If there was any confusion about how the lower half of the US consumer class is doing these days, it was quickly lifted following today’s distressing earnings calls of dollar store titans, Dollar General and Dollar Tree.
Discount retailer Dollar General said it was cutting prices on its most popular items such as bread, eggs and milk, intensifying a price war among already commoditized products with retail giant Wal-Mart Stores to win back falling market share. It shares fell the most on record, plunging by 18% after the company missed on revenue, blaming aggressive competition, lower food prices and reduction in SNAP, or food stamp, coverage in 20 key states.
It’s larger ultra-discount rival Dollar Tree Inc also reported lower-than-expected sales, sending its shares down 10%, the biggest dollar drop decline since going public in 1995.
Artificial measures to stave off a downturn will only make it much worse.
Describing what he called the “crack-up boom”, Ludwig von Mises, the great Austrian economist, said:
The boom cannot continue indefinitely. There are two alternatives. Either the banks continue the credit expansion without restriction and thus cause constantly mounting price increases and an ever-growing orgy of speculation – which, as in all other cases of unlimited inflation, ends in a “crack-up boom” and in a collapse of the money and credit system.
Or the banks stop before this point is reached, voluntarily renounce further credit expansion, and thus bring about the crisis. The depression follows in both instances. (emphasis added)
Although it would be the wiser policy, there is no evidence that the world’s central bankers have the wisdom, either individually or collectively, to select the second alternative. More specifically, they lack “the courage to act” (as Ben Bernanke’s recent, self-congratulatory memoir was so ironically titled); they and their political, big finance and big business cronies are afraid to swallow the “d-pill”, the economic medicine named “depression”.
A good, old-fashioned, pre-1929 depression (like the short-lived, eleven-month depression in 1920-1921, before the days of “modern” central banking and “enlightened” Keynesian intervention “cures”) is the only tonic that can clear out the malinvestment built up since the beginning of the fiat money era. That era began in August of 1971. That is when Richard Nixon, informed that U.S. gold reserves were precipitously declining as a result of President Johnson’s March 1968 action to reduce the gold reserve ratio from 25 percent to zero, “temporarily” suspended the convertibility of the U.S. Dollar into gold. That “temporary” measure has been in effect for forty-five years.
You’ve heard the axiom “History repeats itself.” It does, but never in exactly the same way. To apply the lessons of the past, we must understand the differences of the present.
During the American Revolution, the British came prepared to fight a successful war—but against a European army. Their formations, which gave them devastating firepower, and their red coats, which emphasized their numbers, proved the exact opposite of the tactics needed to fight a guerrilla war.
Before World War I, generals still saw the cavalry as the flower of their armies. Of course, the horse soldiers proved worse than useless in the trenches.
Before World War II, in anticipation of a German attack, the French built the “impenetrable” Maginot Line. History repeated itself and the attack came, but not in the way they expected. Their preparations were useless because the Germans didn’t attempt to penetrate it; they simply went around it, and France was defeated.
The generals don’t prepare for the last war out of perversity or stupidity, but rather because past experience is all they have to go by. Most of them simply don’t know how to interpret that experience. They are correct in preparing for another war but wrong in relying upon what worked in the last one.
Investors, unfortunately, seem to make the same mistakes in marshaling their resources as do the generals. If the last 30 years have been prosperous, they base their actions on more prosperity. Talk of a depression isn’t real to them because things are, in fact, so different from the 1930s. To most people, a depression means ’30s-style conditions, and since they don’t see that, they can’t imagine a depression. That’s because they know what the last depression was like, but they don’t know what one is. It’s hard to visualize something you don’t understand.
Some of them who are a bit more clever might see an end to prosperity and the start of a depression but—although they’re going to be a lot better off than most—they’re probably looking for this depression to be like the last one.
Submitted by Tyler Durden on 03/07/2016 09:15 -0500
Now that Q4 EPS is almost in the history books with 494 S&P500 companies reporting, we can look at the numbers: blended 4Q EPS is $29.49 (-2.9% y/y) with GAAP EPS of $19.92. As DB admits, a 67% GAAP-to-non GAAP ratio is well below the normal ~90% ex. recessions, exacerbated by asset impairments and restructuring costs especially at Energy.
This is how DB shows this almost unprecedented divergence between GAAP and non-GAAP “earnings”:
This is merely a recreation of charts we first showed one week ago, when we commented on the widest spread between GAAP and non-GAAP since the financial crisis:
The chart below shows where the GAAP to non-GAAP divergence is most acute.
Protectionism, shaky debt, and weak banking systems have consequences
One view of what caused the Great Depression in the 1930s is that the Federal Reserve failed to prevent a collapse in the money supply.
This is the famous thesis of Milton Friedman’s and Anna Schwartz’s A Monetary History of the United States, 1867-1960, and it was, more or less, the view of Ben Bernanke when he was chairman of the Federal Reserve.
The global economy today resembles that of the 1930s in several ominous ways.
Financial author Edward Chancellor recently called attention to a paper written by Caludio Borio, head economist at the Bank of International Settlements, that provides a fuller picture of the causes of the Great Depression. The paper also draws parallels between global economic conditions that led to the rise of protectionism in the 1930s and our situation now.
The paper’s thesis is that “financial elasticity” characterizes both the pre-Depression global economy and today’s global economy. Elasticity refers to the buildup of capital imbalances such as money flows into emerging markets because of low rates in developed markets.
Free flowing capital to emerging markets
As Chancellor tells it, the gold exchange standard established in the 1920s allowed U.S. and U.K. bonds to be used together with gold in exchange transactions among central banks. This arrangement encouraged growth in foreign lending.
Specifically, the U.S. lent money to emerging markets in Latin America and Central Europe. Investors in the U.S. enjoyed higher returns for seemingly little extra risk as defaults were initially low.
However, lending standards began to loosen, and American investors brought their dollars home after the Fed hiked rates in 1928. Money flowed into U.S. stocks, among other things, which, of course were poised for a crash.
It is now self-evident to any sentient being (excludes CNBC shills, Wall Street shyster economists, and Keynesian loving politicians) the mountainous level of unpayable global debt is about to crash down like an avalanche upon hundreds of millions of willfully ignorant citizens who trusted their politician leaders and the central bankers who created the debt out of thin air. McKinsey produced a report last year showing the world had added $57 trillion of debt between 2008 and the 2nd quarter of 2014, with global debt to GDP reaching 286%.
The global economy has only deteriorated since mid-2014, with politicians and central bankers accelerating the issuance of debt. These deranged psychopaths have added in excess of $70 trillion of debt in the last eight years, a 50% increase. With $142 trillion of global debt enough to collapse the global economy in 2008, only a lunatic would implement a “solution” that increased global debt to $212 trillion over the next seven years thinking that would solve a problem created by too much debt.
Submitted by Tyler Durden on 01/20/2016 08:15 -0500
CNBC’s Andrew Ross Sorkin and Becky Quick, donning their finest goose down bubble coats to remind viewers they’re reporting live from scenic Davos, generously took some time out of their busy schedules to chat with Ray Dalio on Wednesday and unsurprisingly, the “zen master” again predicted the Fed will reverse course and embark on more QE.
Dalio begins by noting that the Fed’s move to inflate financial assets by pumping money into the system means there’s an “asymmetric risk on the downside.”
The rationale is simple: the trillions in fungible, excess cash the Fed unleashed in the wake of the crisis has driven asset prices into bubble territory and at this juncture, there’s essentially nowhere to go but down.
That, Dalio says, will create a “negative wealth effect”, the opposite of Bernanke’s infamous virtuous circle wherein Americans would supposedly spend more and thus boost the economy if only the Fed could repair the damage their 401ks suffered in 2008.
In short, Dalio reiterated his contention that the Fed will ultimately be forced into QE4 and that the much ballyhooed tightening cycle will essentially amount to a one-off, “just to show you we could do it,” blip on the ZIRP radar screen. “Every country in the world needs easier monetary policy,” Dalio said, before noting that central banks now have less room to ease. He made similar comments in September of last year in an interview with Bloomberg TV.
Dalio also said he’s concerned that the Fed isn’t concerned. When Becky Quick suggested the FOMC is more vigilant than the market might think, Dalio responded with this: “I hope you’re right.”
As for the fact that the historical relationships between asset classes (volatilities and correlations) that are used to construct optimal “risk-parity” funds in order that ‘risk’ is balanced and hedged across bonds and stocks have all broken down dramatically causing funds like Bridgewater’s vaunted “All Weather” portfolio to sink, Dalio warned that if assets remain correlated and things continue to move in the “wrong” direction, “they’ll be a depression.”
That, he concluded, is why MOAR QE, and thus a return to the “full-Krugman” regime, is a virtual certainty.
DUBLIN – Dow down 252 on Wednesday – or 1.5%. Chevron, Apple, and Goldman Sachs leading the retreat. The press blamed China, North Korea, oil, and “geopolitical concerns.”
So far this year, the Dow has lost 3% of its value [ed. note: as of Thursday’s close it has lost a little over 5%]. Let’s see… We believe it is headed for a 50% loss. So, at this rate… we’ll be there by June!
A less than joyous start to the new year: the DJIA has so far delivered its worst first trading week since at least 1900. That’s the year 1900 in case you were wondering – click to enlarge.
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.
Evidently I have a new right wing neo-con fan. I’m guessing a few million people listen to his show everyday. I doubt they will stay long on our site, if they come at all. Rush Limbaugh did a segment today on my recent Depression article. Here is the transcript:
Millennials Are Coming of Age in a Depression — They Just Don’t Know It
BEGIN TRANSCRIPT
RUSH: I mentioned to you last week that I had a story about how what we are living through right now is actually worse than the Great Depression and why nobody knows.I went back to my archives, and I got that story, and I have it here. Open borders, bigger government, free college for everybody. How many people already have free college by virtue of having their student loans forgiven or what have you? Everything these people have tried has not worked, so they want to try even more of it. “Bigger welfare state. Get rid of the guns, no oil, no banks.” Really? That’s what the Democrats in the sixties were talking about when they were protesting Democrat Party convention in Chicago.This is so old, it’s predictable; I don’t even have to wait for these people to say it in a debate. You know what they’re gonna be. Trump, Carson, Fiorina, where are they today? I am serious. Where are they nuking this stuff? Well, they’re running in opposition to it. (interruption) That’s why I’m asking. They’re running for president. Their points last night put their agenda forward. Are you telling me you’re not gonna spend any time obliterating it?
Jim Quinn, The Burning Platform blog. We find everything here, folks. “Why This Feels Like a Depression for Most People.” You read this, and you can figure out why the Millennials are weird or strange or feel that way, because they have come of age in a depression that nobody will call that. Now, none of this in this story is new to those of you who have been regularly listening to this program. But it is well thought out and presented here. I found at the Zero Hedge blog.
Here we go again. The dying legacy media will continue to support the status quo, who provide their dwindling advertising revenue, by papering over the truth with platitudes, lies, and misinformation. I have been detailing the long slow death of retail in America for the last few years. The data and facts are unequivocal. Therefore, the establishment and their media mouthpieces need to suppress the truth.
They spin every terrible report in the most positive way possible. They blame lousy retail results on the weather. They blame them on calendar effects. They blame them on gasoline sales plunging. That one is funny, because we heard for months that retail spending would surge because people had more money in their pockets from the huge decline in gasoline prices.
September retail sales were grudgingly reported by the Census Bureau this morning and they were absolutely dreadful. This followed an atrocious August report. The MSM couldn’t blame it on snow, cold, flooding, drought, or even swarms of locusts. So they just buried the story in their small print headlines. The propaganda media machine had nothing. They continue to spew the drivel about a 5.1% unemployment rate as a reflection of a booming jobs market. If we really have a booming jobs market, we would have a booming retail sector. The stagnant retail market reveals the jobs data to be fraudulent. The 94 million people supposedly not in the job market can’t buy shit with their good looks.
GUALFIN, Argentina – Poor Janet Yellen. Usually, we reserve our pity for the poor, the downtrodden, and the hopeless. But today, we spare a thought for the clueless… and feel Yellen’s pain. Markets are tense. Investors seem to be holding their breath. Everyone is waiting to see what the Fed will do.
There must be hundreds of thousands – if not millions – of well-educated adults sitting on the edges of their seats… eager to hear what this rather ordinary functionary will say.
Try to spot the patsy/ fall guy…
Photo credit: Mark Wilson / Getty Images
Will Janet Yellen proudly put the Fed on the side of the angels, announcing that she and her crew have decided to move the Fed’s key interest rate to a more normal level… regardless of how much it costs the cronies?
Will she admit that the Fed’s ZIRP and its three QE programs have been failures? Or that they have shifted trillions of dollars toward the rich while leaving Main Street poorer? Will she beg forgiveness for such errant policy decisions over such a long time and vow publicly never to interfere with the market again? No, she won’t.
What actually constitutes theLong Depression has been debatable, for at first it was called theGreat Depression,and then that title was transferred to the 1930s. Consequently, some limit the term Long Depression to the worldwide price recession beginning in 1873 and running through the spring of 1879. Six years is not exactly a “long” depression, that in our analysis is 26 years – the typical maximum period which Japan entered following 1989.95. Europe appears to be completing a 13 year depression from 2007 into 2020 thanks to austerity – deliberate deflation to support bondholders.
Domestic analysis of the Long Depression event of the 19th century USA centered on thePanic of 1873,which the inflationists/Silver Democrats dubbed this financial crisis theCrime of 1873. Of course, this view ignored the global economy and this set the tone for a 26-year economic depression plagued by numerous financial panics that finally culminated in thePanic of 1893,which were devastating to say the least and the Panic of 1899 with the peak in US interest rates reaching nearly 200% in a situation similar to Greece today.
Passing exams and courses is so overrated. This antiquated thinking is what is holding back our yuuts. If I only knew that I could not study in college, fail my exams, and then sue the college for a passing grade, I would have gotten drunk a lot more. How many exams did you take in college where you could call the teacher to ask questions? This pampered bitch needs a good slap.
If you were in critical condition, would you want her as your nurse? Let’s face it, some people were meant to pump gas for a living.
Maybe I’ll tell my boss I can’t finish the budget this year because I’m depressed. If he says it has to be done, I’ll sue.
Brace yourselves for what might be the frivolous higher education lawsuit of the century: Misericordia University nursing student Jennifer Burbella is suing the school, the nursing department, and professor Christina Tomkins for failing to accommodate her disabilities in violation of federal law.
What’s wrong with Burbella? It’s not exactly clear, but she suffers from crippling depression and anxiety, according to thetimes-tribune.com. Her mental health issues were so debilitating that she struggled throughout her four years at the Dallas, Pennsylvania-based private university and twice failed a required class for her nursing degree. Her lawsuit claims that she received no special accommodations the first time she took the class, but things were quite different the second time: She was given permission to take the exam in a separate “distraction-free” environment; she also received extra time.
Burbella’s suit claims that the professor, Tomkins, offered to answer questions during the exam, but when Burbella called her on her cell phone, she didn’t answer. This created even greater panic for Burbella, and she again failed.
She is demanding unspecified damages in excess of $75,000.
Today, we have bad news and good news. The good news is that there will be no 25-year recession. Nor will there be a depression that will last the rest of our lifetimes.
The bad news: It will be much worse than that. On Monday, the Dow rose another 43 points. Gold seems to be working its way back to the $1,200 level, where it feels most comfortable.
“A long depression” has been much discussed in the financial press. Several economists are predicting many years of sluggish or negative growth. It is the obvious consequence of several overlapping trends and existing conditions.
Newspaper from October 24 1929, a.k.a. “Black Thursday” – at this point, the panic had just begun with the market losing 11% in one day. On the next two trading days (Friday and Saturday – at the time, the market was open on Saturdays) the market rebounded slightly, then came “Black Monday” and “Black Tuesday”, which erased all doubt about the seriousness of the situation
Old People Are Dead Wood
First, people are getting older. Especially in Europe and Japan, but also in China, Russia and the US. As we’ve described many times, as people get older, they change. They stop producing and begin consuming.
They are no longer the dynamic innovators and eager early adopters of their youth; they become the old dogs who won’t learn new tricks.
Nor are they the green and growing timber of a healthy economy; instead, they become dead wood. There’s nothing wrong with growing old.
There’s nothing wrong with dying either, at least from a philosophical point of view. But it’s not going to increase auto sales or boost incomes – except for the undertakers.
Looks like I was right again. Now the cover-up will begin. The U.S. corporate media is not reporting the fact that anti-depression drugs are the cause of this crash. The drug companies know their drugs result in mass murder, suicide, and ruining people’s lives, but they are the major advertisers on the mainstream media and the media whores will cover-up these facts to keep profits flowing. The drug companies are also huge contributors to politicians, who will never ask the tough questions about these drugs.
Will they report the drugs this guy was on? We know the U.S. media will not. Maybe the German media has more credibility and will report the truth. But, I doubt it.
Germanwings crash: Co-pilot ‘treated for depression’
The man suspected of deliberately crashing a Germanwings A320 plane in the French Alps required treatment for depression, German media say.
Regular assessments were recommended in Andreas Lubitz’s official notes after a serious episode some years ago.
The Barcelona-Duesseldorf plane crashed on Tuesday, killing 150 people.
Data from the plane’s voice recorder suggest Mr Lubitz purposely started a descent as the pilot was locked out of the cockpit.
Several airlines have now pledged to change their rules to ensure at least two crew members are present in the cockpit at all times.
Police have searched two German properties used by Mr Lubitz, taking away boxes and a computer.
‘Heavily depressive’
When Mr Lubitz finished training in 2009, he was diagnosed with a serious depressive episode and went on to receive treatment for a year and a half, the German news site Bild reports.
Internal documents quoted by Bild and German broadcaster ARD say a note on Mr Lubitz’s aviation authority file recommended regular psychological assessment.
Mr Lubitz’s employers have confirmed that his training was interrupted for several months six years ago.
But they have not said why. Carsten Spohr – the head of Lufthansa, the German carrier that owns Germanwings – said on Thursday that Mr Lubitz was only able to resume training after his suitability was “re-established”.
“He passed all the subsequent tests and checks with flying colours,” Mr Spohr was quoted as saying.
German media are also reporting that investigators have found evidence of mental health problems at Mr Lubitz’s Duesseldorf flat.
Earlier, another media report quoted a police spokesman as saying “a very significant clue as to what has happened” had been found during the search of the house the 27-year-old shared with his parents in Montabaur, north of Frankfurt, without specifying what.
Police said the discovery was not a suicide note.
French Prime Minister Manual Valls said the investigation was ongoing, but that “everything is pointing to a criminal, crazy, suicidal action that we cannot comprehend”.
He said investigators and Lufthansa would have to “shed light on the career and profile of this pilot”.
Police continued to come and go at the Montabaur house throughout Thursday morning, reports the BBC’s Anna Holligan who is outside.
She says there are concerns for Mr Lubitz’s parents, who have suffered not just one trauma – their son dying in a crash – but the subsequent shock of finding out he may have been responsible for the tragedy.