broad range of bank accounts and are tracked by monetarists for warning signals about the direction of the US economy a year or so in advance - began shrinking last summer. The pace has since quickened.
The stock of money fell from $14.2 trillion to $13.9 trillion in the three months to April, amounting to an annual rate of contraction of 9.6%. The assets of insitutional money market funds fell at a 37% rate, the sharpest drop ever. While a rising money supply does not always translate into boom times, a FALLING M3 has historically ALWAYS been followed by an economic contraction and a falling stock market.
Record stimulus spending has been an utter failure in triggering job growth and has barely produced any economic recovery. First quarter Gross Domestic Product (GDP) was revised lower to 3% from 3.2% this morning. The economy has lost more than 8 million jobs since the downturn began.
The Obama Administratio has an entirely different explanation for the failure of stimulus measures to produce the hoped for results. They are opting instead for further doses of Keynesian spending, despite warnings from the IMF that the gross public debt of the US will reach 97% of GDP next year and 110% by 2015.
Larry Summers, President Barack Obama’s top economic adviser, has asked Congress to approve another $200 billion stimulus package to produce economic growth.
Federal Reserve head Ben Bernanke no longer pays attention to the M3 data. The bank stopped publishing the data five years ago, considering it too erratic to be of much value.
Mr. Bernanke has conveniently forgotten that double-digit growth of M3 during the US housing bubble gave clear warnings that the boom was out of control. The sudden slowdown in M3 in early to mid-2008 - just as the Fed talked of raising rates - gave a very clear warning that the economy and stock markets were about to go into freefall.
The White House appears to have reversed course just weeks after Mr Obama vowed to rein in a budget deficit of $1.5 trillion (9.4% of GDP) this year and set up a commission to target cuts. Mr. Obama, clearly a reader of "Marko's Take", has now understood that the second dip of this Double-Dip Hyperinflationary Depression is imminent.
The dominant voices in US policy-making, Nobel laureates Paul Krugman and Joe Stiglitz, as well as Mr Summers and Fed chair Ben Bernanke are all Keynesians who reject monetary theory and have an extreme distaste to any mention of the quantity of money. Once they read "Marko's Take", perhaps they ought to open up their copies of "The Monetary History of the United States" by Milton Friedman and Anna Schwartz.
The die is cast. The crash in M3 has ominous implications. It means the second dip is imminent, the stock market will have trouble and on the plus side, interest rates will NOT rise for a long time.
Marko's Take
Interested in ideas on how to fix Social Security? "Social In-Security: The Solution" will be posted in the next 24-48 hours. To familiarize yourself with the ponzi scheme called Social Security, please check out our video entitled "Social In-Security: The Problem" by clicking here http://www.youtube.com/markostaketv#p/u/0/twFn9XyP2rI.
Sunday, April 4, 2010
More Problematic Details Surface For March Non-Farm Payrolls Report
Yesterday, we took on the much fawned-over payroll report and pointed out, that despite the collective cheer from Wall St. and the Obama Administration, when properly analyzed, it STUNK!(http://markostake.blogspot.com/2010/04/jobs-report-received-well-but-below.html)
More details are coming in and they confirm exactly what we said. The recovery in jobs is nothing more than a phantom and is highly likely to be just a temporary blip.
Unemployment can be measured several ways. The headline number, also known as "U-3", is a very narrowly defined measure which conveniently excludes key segments of the labor market.
The Labor Department's more comprehensive gauge of workforce under-utilization, known as "U-6″, accounts for people who have stopped looking for work or who can’t find full-time jobs. Though the rate is still 0.5% below its high of 17.4% in October, its continuing de-coupling from U-3 indicates the job market has a long way to go before growth in the economy translates into relief for workers.
In March, U-6 ROSE 0.1% to 16.9%, despite the supposed creation of hundreds of thousands of jobs.
The official 9.7% unemployment rate is arrived at by including people who are without jobs or, who are able to work and have actively sought employment in the prior four weeks. The “actively looking for work” definition is fairly broad - including people who either contacted an employer, employment agency, job center, friends or sent out resumes.
The U-6 figure includes everyone in the official rate plus so-called “marginally attached workers” — those who are neither working nor looking for work, but say they want a job and have looked for work recently. It also includes people who are part-time because they can't find full-time work.
During the Clinton Administration, "discouraged workers" — those who had given up looking for a job, were re-classified so as to be counted only if they had been "discouraged" for LESS than a year. This time criteria defined away the long-term discouraged workers. The remaining short-term discouraged workers (less than one year) are included in U-6.
The always erudite Dr. Williams of ShadowStats, (http://www.shadowstats.com/) has created an unemployment aggregate which removes the extensive government massaging to provide a more realistic gauge of unemployment.
Known as the "SGS-Alternative Unemployment Measure", Williams adds the excluded long-term discouraged workers back into the total unemployed, resulting in a measure more consistent with real personal experience. The resultant SGS-Alternate Unemployment Measure rose to about 21.7% in March from 21.6% in February.
The 21.7% unemployment rate is not as high as the purported peak unemployment in the Great Depression (1933) of 25%, but the SGS level is probably about as bad as the peak unemployment seen in the 1973 to 1975 recession.
The Great Depression unemployment rate was estimated well after the fact, and with 27% of those employed working on farms, true comparisons are difficult to make. Today, less than 2% of the labor pool works on farms. Thus, for purposes of a Great Depression comparison, Dr. Williams believes it is more appropriate to consider the estimated peak non-farm unemployment rate in 1933 of 34% to 35%.
They keep spinning and we keep cutting through the BS. Marko's Take is on the job, so you don't need a PHD or a lie detector!
We want to wish everyone a Happy Easter.
Marko's Take
Please visit us on YouTube at http://www.youtube.com/markostaketv.
More details are coming in and they confirm exactly what we said. The recovery in jobs is nothing more than a phantom and is highly likely to be just a temporary blip.
Unemployment can be measured several ways. The headline number, also known as "U-3", is a very narrowly defined measure which conveniently excludes key segments of the labor market.
The Labor Department's more comprehensive gauge of workforce under-utilization, known as "U-6″, accounts for people who have stopped looking for work or who can’t find full-time jobs. Though the rate is still 0.5% below its high of 17.4% in October, its continuing de-coupling from U-3 indicates the job market has a long way to go before growth in the economy translates into relief for workers.
In March, U-6 ROSE 0.1% to 16.9%, despite the supposed creation of hundreds of thousands of jobs.
The official 9.7% unemployment rate is arrived at by including people who are without jobs or, who are able to work and have actively sought employment in the prior four weeks. The “actively looking for work” definition is fairly broad - including people who either contacted an employer, employment agency, job center, friends or sent out resumes.
The U-6 figure includes everyone in the official rate plus so-called “marginally attached workers” — those who are neither working nor looking for work, but say they want a job and have looked for work recently. It also includes people who are part-time because they can't find full-time work.
During the Clinton Administration, "discouraged workers" — those who had given up looking for a job, were re-classified so as to be counted only if they had been "discouraged" for LESS than a year. This time criteria defined away the long-term discouraged workers. The remaining short-term discouraged workers (less than one year) are included in U-6.
The always erudite Dr. Williams of ShadowStats, (http://www.shadowstats.com/) has created an unemployment aggregate which removes the extensive government massaging to provide a more realistic gauge of unemployment.
Known as the "SGS-Alternative Unemployment Measure", Williams adds the excluded long-term discouraged workers back into the total unemployed, resulting in a measure more consistent with real personal experience. The resultant SGS-Alternate Unemployment Measure rose to about 21.7% in March from 21.6% in February.
The 21.7% unemployment rate is not as high as the purported peak unemployment in the Great Depression (1933) of 25%, but the SGS level is probably about as bad as the peak unemployment seen in the 1973 to 1975 recession.
The Great Depression unemployment rate was estimated well after the fact, and with 27% of those employed working on farms, true comparisons are difficult to make. Today, less than 2% of the labor pool works on farms. Thus, for purposes of a Great Depression comparison, Dr. Williams believes it is more appropriate to consider the estimated peak non-farm unemployment rate in 1933 of 34% to 35%.
They keep spinning and we keep cutting through the BS. Marko's Take is on the job, so you don't need a PHD or a lie detector!
We want to wish everyone a Happy Easter.
Marko's Take
Please visit us on YouTube at http://www.youtube.com/markostaketv.
Saturday, April 3, 2010
Jobs Report Well-Received, But Below The Surface - Fissures Emerge
With the stock market closed on Friday, Wall Street waited for the Non-Farm payrolls report, also referred to as the "Jobs Report", with baited breath. Earlier in the week, optimism was running unchecked, as the hopelessly perma-bullish investor community began to predict that the number would be a blowout.
Then came the ADP (Automatic Data Processing) employment report, which showed that private sector jobs were LOST, not gained, and suddenly a more sober Wall St. began to ratchet down expectations.
Even with the projections running above a hoped-for gain of more than 200,000 jobs, down from the 300,000 anticipated a week earlier, the final number still stunk. Monthly job gains were a poor 162,000, of which 48,000, were made up of temporary census hires.
Therefore, as reported, March payrolls were up by a net of 114,000. The latest data also included upside revisions totaling 62,000 to prior January and February reporting. Part of the relatively stronger March report has been attributed to rebound effects from February’s blizzards. There we go with the weather again!
Logically, any weather-related impact would be non-recurring. But, who knows, maybe as the snow melts, we'll have floods to blame!
Dr. Williams, of the marvelous site ShadowStats (http://www.shadowstats.com/), believes that the government currently overestimates monthly payroll growth by at least 250,000, which suggests that more-accurate current reporting still would be very much in negative territory. On the unemployment-rate side, the broader measures increased and the headline number would have too, except for some rounding and census hiring.
The trend of reported monthly decline has continued to slow sharply against prior-year comparisons, indicating a bottoming process. The year-to-year decline in total non-farm payrolls narrowed to 1.7% (1.8% net of census effects) in March, versus an unrevised 2.5% decline in February and from a post-World War II record 5.0% decline in July 2009.
The July 2009 decline was the most extreme annual drop seen since the production shutdown at the end of World War II, which reflected an annual trough of 7.6% in September 1945. Otherwise, the current annual decline would be the worst since the Great Depression!
The Obama administration was jubilant over the tremendous news and couldn't wait to begin its ritualistic back-patting. Have they forgotten that 8.4 million jobs have been lost in the last 2 years? Oh, yes, that's all George Bush's and Ronald Reagan's fault!
Beneath the surface, however, a more dangerous trend and un-noticed by most economists, is the VERY ominous decline in liquidity as measured by the contraction in the broad money supply aggregates. According to Dr. Williams, "real (adjusted for inflation), broad systemic liquidity, as reflected in M3 (SGS Continuing Estimate), continues to shrink year-to-year. As of March, the series appears to be down by the largest percentage in modern reporting. The negative effects of this liquidity squeeze on the economy should become increasingly obvious in the next month or so, including subsequent employment data, ex-census."
Historically, sudden, sharp fall-offs in money supply growth have been closely followed by both stock market sell-offs and economic decline. In addition, this contraction bodes poorly for commodities, despite the recent strength.
Here's to hoping everyone has a Happy Easter with a booming PERSONAL money supply!
Marko's Take
Please visit us on YouTube at http://www.youtube.com/markostaketv. The very excellent Phoenix Film Group is now placing the final touches on our next episode on the legality of the Personal Income Tax.
Then came the ADP (Automatic Data Processing) employment report, which showed that private sector jobs were LOST, not gained, and suddenly a more sober Wall St. began to ratchet down expectations.
Even with the projections running above a hoped-for gain of more than 200,000 jobs, down from the 300,000 anticipated a week earlier, the final number still stunk. Monthly job gains were a poor 162,000, of which 48,000, were made up of temporary census hires.
Therefore, as reported, March payrolls were up by a net of 114,000. The latest data also included upside revisions totaling 62,000 to prior January and February reporting. Part of the relatively stronger March report has been attributed to rebound effects from February’s blizzards. There we go with the weather again!
Logically, any weather-related impact would be non-recurring. But, who knows, maybe as the snow melts, we'll have floods to blame!
Dr. Williams, of the marvelous site ShadowStats (http://www.shadowstats.com/), believes that the government currently overestimates monthly payroll growth by at least 250,000, which suggests that more-accurate current reporting still would be very much in negative territory. On the unemployment-rate side, the broader measures increased and the headline number would have too, except for some rounding and census hiring.
The trend of reported monthly decline has continued to slow sharply against prior-year comparisons, indicating a bottoming process. The year-to-year decline in total non-farm payrolls narrowed to 1.7% (1.8% net of census effects) in March, versus an unrevised 2.5% decline in February and from a post-World War II record 5.0% decline in July 2009.
The July 2009 decline was the most extreme annual drop seen since the production shutdown at the end of World War II, which reflected an annual trough of 7.6% in September 1945. Otherwise, the current annual decline would be the worst since the Great Depression!
The Obama administration was jubilant over the tremendous news and couldn't wait to begin its ritualistic back-patting. Have they forgotten that 8.4 million jobs have been lost in the last 2 years? Oh, yes, that's all George Bush's and Ronald Reagan's fault!
Beneath the surface, however, a more dangerous trend and un-noticed by most economists, is the VERY ominous decline in liquidity as measured by the contraction in the broad money supply aggregates. According to Dr. Williams, "real (adjusted for inflation), broad systemic liquidity, as reflected in M3 (SGS Continuing Estimate), continues to shrink year-to-year. As of March, the series appears to be down by the largest percentage in modern reporting. The negative effects of this liquidity squeeze on the economy should become increasingly obvious in the next month or so, including subsequent employment data, ex-census."
Historically, sudden, sharp fall-offs in money supply growth have been closely followed by both stock market sell-offs and economic decline. In addition, this contraction bodes poorly for commodities, despite the recent strength.
Here's to hoping everyone has a Happy Easter with a booming PERSONAL money supply!
Marko's Take
Please visit us on YouTube at http://www.youtube.com/markostaketv. The very excellent Phoenix Film Group is now placing the final touches on our next episode on the legality of the Personal Income Tax.
Tuesday, March 30, 2010
Taxing Banks Gains Favor, But Is It The Answer?
In January, President Obama floated an idea to tax banks as a means of compensating America for the tremendous financial damage caused by the collective stupidity and greed of the banking sector. That idea is gaining support on both sides of the Atlantic.
Anti-Wall Street sentiment, in conjuction with concerns over the ballooning budget deficit, have Democratic leaders on Capitol Hill embracing the proposal. Obama's proposal is expected to raise up to $117 billion to cover projected bailout losses. Republicans have been silent as their instinctive opposition to tax increases is in conflict with their fear of defending big bankers.
The administration has opposed interfering with bonuses in the past, saying shareholders and Boards of Directors should be responsible for determining corporate compensation.
“We’re already hearing a hue and cry from Wall Street suggesting that this proposed fee is not only unwelcome but unfair,” he said. “That by some twisted logic it is more appropriate for the American people to bear the cost of the bailout rather than the industry that benefited from it, even though these executives are out there giving themselves huge bonuses.”
The proposed tax would apply to bank, thrift and insurance companies with more than $50 billion in assets and would start after June 30. It would not apply to certain holdings, like customers’ insured savings, but to assets in risk-taking operations.
The concept is gaining momentum in Europe. However, different countries have proposed varying structures.
Germany and Sweden would use the money to fund a "resolution authority" that would use the money to shut troubled banks whose failure would put the broader economy at risk. Others, such as France, would assess the fee after a crisis passed.
Officials in the U.S., Europe and the IMF say the bank-tax concept has gained so much momentum that it is likely to be on the agenda when of the Group of 20 industrial and developing nations meet in Canada in June. "Reforms would put in practice the principle that large institutions should bear the costs of any losses to the taxpayer," U.S. Treasury Secretary Timothy Geithner said in a speech last week.
In the U.K., Prime Minister Gordon Brown has been championing a global levy, including one in which revenues would be used to help pay down deficits. The opposition Conservative Party says it will press ahead regardless, although the fee's size will depend on how far other countries follow
The IMF plans to recommend a bank tax when global economic officials convene in Washington in April and is leaning toward a fee in advance to fund a resolution authority, said officials involved with the IMF effort.
Support for a bank tax isn't unanimous among the G-20. Canada, which now has an outsized role in the group's deliberations because it hosts this year's meeting, opposes a tax on its banks.
Instead, Canada, whose banks weathered the crisis well, is pressing the G-20 to stiffen leverage requirements to avert problems, a proposal that has already been on the group's agenda. India and China haven't taken positions.
Unfortunately, any industry specific tax, like the old "windfall profits tax" imposed on oil companies in the 1970's, will only make a troubled situation worse. The problem in the finacial industry has always been "moral hazard", the practice of allowing banks take excessive risks and then rescuing them when their ill-advised risk-taking backfires. This practice incentivizes a "heads I win, tails I DON'T lose" mentality.
The other problem is the very "cozy" relationship between the big banks, the Treasury, the Federal Reserve and the administration itself. Major banks should be treated at arms-length, but they're not. With an administration made up of Goldman Sachs alumni, the "conflicts of interest" will undoubtedly lead to legislation that looks tough on the surface, but will instead leave the banks with a "bank-door" way to coin money.
The only mechanism to enforce a fair playing field is to HAVE a fair playing field. WE DON'T.
Marko's Take? Don't waste our time with legislation that will only buy votes from angry Americans and get out-of-bed with these institutions. Only then can we create a competitive and fair financial system.
Marko's Take
Please visit us on You Tube at http://www.youtube.com/markostake and our friends at LeMetropole http://www.lemetropolecafe.com/ and http://www.stockmavrick.com/.
Anti-Wall Street sentiment, in conjuction with concerns over the ballooning budget deficit, have Democratic leaders on Capitol Hill embracing the proposal. Obama's proposal is expected to raise up to $117 billion to cover projected bailout losses. Republicans have been silent as their instinctive opposition to tax increases is in conflict with their fear of defending big bankers.
The administration has opposed interfering with bonuses in the past, saying shareholders and Boards of Directors should be responsible for determining corporate compensation.
“We’re already hearing a hue and cry from Wall Street suggesting that this proposed fee is not only unwelcome but unfair,” he said. “That by some twisted logic it is more appropriate for the American people to bear the cost of the bailout rather than the industry that benefited from it, even though these executives are out there giving themselves huge bonuses.”
The proposed tax would apply to bank, thrift and insurance companies with more than $50 billion in assets and would start after June 30. It would not apply to certain holdings, like customers’ insured savings, but to assets in risk-taking operations.
The concept is gaining momentum in Europe. However, different countries have proposed varying structures.
Germany and Sweden would use the money to fund a "resolution authority" that would use the money to shut troubled banks whose failure would put the broader economy at risk. Others, such as France, would assess the fee after a crisis passed.
Officials in the U.S., Europe and the IMF say the bank-tax concept has gained so much momentum that it is likely to be on the agenda when of the Group of 20 industrial and developing nations meet in Canada in June. "Reforms would put in practice the principle that large institutions should bear the costs of any losses to the taxpayer," U.S. Treasury Secretary Timothy Geithner said in a speech last week.
In the U.K., Prime Minister Gordon Brown has been championing a global levy, including one in which revenues would be used to help pay down deficits. The opposition Conservative Party says it will press ahead regardless, although the fee's size will depend on how far other countries follow
The IMF plans to recommend a bank tax when global economic officials convene in Washington in April and is leaning toward a fee in advance to fund a resolution authority, said officials involved with the IMF effort.
Support for a bank tax isn't unanimous among the G-20. Canada, which now has an outsized role in the group's deliberations because it hosts this year's meeting, opposes a tax on its banks.
Instead, Canada, whose banks weathered the crisis well, is pressing the G-20 to stiffen leverage requirements to avert problems, a proposal that has already been on the group's agenda. India and China haven't taken positions.
Unfortunately, any industry specific tax, like the old "windfall profits tax" imposed on oil companies in the 1970's, will only make a troubled situation worse. The problem in the finacial industry has always been "moral hazard", the practice of allowing banks take excessive risks and then rescuing them when their ill-advised risk-taking backfires. This practice incentivizes a "heads I win, tails I DON'T lose" mentality.
The other problem is the very "cozy" relationship between the big banks, the Treasury, the Federal Reserve and the administration itself. Major banks should be treated at arms-length, but they're not. With an administration made up of Goldman Sachs alumni, the "conflicts of interest" will undoubtedly lead to legislation that looks tough on the surface, but will instead leave the banks with a "bank-door" way to coin money.
The only mechanism to enforce a fair playing field is to HAVE a fair playing field. WE DON'T.
Marko's Take? Don't waste our time with legislation that will only buy votes from angry Americans and get out-of-bed with these institutions. Only then can we create a competitive and fair financial system.
Marko's Take
Please visit us on You Tube at http://www.youtube.com/markostake and our friends at LeMetropole http://www.lemetropolecafe.com/ and http://www.stockmavrick.com/.
Thursday, March 11, 2010
Budget Deficit On Parabolic Path
In February, the U.S. Government ran its largest ever monthly deficit — $221 billion, the U.S. Treasury said in releasing its monthly budget statement Wednesday. By comparison, the government in February 2009 ran a budget deficit of nearly $194 billion.
The U.S. February deficit came in below the Congressional Budget Office's (CBO's) estimate of $223 billion. The CBO projected the year-to-date budget deficit would hit $655 billion.
The CBO has forecast a $1.56 trillion deficit for fiscal year 2010, or 10.6% of the economy measured by Gross Domestic Product (GDP). This funding gap is up from a 9.9% share of GDP in 2009. But, the shortfall was forecast to shrink to 8.3% of GDP in 2011. This would be a drop of 50% from the level Obama inherited when he took office by the time his term ends in January 2013. Right! (Sarcasm intentional!)
The deficit's rise in 2010 was partly due to the $787 billion stimulus package Obama pushed through Congress soon after taking office last year to fight the recession. Obama, a Democrat, and ever so eager to accept responsibilty (sarcasm intentional!), pinned the financial mess firmly on his Republican predecessor President George W. Bush.
The CBO's budget deficit forecasts are premised on some pretty flimsy assumptions, such as that the GDP will grow by 2.7% in 2010, 3.8% in 2011 and more than 4% in successive years. As readers of Marko's Take already know, the economy is poised to re-enter the second dip of the Double-Dip-Depression, therefore, this assumption is preposterous.
The budget also assumes unemployment will fall to 8.2% in 2012 from 10% this year, while inflation stays mild and interest rates rise only slightly.
Government receipts posted a rare increase in February, while soaring spending pushed the nation's year-to-date deficit up to a record $651.60 billion.
The government's fiscal 2010 year-to-date deficit is up 10.5% from fiscal year 2009.
February 2010 marks the 17th consecutive month in which the U.S. has posted a budget deficit. The country has posted a budget deficit for 43 of the last 56 Februarys.
There was some good news. The government saw its monthly receipts in February increase on a year-over-year basis for the first time in nearly two years. An increase in corporate tax collections, coupled with lower refunds to individual taxpayers, drove receipts up 23% to $107.52 billion in February 2010 from $87.31 billion in February 2009.
The U.S. spent $16.1 billion last month to service its debt, an annualized amount of approximately $200 billion. Given the nearly $14 trillion in national debt, a 1% increase in interest rates would add $140 billion to debt service. That's why interest rates will NOT be allowed to rise until forced to do so by hyper-inflation and the demands of the market.
Undoubtedly, the "rosy" projections of the CBO will vastly understate the budget deficits that will ultimately be realized. In turn, this will create demand to borrow more money, which will expand the deficit and the vicious cycle will continue until the U.S. Dollar is debased to nearly worthless.
Think the country's on the right path? If so, TAKE ME ON!
Marko's Take
Please visit our new YouTube channel at http://www.youtube.com/markostaketv. We have 5 new episodes to be added over the coming weeks. Stay tuned!
The U.S. February deficit came in below the Congressional Budget Office's (CBO's) estimate of $223 billion. The CBO projected the year-to-date budget deficit would hit $655 billion.
The CBO has forecast a $1.56 trillion deficit for fiscal year 2010, or 10.6% of the economy measured by Gross Domestic Product (GDP). This funding gap is up from a 9.9% share of GDP in 2009. But, the shortfall was forecast to shrink to 8.3% of GDP in 2011. This would be a drop of 50% from the level Obama inherited when he took office by the time his term ends in January 2013. Right! (Sarcasm intentional!)
The deficit's rise in 2010 was partly due to the $787 billion stimulus package Obama pushed through Congress soon after taking office last year to fight the recession. Obama, a Democrat, and ever so eager to accept responsibilty (sarcasm intentional!), pinned the financial mess firmly on his Republican predecessor President George W. Bush.
The CBO's budget deficit forecasts are premised on some pretty flimsy assumptions, such as that the GDP will grow by 2.7% in 2010, 3.8% in 2011 and more than 4% in successive years. As readers of Marko's Take already know, the economy is poised to re-enter the second dip of the Double-Dip-Depression, therefore, this assumption is preposterous.
The budget also assumes unemployment will fall to 8.2% in 2012 from 10% this year, while inflation stays mild and interest rates rise only slightly.
Government receipts posted a rare increase in February, while soaring spending pushed the nation's year-to-date deficit up to a record $651.60 billion.
The government's fiscal 2010 year-to-date deficit is up 10.5% from fiscal year 2009.
February 2010 marks the 17th consecutive month in which the U.S. has posted a budget deficit. The country has posted a budget deficit for 43 of the last 56 Februarys.
There was some good news. The government saw its monthly receipts in February increase on a year-over-year basis for the first time in nearly two years. An increase in corporate tax collections, coupled with lower refunds to individual taxpayers, drove receipts up 23% to $107.52 billion in February 2010 from $87.31 billion in February 2009.
The U.S. spent $16.1 billion last month to service its debt, an annualized amount of approximately $200 billion. Given the nearly $14 trillion in national debt, a 1% increase in interest rates would add $140 billion to debt service. That's why interest rates will NOT be allowed to rise until forced to do so by hyper-inflation and the demands of the market.
Undoubtedly, the "rosy" projections of the CBO will vastly understate the budget deficits that will ultimately be realized. In turn, this will create demand to borrow more money, which will expand the deficit and the vicious cycle will continue until the U.S. Dollar is debased to nearly worthless.
Think the country's on the right path? If so, TAKE ME ON!
Marko's Take
Please visit our new YouTube channel at http://www.youtube.com/markostaketv. We have 5 new episodes to be added over the coming weeks. Stay tuned!
Friday, March 5, 2010
Great News!... More Jobs Lost!
The audacity of the Obama Administration to spin a systemic unemployment problem is nothing short of Orwellian. "Good news is good news". "Bad news is good news"! Is this the Audacity of Hope?
This morning, the closely watched jobs report came out. The Labor Department, which carried out its surveys at the same time that the snowstorms battered the East Coast, said in a report today that non-farm payrolls fell by 36,000 compared with a revised 26,000 drop in January.
While to most people, including all of us at Marko's Take, losing jobs AGAIN would seem like bad news.
But we don't live in Washington, D.C. where it's more important to "beat the spread" than to win.
Economists polled by Dow Jones Newswires were expecting payrolls to fall by 75,000, mainly because of the severe weather. So, the loss of "only" 36,000 jobs was a WIN! The January figure was revised from an originally reported 20,000 decline.
While jobs were LOST, the unemployment rate went DOWN! The unemployment rate, which is calculated using a different household survey, remained at 9.7% last month. Economists had forecast the jobless rate would edge higher to 9.8%.
A major factor in the "great" jobs number was care of Uncle Sam. Employment fell in construction and information, while temporary help services added jobs. Total government employment fell by 18,000, but that is mostly due to a decline in state and local jobs. The FEDERAL work force grew by 7,000, helped by an influx of Census workers along with the addition of 15,000 temporary workers!
Since December 2007, the start of the worst U.S. recession in decades, payroll employment has fallen by 8.4 million. So, what's another 36,000 jobs lost, unless, of course, you're one of those folks that are now jobless!
The White House continues to BLAME THE WEATHER!
Dr. Williams of ShadowStats (http://www.shadowstats.com/) has a far less sanguine view of the jobs situation than da boyz in D.C. According to Dr. Williams, "the weekly new claims for unemployment insurance numbers appears to have stabilized well off its peak at around an average of 470,000 per week, a level last seen as the current economic downturn was formally underway in early 2008."
Dr. Williams goes further on to say that "there has been some flattening out in activity, where a certain layer of layoffs has tended to run its course. Layoffs should start to rise again in the next couple of months. On the offsetting hiring side, the Conference Board’s seasonally-adjusted January help-wanted advertising (newspapers) was unchanged month-to-month at 10, while the seasonally-adjusted help-wanted advertising (online) declined".
So, this "great" jobs report (sarcasm intentional!) is likely to prove to be temporary, and as the second Dip of the Double-Dip-Depression takes its grip on the economy, the unemployment rate is likely to resume its rise. We hate to be the bearers of bad news, but we just tell it like it is!
Think we're in a recovery? Think the jobs news was really good news? TAKE ME ON!
Marko's Take
Episode 4 of our new YouTube series will be posted shortly. You can access it here: http://www.youtube.com/markostaketv. We are planning 5 more episodes in the near future and will publish a schedule of upcoming segments all based on Marko's Take. I hope you've had a chance to tune in and leave comments!
This morning, the closely watched jobs report came out. The Labor Department, which carried out its surveys at the same time that the snowstorms battered the East Coast, said in a report today that non-farm payrolls fell by 36,000 compared with a revised 26,000 drop in January.
While to most people, including all of us at Marko's Take, losing jobs AGAIN would seem like bad news.
But we don't live in Washington, D.C. where it's more important to "beat the spread" than to win.
Economists polled by Dow Jones Newswires were expecting payrolls to fall by 75,000, mainly because of the severe weather. So, the loss of "only" 36,000 jobs was a WIN! The January figure was revised from an originally reported 20,000 decline.
While jobs were LOST, the unemployment rate went DOWN! The unemployment rate, which is calculated using a different household survey, remained at 9.7% last month. Economists had forecast the jobless rate would edge higher to 9.8%.
A major factor in the "great" jobs number was care of Uncle Sam. Employment fell in construction and information, while temporary help services added jobs. Total government employment fell by 18,000, but that is mostly due to a decline in state and local jobs. The FEDERAL work force grew by 7,000, helped by an influx of Census workers along with the addition of 15,000 temporary workers!
Since December 2007, the start of the worst U.S. recession in decades, payroll employment has fallen by 8.4 million. So, what's another 36,000 jobs lost, unless, of course, you're one of those folks that are now jobless!
The White House continues to BLAME THE WEATHER!
Dr. Williams of ShadowStats (http://www.shadowstats.com/) has a far less sanguine view of the jobs situation than da boyz in D.C. According to Dr. Williams, "the weekly new claims for unemployment insurance numbers appears to have stabilized well off its peak at around an average of 470,000 per week, a level last seen as the current economic downturn was formally underway in early 2008."
Dr. Williams goes further on to say that "there has been some flattening out in activity, where a certain layer of layoffs has tended to run its course. Layoffs should start to rise again in the next couple of months. On the offsetting hiring side, the Conference Board’s seasonally-adjusted January help-wanted advertising (newspapers) was unchanged month-to-month at 10, while the seasonally-adjusted help-wanted advertising (online) declined".
So, this "great" jobs report (sarcasm intentional!) is likely to prove to be temporary, and as the second Dip of the Double-Dip-Depression takes its grip on the economy, the unemployment rate is likely to resume its rise. We hate to be the bearers of bad news, but we just tell it like it is!
Think we're in a recovery? Think the jobs news was really good news? TAKE ME ON!
Marko's Take
Episode 4 of our new YouTube series will be posted shortly. You can access it here: http://www.youtube.com/markostaketv. We are planning 5 more episodes in the near future and will publish a schedule of upcoming segments all based on Marko's Take. I hope you've had a chance to tune in and leave comments!
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