Tag: recesssion

THE WORSE THINGS GET FOR YOU, THE BETTER THEY GET FOR WALL STREET

On October 2 the BLS reported absolutely atrocious employment data, with virtually no job growth other than the phantom jobs added by the fantastically wrong Birth/Death adjustment for all those new businesses springing up around the country. The MSM couldn’t even spin it in a positive manner, as the previous two months of lies were adjusted significantly downward. What a shocker. At the beginning of that day the Dow stood at 16,250 and had been in a downward trend for a couple months as the global economy has been clearly weakening. The immediate rational reaction to the horrible news was a 250 point plunge down to the 16,000 level. But by the end of the day the market had finished up over 200 points, as this terrible news was immediately interpreted as good news for the market, because the Federal Reserve will never ever increase interest rates again.

Over the next three weeks, the economic data has continued to deteriorate, corporate earnings have been crashing, and both Europe and China are experiencing continuing and deepening economic declines. The big swinging dicks on Wall Street have programmed their HFT computers to buy, buy, buy. The worse the data, the bigger the gains. The market has soared by 1,600 points since the low on October 2. A 10% surge based upon lousy economic info, as the economy is either in recession or headed into recession, is irrational, ridiculous, and warped, just like our financial system. This is what happens when crony capitalism takes root like a foul weed and is bankrolled by a central bank that cares only for Wall Street, while throwing Main Street under the bus.

Continue reading “THE WORSE THINGS GET FOR YOU, THE BETTER THEY GET FOR WALL STREET”

10 YEAR TREASURY YIELDS AT 2008 CRISIS LEVELS

The 10 Year Treasury yield this morning is 2.35%. It was 3.04% earlier this year and 4% in 2010. In a healthy growing economy with GDP supposedly exceeding 4%, and real inflation running at 5%, would the 10 Year Treasury be trading at 2008 financial crisis levels? Of course not.

If Obama and his minions, touting our growing economy and millions of “new” jobs one month before the mid-term elections, are telling the truth than why have rates plunged from 3.04% to 2.35% since the beginning of this year? This is while the Fed has been tapering their QE heroine injections. When 10 year rates fall by 23% in nine months it is signaling trouble ahead.

HOW LOW CAN WE GO?


Chart of the Day

For some perspective on all-important long-term interest rates, today’s chart illustrates the 30-year trend of the 10-year Treasury bond yield (thick blue line). As today’s chart illustrates, the 10-year Treasury bond yield has moved within the confines of a 28-year downward sloping trend channel. Since 2008, the trend channel has narrowed slightly (see dashed gray lines). The recent spate of economic concerns (Europe, China, etc.) and geopolitical issues (ISIL, Ukraine, etc.) has encouraged a flight to safety resulting in a decline of the 10-year Treasury bond yield over the past ten months. In fact, the 10-year yield is currently at a level similar to what occurred during the height of the financial crisis in late 2008.

RETAIL SALES AT 2004 LEVELS

I’m sure you won’t get this perspective from the faux financial “journalists” on CNBC and Rupert Murdoch’s rags or neo-con networks. Meanwhile, the brilliant CEO’s of mega-retailers across the land have added 3 billion square feet of retail space since 2000.

 

Guest Post by Doug Short

Real Retail Sales Per Capita: Another Perspective on the Economy

In real, population-adjusted terms, Retail Sales are at the level we first reached in September 2004.

Last week the Advance Retail Sales Report showed that sales in June rose 0.2% month-over-month and 4.2% year-over-year, as I reported in my real-time update.

With today’s release of the Consumer Price Index, we can now dig a bit deeper into the “real” data, adjusted for inflation and against the backdrop of our growing population.

The first chart shows the complete series from 1992, when the U.S. Census Bureau began tracking the data in its current format. I’ve highlighted recessions and the approximate range of two major economic episodes.

The Tech Crash that began in the spring of 2000 had relatively little impact on consumption. The Financial Crisis of 2008 has had a major impact. After the cliff-dive of the Great Recession, the recovery in retail sales has taken us (in nominal terms) 15.7% above the November 2007 pre-recession peak to a record high.

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Here is the same chart with two trendlines added. These are linear regressions computed with the Excel Growth function.

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The green trendline is a regression through the entire data series. The latest sales figure is 4.0% below the green line end point.

The blue line is a regression through the end of 2007 and extrapolated to the present. Thus, the blue line excludes the impact of the Financial Crisis. The latest sales figure is 18.8% below the blue line end point.

We normally evaluate monthly data in nominal terms on a month-over-month or year-over-year basis. On the other hand, a snapshot of the larger historical context illustrates the devastating impact of the Financial Crisis on the U.S. economy.

The “Real” Retail Story: The Consumer Economy Remains at a Recessionary Level

How much insight into the US economy does the nominal retail sales report offer? The next chart gives us a perspective on the extent to which this indicator is skewed by inflation and population growth. The nominal sales number shows a cumulative growth of 166.7% since the beginning of this series. Adjust for population growth and the cumulative number drops to 113.9%. And when we adjust for both population growth and inflation, retail sales are up only 25.0% over the past two-plus decades. With this adjustment, we’re now at a level we first reached in September 2004.

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Let’s continue in the same vein. The charts below give us a rather different view of the U.S. retail economy and the long-term behavior of the consumer. The sales numbers are adjusted for population growth and inflation. For the population data I’ve used the Bureau of Economic Analysis mid-month series available from the St. Louis FRED with a linear extrapolation for the latest month. Inflation is based on the latest Consumer Price Index. I’ve used the seasonally adjusted CPI as a best match for the seasonally adjusted retail sales data. The latest retail sales with the dual adjustment declined 0.1% month-over-month, and the adjusted data is only up 1.4% year-over-year.

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Consider: Since January 1992, the U.S. population has grown about 25% while the dollar has lost about 42% of its purchasing power to inflation. Retail sales have been recovering since the trough in 2009. But the “real” consumer economy, adjusted for population growth is 3.7% below its all-time high in January 2006.

As I mentioned at the outset, nominal month-over-month retail sales were up 0.2%. Let’s now examine Core Retail Sales, a version that excludes auto purchases.

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By this analysis, adjusted Core Retail Sales were up 0.1% in June from the previous month, up only 0.9% year-over-year and down 1.8% from its record high in November 2007.

The Great Recession of the Financial Crisis is behind us, a close analysis of the adjusted data suggests that the recovery has been frustratingly slow. The reality is that, in “real” terms — adjusted for population growth and inflation — consumer sales remain below the level we saw at the peak before the last recession.