On The Road To Economic Recovery Or On The Eve Of A Great Depression

The following claims can be confirmed at these sites:

http://stockcharts.com/charts/historical/djia19201940.html                                                                                                           http://seansrant.com/ive-said-it-before-and-ill-say-it-again-the-decline-still-isnt-over-and-heres-why-im-short-the-djia/

The DJIA high in 1929 was 381.17. After the 1929 “crash” the DJIA stood at 198.69, a 48% drop.

The DJIA “rebounded in 1930 to a high of  294.07, a gain of 95.38 points, a nearly 50% recovery, a recovery very similar to our current recovery in 2009/2010.

The real “crash” of the Great Depression began in late 1930 when the DJIA began a decline to a level of 41.22 in 1933. Between 1930 and 1933 there were several sharp “spikes” upward, followed by precipitous drops of the DJIA.

Does our current “spike” indicate a recovery? Certainly not!

The toxic assets are still on the Bank’s books, yet the financial marklets are leading the recovery. Commercial real estate is on the brink of collapse, home mortgage foreclosures continue to climb – while the Obama mortgage assistance program has resulted in less than 2000 permanently modified mortgages – the President pledged to help 9,000,000. Credit card defaults and personal bankrupties continue to climb and the unemployment rate – incorrectly called a “lagging indicator” – continues to climb. Unemployment doesn’t lag – it is “current” – unemployment can only be said to “lag” other indicators which are actually “predicting” future activity. The DJIA current level is “predciting” that “profits” and associated dividends will be better six months from now -that ”prediction” is based on a set of “assumptions”, one of the assumptions is that unemployment will improve and not worsen. The unemployment rate predicts nothing – it is a number that “understates” a current condition.

The DJIA is not predicative of economic health.  

The following from: http://www.online-stock-trading-guide.com/great-depression-stock-chart.htm

1929-1930 Stock Chart 1   
 
If you changed the dates from 1929 – 1930 to 2007 – 2009 you’d have an almost identical set of charts. http://seansrant.com/ive-said-it-before-and-ill-say-it-again-the-decline-still-isnt-over-and-heres-why-im-short-the-djia/

1930 Stock Chart
 
1932 Stock Chart
 
 
1928-1933 Stock Chart
 
1928-1955 Stock Chart
 
 The DJIA has “zero” value in predicting whether our economic health has “turned” the corner.

AP - CHANGES headline and intro text; graphic shows total foreclosure filings for past 13 months ...

AP – CHANGES headline and intro text; graphic shows total foreclosure filings for past 13 months …The foreclosure crisis affected nearly 938,000 properties in the July-September quarter, compared with about 890,000 in the prior three months, according to a report released Thursday by RealtyTrac Inc. That puts foreclosure-related filings on a pace to hit about 3.5 million this year, up from more than 2.3 million last year.

Unemployment is the main reason homeowners are falling into trouble. While the economy is likely out of recession, the unemployment rate — now at a 26-year high of 9.8 percent — isn’t expected to peak until the middle of next year.  

http://www.charter.net/news/read.php?id=15958748&ps=1011&srce=news_class&action=1&lang=en&_LT=HOME_USNWC00L1_UNEWS 

This is after an 81% increase in mortage foreclosures between 2007 and 2008. http://www.thestandard.com.hk/breaking_news_detail.asp?id=11900

Credit card defaults up at major lenders

Over the past few months, banks had been releasing some promising figures regarding credit card defaults – but new data suggests that any signs of improvement may not be lasting.

The latest figures from major lenders implies that previous progress could be more accurately credited to seasonal factors and Americans paying down credit card debt with their tax refunds, according to Bloomberg.

Banks including JPMogan Chase, Bank of America, Citigroup and Discover all reported an increase in credit card defaults – also known as charge-offs – during August. Charge-offs reflect credit card accounts that issuers deem uncollectable.

In particular, BofA reported that charge-offs climbed from 13.8 percent to 14.5 percent last month, while Citigroup saw a rise from 10 percent to 12.1 percent during the same period.

http//www.credit.com/news/credit-debt/2009-09-16/credit-card-defaults-up-at-major-lenders.html  

What is the truth about the underlying fundamentals is our economy ……

At foreclosure auctions, broken dreams on sale

On 11:52 am EDT, Thursday October 15, 2009

CHICAGO (Reuters) – The seven-bedroom, three-bath house in this city’s West Garfield Park neighborhood had once been someone’s American Dream.

But at a recent auction of about 100 foreclosed houses and condos, it was just Property No. 20 — and drawing no bids from a roomful of buyers despite its bargain-basement price.

“Any interest in this home at $7,000?” fast-talking auctioneer Renee Jones asked the crowd. “If not, we’ll move on.”

 http://finance.yahoo.com/news/At-foreclosure-auctions-rb-853906128.html?x=0&.v=1

 Foreclosures rise 5 percent from summer to fall

US foreclosures keep soaring as unemployment remains main cause of housing woes

By Alan Zibel, AP Real Estate Writer

On 1:59 pm EDT, Thursday October 15, 2009

WASHINGTON (AP) — The number of U.S. households caught up in the foreclosure crisis rose more than 5 percent from summer to fall as a federal effort to assist struggling borrowers was overwhelmed by a flood of defaults among people who lost their jobs.

 

Associated Press Reports: Economy Still In Decline

The economy is still in decline but results from a new economic survey show evidence the recession is abating as more companies see rising demand for their products, taper plans for job cuts and report profit margins on the uptick.

The latest quarterly survey by the National Association for Business Economics, set to be released Monday, indicates that the economy is at an inflection point, but not quite a turning point, said Sara Johnson, NABE’s lead analyst on the survey and an economist at IHS Global Insight.

Still, the NABE survey of companies and trade associations showed that pessimism about U.S. economic growth is rising, as 93 percent of respondents expected real GDP to decline this year. That was worse than 78 percent in the previous survey in January.

Employment prospects are still down, too, and wages are at their lowest point since the survey began 27 years ago.

The number of companies reporting lower employment totaled 39 percent, down from 44 percent. Goods-producing industries fared the worst, with 83 percent reporting job losses, and none reporting growth.

The outlook for jobs remains grim, with losses expected to continue in the next six months. Only 16 percent of companies predicted an increase in hiring at their firms, slightly worse than the 17 percent in January. But the number of companies predicting job losses improved to 33 percent from 39 percent.

http://news.yahoo.com/s/ap/20090420/ap_on_bi_ge/nabe_survey

The straight talk translation: The ship is still sinking,  just not as fast.

Dow ends best 6 weeks since 1938: 1938 – “The Rest Of The Story”

Dow ends best 6 weeks since 1938

Stocks rose on Friday, with the Dow scoring its biggest six-week gain since July 1938, helped by a reassuring report on the mood of consumers and stabilization in General Electric (GE.N) and Citigroup’s (C.N) quarterly results.

The Dow is up 22.7 percent over the past six weeks, making this the largest six-week gain since July 29, 1938.

http://www.nyse.tv/dow-jones-industrial-average-history-djia.htm

As famed commentator Paul Harvey would have said, “and now for the rest of the story”.

The year 1938 was a year during the “Great Depression”. 1938 did not signal the end of the “Great Depression”. The “Great Depression” lasted ” 4 more years” after 1938, not ending until 1942.

How did the ”stock market” fare during the Great Depression? In 6 of the 11+ years of the Great Depression the “Stock Market” closed up despite the fact that unemployment continued to rise, home foreclosures hit all time highs and thousands of businesses and farms were lost.

Following the 1938 “bounce” in the DJIA, the “stock market” closed down for 4 straight years. The Market was down in 1938 – 1939, 1939 – 1940, 1940 – 1941 and 1941 – 1942. During that time period the DJIA lost nearly 25% of its value. In fact, the DJIA closed lower in 1942 than it did in 1937. http://www.nyse.tv/dow-jones-industrial-average-history-djia.htm

Economists note that these years of the “Great Depression”, 1939 -1942, followed the implementation of FDR’s “New Deal” and that the “New Deal” may have, in fact, caused this, the second half, of the Great Depression”. (New Deal or Raw Deal?: How FDR’s Economic Legacy Has Damaged America,  by Burton W., Jr. Folsom, http://www.amazon.com/New-Deal-Raw-Economic-Damaged/dp/1416592229 )

This writer is hoping an economic recovery is underway, however, that is not what the data suggests. As you can see, the DJIA, does not necessarily reflect the direction of  economic activity – the DJIA can register gains while the “economy” slips futher into a “Great Depression” or, in other words, Government bailout programs can make the politically connected extremely rich while the Country, as a whole, slips below water.

April 2009 unemployment continues to climb at 600,000 + per week. Unemployment, with the addition of the newly unemployed in April 2009,  is now above 9%, nearly one full percentage point above the Obama Administration’s “worse case estimate” for a “maximum unemployment figure” of 8.1% in 2009. Economists are now examining whether unemployment will top 11% before year end, 40% higher than the Administration’s forecast.  http://www.bls.gov/news.release/pdf/empsit.pdf  Between January of 2004 and January of 2008 unemployment in the US averaged 4.5%. 1/2 the current rate. Twice that number of people are currently unemployed and the fact that the unemployment number will continue to rise is undisputed. There are no (zero) projections that the US unemployment rate will return to a 4.5% rate prior to 2017, a full 8 years from now.  

Despite the moratorium on “Mortgage Foreclosures”, March 2009 foreclosures were 46% above March 2008 figures. Fannie & Freddie’s moratorium on foreclosures ended on March 31st 2009, so this increase occurred prior to the moratorium’s expiration. A huge backlog of foreclosures were placed on “hold” and will now move forward.  In many parts of the Country “housing surpluses” will take 4 to 7 years to be absorbed. Reaching a floor in the housing market is years off. Maybe 5 years off, if we pursue the correct policies and restore confidence in  American mortgage backed securities and the international investment community commits to investing in those “derivatives” once again.   http://www.mlive.com/business/index.ssf/2009/04/us_foreclosures_up_24_percent.html http://www.idahobusiness.net/archive.htm/2009/04/08/Foreclosures-up-again-in-March

New home starts are way down. New single family home starts for March 2009 are 45% lower than March 2008. http://redfishemergingmarkets.com/blog/2009/04/16/housing-starts-are-still-anemic-anybody-surprised-at-the-data/

March 2008 was a very bad year in it’s own right. Housing starts will need to increase 500% before reaching the levels seen in 2005. http://www.reedconstructiondata.com/news/2008/08/residential-construction-near-bottom-but-still-declining/

In March 2009 there was nearly 1 home foreclosure for every new home start. http://redfishemergingmarkets.com/blog/2009/04/16/housing-starts-are-still-anemic-anybody-surprised-at-the-data/

Auto sales remain down, despite dishonest claims to the contrary. March 2008 to March 2009 auto sales are down an additional 40%. http://money.cnn.com/2009/03/26/autos/jd_power_march_sales/index.htm . February 2008 to February 2009 auto sales were also down, almost 50%. http://www.thegreenmotorist.com/index.php/february-2009-auto-sales-down-yet-again/ . March 2008 auto sales figures were no reason for optimism. Even if sales figures should suddenly leap “up to” 2008 sales levels, one needs to recall that 2008 sales figures were dismal in there own right and were down 20% from 2007 sales levels. GM’s sales volumes in 2007 were 40% less than in 2006. Current auto sales levels will need to triple to catch back up with the “profitable” levels of 2006. After “special items” GM only lost $2 Billion in 2006. http://jalopnik.com/cars/breaking-gm-finally-releases-2006-financial-results-showing-profits-and-notsomuch-profits-244072.php

The current cause for “economic optimism”?  Two banks reported “profits” at the end of the first quarter. What do the bank’s financial numbers mean? Where did the profits come from? Who really knows?

Both “banks” received Billions in bailout funds that have not been repaid. Despite promises of “transparency” the Government’s Stress tests formulas are a secret and the “formula” applied changes from bank to bank. The “stress test” results are also being kept secret. Who passed? Who failed? Who knows? What transparency!

The recent “mark to market” accounting changes are a sham. There is no way for the public to know exactly what a banks exposure to toxic mortgages are, nor can the public determine how the bank is evaluting those assets or exposures. Isn’t this is exactly how we got into this mess in the first place, financial institutions overstating the value of their investments in Mortgage backed securities?

See: http://articles.moneycentral.msn.com/Investing/ContrarianChronicles/a-bear-rally-in-bulls-clothing.aspx   “Money printing plus imagination are potent forces that can’t solve our problems but can affect the stock market in such a way as to make it appear that the worst has passed.”

The recent accounting changes allow banks to evaluate the same piece of property differently, depending on how the bank chooses to classify the property. If a property or asset is to be put up for sale in the near future, the expected sale price is to be used. If the property is to be held for a longer period of time, the anticipated value at the time of sale can be used. How can the public discern whether a piece of property or asset currently valued at $1,000,000, doesn’t in fact have a “real” current value of $10,000. The bank, when it cannot sell the property for $1 Million, simply changes the “asset classification” to a long term hold rather than calling the property what it is, an overvalued piece of realestate with a $1 Million asking price and a current $10,000 value.

Is TALF responsible for the Bank’s stated profits, profits made at taxpayer expense? Who knows? http://www.businessinsider.com/how-banks-and-hedge-funds-will-scam-the-talf-2009-3 Are these profits a sign of economic improvement or a sign of the fleecing of America?

Had the Government allowed this sham, the change in accounting practices,  months ago, the Financial Institutions bailout would not have been necessary.

Nothing has changed in terms of the availability of “zero down” mortgages or the “Liar” or “Ninja” loans. The actions of Congress and the Boston Federal Reserve still stand, nothing has been repealed or revoked. Now those without a “down payment” can acquire their “down payment” through the use of a “second mortgage” where the “downpayment” is funded through a “second mortgage” or other “give away programs” intended to create the illusion that a purchaser has a “down payment”. http://www.mhdc.com/homes/down_payment_assistance/index.htm , http://www.ehow.com/how_4492950_through-zero-down-payment-loophole.html (An ACORN Scam),  http://www.collinsdevelopment.com/home-buying/mortgage-down-payment.php .

The “leveraging” in the US banking system remains unchanged. Certain US banks are still permitted to “leverage” up to 40%. http://www.startribune.com/business/41611927.html?elr=KArks:DCiU1OiP:DiiUiD3aPc:_Yyc:aUU  The “dangers” of leveraging, another lesson that went “unlearned” from the “Great Depression”.

The Government TALF Program even encourages the Hedge Funds and Banks to “leverage up” at taxpayer expense. http://www.businessinsider.com/how-banks-and-hedge-funds-will-scam-the-talf-2009-3  Do these Bank and Hedge Fund profits signal economic recovery or are they simply derived from looting “taxpayer” provided funds.

Beware the “false recovery”. Many things can be learned from the 1938 “bounce” in the DJIA. One of those things is that the “1938 Bounce” did not signal an economic recovery. That recovery was 4 long years away.

Signs of a pending economic recovery in 2009 are few and far between. Next to nothing has been done to prevent a repeat of the current crisis. The Government, Regulatory Agencies and Financial Institutions are busy cooking with the old recipe.  

Don’t delude yourself, when clear thinking is needed.

The ship may be sinking at a slower rate, but the ship is still sinking. The time to call the orchestra on deck and dance has not arrived. It is time to man the buckets and bail like crazy.

For a technical analysis of the Market Recovery in 1929 – 1930 and how Federal Reserve Interest Rate moves affected the Great Depresssion see:  http://www.ameinfo.com/16529.html

BEAR MARKET RALLY – Definition and Chart Examples: http://www.mysmp.com/stocks/bear-market-rally.html ; “After a move up of 20% to 35% off the bottom, the market begins to stall out”.

Beware The False Economic Recovery – 1938, The Rest Of The Story: Dow ends best 6 weeks since 1938

You may have seen the following headline and story:

Dow ends best 6 weeks since 1938 on econ hopes

Stocks rose on Friday, with the Dow scoring its biggest six-week gain since July 1938, helped by a reassuring report on the mood of consumers and stabilization in General Electric (GE.N) and Citigroup’s (C.N) quarterly results.

The Dow is up 22.7 percent over the past six weeks, making this the largest six-week gain since July 29, 1938.

http://www.nyse.tv/dow-jones-industrial-average-history-djia.htm

As famed commentator Paul Harvey would have said, “and now for the rest of the story”.

The year 1938 was a year during the “Great Depression”. 1938 did not signal the end of the “Great Depression”. The “Great Depression” lasted ” 4 more years” after 1938, not ending until 1942.

How did the “stock market” fare during the Great Depression? In 6 of the 11+ years of the Great Depression the “Stock Market” closed up despite the fact that unemployment continued to rise, home foreclosures hit all time highs and thousands of businesses and farms were lost.

Following the 1938 “bounce” in the DJIA, the “stock market” closed down for 4 straight years. The Market was down in 1938 – 1939, 1939 – 1940, 1940 – 1941 and 1941 – 1942. During that time period the DJIA lost nearly 25% of its value. In fact, the DJIA closed lower in 1942 than it did in 1937. http://www.nyse.tv/dow-jones-industrial-average-history-djia.htm

Economists note that these years of the “Great Depression”, 1939 -1942, followed the implementation of FDR’s “New Deal” and that the “New Deal” may have, in fact, caused this, the second half, of the Great Depression”. (New Deal or Raw Deal?: How FDR’s Economic Legacy Has Damaged America,  by Burton W., Jr. Folsom, http://www.amazon.com/New-Deal-Raw-Economic-Damaged/dp/1416592229 )

This writer is hoping an economic recovery is underway, however, that is not what the data suggests. As you can see, the DJIA, does not necessarily reflect the direction of  economic activity – the DJIA can register gains while the “economy” slips futher into a “Great Depression” or, in other words, Government bailout programs can make the politically connected extremely rich while the Country, as a whole, slips below water.

April 2009 unemployment continues to climb at 600,000 + per week. Unemployment, with the addition of the newly unemployed in April 2009,  is now above 9%, nearly one full percentage point above the Obama Administration’s “worse case estimate” for a “maximum unemployment figure” of 8.1% in 2009. Economists are now examining whether unemployment will top 11% before year end, 40% higher than the Administration’s forecast.  http://www.bls.gov/news.release/pdf/empsit.pdf  Between January of 2004 and January of 2008 unemployment in the US averaged 4.5%. 1/2 the current rate. Twice that number of people are currently unemployed and the fact that the unemployment number will continue to rise is undisputed. There are no (zero) projections that the US unemployment rate will return to a 4.5% rate prior to 2017, a full 8 years from now.  

Despite the moratorium on “Mortgage Foreclosures”, March 2009 foreclosures were 46% above March 2008 figures. Fannie & Freddie’s moratorium on foreclosures ended on March 31st 2009, so this increase occurred prior to the moratorium’s expiration. A huge backlog of foreclosures were placed on “hold” and will now move forward.  In many parts of the Country “housing surpluses” will take 4 to 7 years to be absorbed. Reaching a floor in the housing market is years off. Maybe 5 years off, if we pursue the correct policies and restore confidence in  American mortgage backed securities and the international investment community commits to investing in those “derivatives” once again.   http://www.mlive.com/business/index.ssf/2009/04/us_foreclosures_up_24_percent.html http://www.idahobusiness.net/archive.htm/2009/04/08/Foreclosures-up-again-in-March

New home starts are way down. New single family home starts for March 2009 are 45% lower than March 2008. http://redfishemergingmarkets.com/blog/2009/04/16/housing-starts-are-still-anemic-anybody-surprised-at-the-data/

March 2008 was a very bad year in it’s own right. Housing starts will need to increase 500% before reaching the levels seen in 2005. http://www.reedconstructiondata.com/news/2008/08/residential-construction-near-bottom-but-still-declining/

In March 2009 there was nearly 1 home foreclosure for every new home start. http://redfishemergingmarkets.com/blog/2009/04/16/housing-starts-are-still-anemic-anybody-surprised-at-the-data/

Auto sales remain down, despite dishonest claims to the contrary. March 2008 to March 2009 auto sales are down an additional 40%. http://money.cnn.com/2009/03/26/autos/jd_power_march_sales/index.htm . February 2008 to February 2009 auto sales were also down, almost 50%. http://www.thegreenmotorist.com/index.php/february-2009-auto-sales-down-yet-again/ . March 2008 auto sales figures were no reason for optimism. Even if sales figures should suddenly leap “up to” 2008 sales levels, one needs to recall that 2008 sales figures were dismal in there own right and were down 20% from 2007 sales levels. GM’s sales volumes in 2007 were 40% less than in 2006. Current auto sales levels will need to triple to catch back up with the “profitable” levels of 2006. After “special items” GM only lost $2 Billion in 2006. http://jalopnik.com/cars/breaking-gm-finally-releases-2006-financial-results-showing-profits-and-notsomuch-profits-244072.php

The current cause for “economic optimism”?  Two banks reported “profits” at the end of the first quarter. What do the bank’s financial numbers mean? Where did the profits come from? Who really knows?

Both “banks” received Billions in bailout funds that have not been repaid. Despite promises of “transparency” the Government’s Stress tests formulas are a secret and the “formula” applied changes from bank to bank. The “stress test” results are also being kept secret. Who passed? Who failed? Who knows? What transparency!

The recent “mark to market” accounting changes are a sham. There is no way for the public to know exactly what a banks exposure to toxic mortgages are, nor can the public determine how the bank is evaluting those assets or exposures. Isn’t this is exactly how we got into this mess in the first place, financial institutions overstating the value of their investments in Mortgage backed securities?

The recent accounting changes allow banks to evaluate the same piece of property differently, depending on how the bank chooses to classify the property. If a property or asset is to be put up for sale in the near future, the expected sale price is to be used. If the property is to be held for a longer period of time, the anticipated value at the time of sale can be used. How can the public discern whether a piece of property or asset currently valued at $1,000,000, doesn’t in fact have a “real” current value of $10,000. The bank, when it cannot sell the property for $1 Million, simply changes the “asset classification” to a long term hold rather than calling the property what it is, an overvalued piece of realestate with a $1 Million asking price and a current $10,000 value.

Is TALF responsible for the Bank’s stated profits, profits made at taxpayer expense? Who knows? http://www.businessinsider.com/how-banks-and-hedge-funds-will-scam-the-talf-2009-3 Are these profits a sign of economic improvement or a sign of the fleecing of America?

Had the Government allowed this sham, the change in accounting practices,  months ago, the Financial Institutions bailout would not have been necessary.

Nothing has changed in terms of the availability of “zero down” mortgages or the “Liar” or “Ninja” loans. The actions of Congress and the Boston Federal Reserve still stand, nothing has been repealed or revoked. Now those without a “down payment” can acquire their “down payment” through the use of a “second mortgage” where the “downpayment” is funded through a “second mortgage” or other “give away programs” intended to create the illusion that a purchaser has a “down payment”. http://www.mhdc.com/homes/down_payment_assistance/index.htm , http://www.ehow.com/how_4492950_through-zero-down-payment-loophole.html (An ACORN Scam),  http://www.collinsdevelopment.com/home-buying/mortgage-down-payment.php .

The “leveraging” in the US banking system remains unchanged. Certain US banks are still permitted to “leverage” up to 40%. http://www.startribune.com/business/41611927.html?elr=KArks:DCiU1OiP:DiiUiD3aPc:_Yyc:aUU  The “dangers” of leveraging, another lesson that went “unlearned” from the “Great Depression”.

The Government TALF Program even encourages the Hedge Funds and Banks to “leverage up” at taxpayer expense. http://www.businessinsider.com/how-banks-and-hedge-funds-will-scam-the-talf-2009-3  Do these Bank and Hedge Fund profits signal economic recovery or are they simply derived from looting “taxpayer” provided funds.

Beware the “false recovery”. Many things can be learned from the 1938 “bounce” in the DJIA. One of those things is that the “1938 Bounce” did not signal an economic recovery. That recovery was 4 long years away.

Signs of a pending economic recovery in 2009 are few and far between. Next to nothing has been done to prevent a repeat of the current crisis. The Government, Regulatory Agencies and Financial Institutions are busy cooking with the old recipe.  

Don’t delude yourself, when clear thinking is needed.

The ship may be sinking at a slower rate, but the ship is still sinking. The time to call the orchestra on deck and dance has not arrived. It is time to man the buckets and bail like crazy.

Has The Economic Recovery Started? Is The Worse Over? The Unvarnished Economic Data

This headline greeted me this morning:

World markets surge as US data boost recovery hope

http://news.yahoo.com/s/ap/20090402/ap_on_bi_ge/world_markets

US Data? What US data can they be talking about? GM, Chrysler and Ford posted huge additional losses. http://news.yahoo.com/s/ap/20090402/ap_on_bi_ge/world_markets

The article then went on to say some very surprising things: “Nearly every sector in Asia charged higher, with carmakers like Toyota Motor Corp. and Nissan Motor Co. rallying on U.S. auto figures that were less dismal than feared.” Really, rallying on US auto figures – just what were those figures? Less dismal? They seem very dismal to me – after all you didn’t expect car sales to be zero did you?

‘Investors were encouraged after U.S. car sales jumped by nearly 25 percent last month from February, beating the typical rise and underpinning hopes of a turnaround in the American auto market — critical for Asia’s giant auto companies.’ What? Auto sales “jumped” by 25% last month – I don’t believe it, do you? (I don’t believe it for good reason – I know the real numbers).

SEE: http://www.msnbc.msn.com/id/30024711

https://mcauleysworld.wordpress.com/2009/04/03/auto-bubble-bursts-march-09-auto-sales-down-40-tax-dollars-to-fund-high-risk-auto-loans/

“A rebound in pending U.S. home sales in February from a record low, as well as improving manufacturing activity, added to a growing belief the most severe global downturn in decades may be moving close to a bottom.’ What? Housing sales are up? Where? By whose count? Manufacturing activity is up? By what measure and whose numbers? I’ll provide the unvarnished numbers shortly …..

“Still, the upbeat evidence distracted investors from more sobering news the U.S. private sector continued to shed hundreds of thousands of jobs last month — a worrisome sign as investors brace for Friday’s report on nationwide job cuts.” Yes, those pesky unemployment numbers – preliminary projects announced yesterday were absolutely awful – specifics to follow.

You can imagine my surprise when 3/4 of the way through this same article the following sentence appears,

“With the economic crisis still far from over, analysts warned of more painful market volatility as the recession unfolds.”

Recession unfolds? Unfolds? One would think the recovery was underway based on the previous statements. This is beyond shoddy journalism, this is unethical reporting.  

My point is this, the data suggest we have not hit bottom, plain and simple. I’m looking forward to the “turn around” as much as the next person. I’m looking forward to it more than youmight guess. Unfortunately, that turnaround is expected to beging in 6 to 12 months and today’s data does not dignal an earlier start. Misrepresenting where we are at now can cost individuals a fortune with bad investment advise and can harm the recovery by setting false expectations that can only lead to disapointment. The truth is this; the economic elevator from hell that we are all riding, is still heading down. It’s descent may be slowing but there is no sign that it is about to stop.

I’m glad to see that stock prices are rebounding from their 12 year lows, but as unemployment continues to grow and as the prosepcts for profits and dividends remain bleak, there is more than a possibility that these gains will be surrendered and that the markets will test new all time lows. Spending, taxes and the possibility of runaway inflation remain serious concerns.

Remember this, the Stock Market is not the economy. During many of the years which made up the Great Depression (1929 – 1941) , the stock market “went up” while the economy deteriorated. In fact the DJIA went up in 6 of the 12 years of “The Great Depression”. http://www.nyse.tv/dow-jones-industrial-average-history-djia.htm 

Wildly incorrect headlines maybe spurring people to re-enter the markets prematurely. Without a return to broad based profitability and dividend payments increased stock prices may not hold. Beware a “Bear Market Bounce” and don’t confuse “trading activity” with “investment activity”. Good Luck and lets hope for the best.

Hope aside – here are the unvarnished numbers.

Auto Sales: 

US Auto sales are down, horrifically down. The report above so badly misrepresents the true state of auto sales in the US, I have to question the author’s ethics. The numbers simply don’t support, in anyway, the statement made above. The statement above can actually be harmful. If one were to believe auto sales were on there way back, one might fight necessary change to correct “broken business models”. What do the numbers show?

Sales of new cars and trucks are down 36.8% in March 2009 compared to March 2008.

The Boston Globe reported this yesterday: “Automakers began 2008 expecting the worst year for U.S. auto sales in a decade. So far, they’re getting what they anticipated. Sales dropped by double digits in March, even for usual stalwarts like Toyota. And with fragile consumer confidence, falling home values, tightening credit and high energy prices, it may be some time before auto sales recover. http://www.boston.com/business/articles/2008/04/01/us_auto_sales_fall_in_march/

Current sales figures indicate 1,000,000 fewer cars will be sold in the US in 2009 than last year and last year was one of the worst years in memory.  http://www.boston.com/business/articles/2008/04/01/us_auto_sales_fall_in_march/ Continued sales reductions mean continued cutbacks, not growth , new jobs or new auto plants. 

Remember 1 year ago, March 2008, GM sales figures were down 19% compared to March 2007, Ford’s sales were down 14% over March 2007. http://articles.latimes.com/2008/apr/02/business/fi-carsales2  Chryslers sales were down  21.2% in March 2008 from March 2007. http://www.autoobserver.com/2008/03/march-car-sales-down-j-d-power-report-says.html .

Having a year in which year to prior year sales drop 40%, after a nearly 20% drop in the prior year, is horrific. There has been zero increase in auto sales – not a 25% increase – net auto sales are down 40%.  

The March 2009 sales drop is twice as large as the sales drop in 2008. You may be asking, what did they base these incredible claims of increased car sales on – it is this – car sales increased from February to March. The fact is Car sales always increase from February to March. Car sales last year, one of the worst years for car sales in memory, still reflected an increased number of cars sold between February and March. The important or meaningful comparison is March 2008 to March 2009 sales numbers. By that measurement sales are down by almost 40%. As to car sales, the economic elevator has not even begun to slow, it is still acelerating. To misrepresent this number does a disservice to everyone.  To claim that the data presents a picture of a recovering car market is false. Year to year sales are down 40%. In 2008 when sales were down 1/2 that amount the press described the drop as “falling of a cliff”. Now that the sales drop is twice that large, it is being reported as signs of a turnaround. GM’s sale decrease between January 2008 and Jaunuary 2009 was 49%. http://www.thetorquereport.com/2009/02/gm_sales_plunge_49_percent_for.html GM’s auto sales in February 2009 were down 53.1% from February 2008. http://www.mlive.com/business/index.ssf/2009/03/auto_sales_continued_slide_gm.html  These numbers are simply horrible. To suggest this paints a picture of a “recovery” or “turnaround” is dishonest.

Home Sales:

First, some related news, “Modified Mortgage Refinances Continue to Re-default”, “US bank regulators continue to report escalating re-default rates on mortgage loan modifications. Data being assembled by bank regulators is showing a steady trend of rising month-over-month loan work-outs falling back into delinquency within six months.” “One very troubling point is that, whether measured using 30-day or 60-day delinquencies, re-default rates increased each month and showed no signs of leveling off after six months or even eight months,” John Dugan, head of the Office of the Comptroller of the Currency, said in a statement. Defaults rose consistently across all loan types, but subprime loans understandably had the highest re-default average.” http://www.mortgageloan.com/modified-mortgage-refinances-continue-to-redefault-2743

Mortgage refinancing is up, but refinancing does not indicate an increase in home sales. Real estate investment purchasing is down 18.1% from a year prior. http://news.nationalrelocation.com/2008/03/

Last year (March 2008) existing home sales fell 19.1%. The median home price was $200,700, down 7.7% from March 2007. http://www.realtor.org/press_room/news_releases/2008/04/existing_home_sales_slip_in_march  March 2009 home sales have declined 8.6% from last year. http://www.realestateabc.com/outlook.htm The median price of a home today is $170,3000. So despite a drop in price (Value) of the medican home by $30,000,(17%) sales continue to decline year to year. The percentage decrease is smaller this year, but I’m not sure that is a signal that the elevator is slowing. As mortgage defaults or forelcosures continue and as unemployment numbers continue to worsen, I don’t know that a housing recovery can be predicted. What doesn’t need to be predicted, it can be stated, Home Sales did not incease as reported, they decreased again, from March 2008 to March 2009. The decrease was by 8.6%. Home sales were said to be at “crisis” levels in March 2008 and we have a further reduction so far this year. While there is no need to panic, these numbers so no signs of a pending recovery. Claiming that home sales increased is  a simple lie. The are down by 8.6%.

New home sales posted 331,000 seasonally adjusted annualized units in December. New home sales were off 13.9% from November’s pace and 44.8% below the pace in December 2007. http://www.garealtor.com/ConsumerInformation/LeadingEconomicIndicators/tabid/394/Default.aspx

Meanwhile US banks experienced a 149% increase in bad loans in 2008. http://news.yahoo.com/s/ap/20090402/ap_on_bi_ge/world_markets

“banks face many risks in the coming months due to souring loans and investments which will impair capital through large credit writedowns. The central tenet of this site is that writedowns = reduced capital = reduced credit = reduced growth prospects.” “Loan losses for U.S. commercial banks are expected to rise to 3 percent by the end of 2010, from 1.5 percent in the third quarter of 2008, hurt by an increased percentage of bad loans, greater consumer leverage and faster problem recognition by banks”, ” Loan losses might even surpass the 3.4 percent loss levels reached in 1934 during the Great Depression as the industry has taken on increased structural risk in addition to mortgages that should become more apparent during the cyclical slowdown” http://www.creditwritedowns.com/2009/01/deutsche-bank-loan-losses-will-double-in-2009.html

Unemployment

In it’s Budget Plan the Obama Administration predicted that the recession would bottom out some time before year end 2009 or in a worse case scenario, in early in 2010. Unemployment levels were predicted to bottom out at 8.1%. This prediction was made 3 weeks ago, in early March 2009.  http://seekingalpha.com/article/124458-obama-s-unemployment-forecast-much-too-rosy . Those predictions have already proved to be overly optimistic as the February unemployment numbers (released in March) indicated that the unemployment rate had, in fact, already hit 8.1%. http://www.bls.gov/news.release/empsit.nr0.htm  An additional 651,000 jobs were lost in February 2009. Unemployment increased 1/2 a percentage point in February. Unemployment last year (February 2008) was 4.8%. Unemployment increased 60% in the 12 months between February 2008 & February 2009 . http://www.bls.gov/news.release/laus.nr0.htm

Preliminary unemployment numbers for March continue to be bleak. “There is no sign of even a temporary easing in the downward pressure on employment,”Ian Shepherdson, chief U.S. economist at High Frequency Economics, wrote in a client note. http://www.nydailynews.com/money/2009/03/19/2009-03-19_new_jobless_claims_fall_more_than_expect-2.html

Initial claims have topped 600,000 for seven straight weeks, a level that many economists say is consistent with another huge drop in net payrolls when the Labor Department issues its monthly employment report next month. Net job losses could top 700,000 in March, Shepherdson said, which would bring total losses to above 5 million jobs since the recession began in December 2007. http://www.nydailynews.com/money/2009/03/19/2009-03-19_new_jobless_claims_fall_more_than_expect-2.html

Unemployment for March 2009 may hit 9%. The unemployment rate in March 2008 was 5.1%. Unemployment this March is almost twice as high. http://www.bls.gov/opub/ted/2008/apr/wk1/art01.htm 

Economic Output

“Reports from the twelve Federal Reserve Districts suggest that national economic conditions deteriorated further during the reporting period of January through late February.  Ten of the twelve reports indicated weaker conditions or declines in economic activity; the exceptions were Philadelphia and Chicago, which reported that their regional economies “remained weak.”  The deterioration was broad based, with only a few sectors such as basic food production and pharmaceuticals appearing to be exceptions.  Looking ahead, contacts from various Districts rate the prospects for near-term improvement in economic conditions as poor, with a significant pickup not expected before late 2009 or early 2010. http://www.federalreserve.gov/fomc/beigebook/2009/20090304/FullReport.htm

“US economic output slumps.” “The United States economy shrank at a rate of 3.8 per cent in the fourth financial quarter of 2008, formally plunging the country into recession, the US government has said. The figure marked a sharp drop compared to the third financial quarter, in which the growth rate fell by only 0.5 per cent, the commerce department said on Friday.” http://english.aljazeera.net/news/americas/2009/01/20091301517711306.html , http://www.cbo.gov/ftpdocs/99xx/doc9957/01-07-Outlook.pdf

World growth is projected to fall to ½ percent in 2009, its lowest rate since World War II. Despite wide-ranging policy actions, financial strains remain acute, pulling down the real economy. http://www.imf.org/external/pubs/ft/weo/2009/update/01/index.htm

Economic Report: Industrial Production: US industrial production, output at the nation’s factories, mines, and utilities, decreased a hefty 1.8% in the month of January, after falling a downwardly-revised 2.4% in December, according to the Federal Reserve. After declines in five of the last six months, production has decreased 10% in the past year, an astonishing number. The report was significantly below estimations, as economists were expecting a 1.5% decrease in output. Capacity utilization, a key gauge of inflationary pressures, fell to 72% from 73.6%. This is the lowest level since February 1983, and 9 percentage points below its average level from 1972 to 2007. Lower capacity usually leads to slower inflation, as producers compete with each other for work. http://alhambrainvestments.com/blog/2009/02/18/economic-report-industrial-production-3/

Global Business Cycle Indicators: Leading Economic Indicators declined in February. The weaknesses among the leading indicators have remained widespread in recent months. http://www.conference-board.org/economics/bci/pressRelease_output.cfm?cid=1

National Economic Update: “Recently released data indicate that the economic contraction has intensified at a pace associated with severe recessions. Two consecutive quarters of negative real growth, striking job losses and deep declines in both manufacturing and services output defined year-end 2008. While the economic outlook remains bleak for the first half of 2009, a few indicators suggest that the pace of contraction may slow in coming months.” http://dallasfed.org/research/update-us/2009/0901.cfm The rate of contraction “maybe” slowing in the months ahead – not that the descent on the economic elevator to hell is slowing at this time. 

Durable Good Orders Drop: Durable good orders also painted a grim outlook. “Demand for U.S.-made durable goods fell for the sixth straight month in January.  Orders for durable goods  such as PC’s,  planes,  and washing machines fell 5.2% in January. Orders fell in every major sector”. http://www.chartingstocks.net/2009/02/jobless-claims-jump-durable-good-orders-drop/ After a small uptick  in February early indications for March are not good. For both the Philly and New York Fed manufacturing reports, the new orders index fell in both February and March. Both surveys have data for a given reference month that overlaps two actual months (the March report includes data from both late February and early March). http://gain.econoday.com/byshoweventfull.asp?fid=437975&cust=gain

The datum does not suggest the recovery has started, but the descent into hell maybe slowing. We are still descending, but not as quickly. Lets hope the policies being implement are the correct ones and we don’t suddenly accelerate into oblivion. I, for one, doubt that we can spend our way out of recession or borrow our way out of debt.

Is The Worst Over? Economic Recovery? The Unvarnished Numbers Tell The Story.

This headline greeted me this morning:

World markets surge as US data boost recovery hope

http://news.yahoo.com/s/ap/20090402/ap_on_bi_ge/world_markets

US Data? What US data can they be talking about? GM, Chrysler and Ford posted huge additional losses. http://news.yahoo.com/s/ap/20090402/ap_on_bi_ge/world_markets

The article then went on to say some very surprising things: “Nearly every sector in Asia charged higher, with carmakers like Toyota Motor Corp. and Nissan Motor Co. rallying on U.S. auto figures that were less dismal than feared.” Really, rallying on US auto figures – just what were those figures?

‘Investors were encouraged after U.S. car sales jumped by nearly 25 percent last month from February, beating the typical rise and underpinning hopes of a turnaround in the American auto market — critical for Asia’s giant auto companies.’ What? Auto sales “jumped” by 25% last month – I don’t believe it, do you? (I don’t believe it for good reason – I know the real numbers).

See: http://www.msnbc.msn.com/id/30024711 https://mcauleysworld.wordpress.com/2009/04/03/auto-bubble-bursts-march-09-auto-sales-down-40-tax-dollars-to-fund-high-risk-auto-loans/

“A rebound in pending U.S. home sales in February from a record low, as well as improving manufacturing activity, added to a growing belief the most severe global downturn in decades may be moving close to a bottom.’ What? Housing sales are up? Where? By whose count? Manufacturing activity is up? By what measure and whose numbers. I’ll provide the unvarnished numbers shortly …..

“Still, the upbeat evidence distracted investors from more sobering news the U.S. private sector continued to shed hundreds of thousands of jobs last month — a worrisome sign as investors brace for Friday’s report on nationwide job cuts.” Yes, those pesky unemployment numbers – preliminary projections announced yesterday were absolutely awful – the specifics to follow.

You can imagine my surprise when 3/4 of the way through this same article the following sentence appears,

“With the economic crisis still far from over, analysts warned of more painful market volatility as the recession unfolds.”

Recession unfolds? Unfolds? One would think the recovery was underway based on the previous statements. This is beyond shoddy journalism, this is unethical reporting.  

My point is this, the data suggest we have not hit bottom, plain and simple. I’m looking forward to the turn around as much as the next person. That turnaround is expected to beging in 6 to 12 months. Misrepresenting where we are at now can cost individuals a fortune with bad investment advice and can harm the recovery by setting false expectations that can only lead to disapointment. The truth is this; the economic elevator from hell, that we are all riding, is still heading down. It’s descent may be slowing but there is no sign that it is about to stop.

I’m glad to see that stock prices are rebounding from their 12 year lows, but as unemployment continues to grow and as the prosepcts for profits and dividends remain bleak, there is more than a possibility that these gains will be surrendered and that the markets will test new all time lows. Spending, taxes and the possibility of runaway inflation remain serious concerns.

Wildly incorrect headlines maybe spurring people to re-enter the markets prematurely. Without a return to broad based profitability and dividend payments increased stock prices may not hold. Beware a “Bear Market Bounce” and don’t confuse “trading activity” with “investment activity”. Good Luck and lets hope for the best.

Hope aside – here are the unvarnished numbers.

Auto Sales: 

US Auto sales are down, horrifically down. The report above so badly misrepresents the true state of auto sales in the US, I have to question the author’s ethics. The numbers simply don’t support, in anyway, the statement made above. The statement above can actually be harmful. If one were to believe auto sales were on there way back, one might fight necessary change to “broken business models”. What do the numbers show?

Sales of new cars and trucks are down 36.8% in March 2009 compared to March 2008.

The Boston Globe reported this yesterday: “Automakers began 2008 expecting the worst year for U.S. auto sales in a decade. So far, they’re getting what they anticipated.Sales dropped by double digits in March, even for usual stalwarts like Toyota. And with fragile consumer confidence, falling home values, tightening credit and high energy prices, it may be some time before auto sales recover. http://www.boston.com/business/articles/2008/04/01/us_auto_sales_fall_in_march/

Current sales figures indicate 1,000,000 fewer cars will be sold in the US in 2009 than last year and last year was one of the worst years in memory.  http://www.boston.com/business/articles/2008/04/01/us_auto_sales_fall_in_march/ Continued sales reductions mean continued cutbacks, not growth , new jobs or new auto plants. 

Remember 1 year ago, March 2008, GM sales figures were down 19% compared to March 2007, Ford’s sales were down 14% over March 2007. http://articles.latimes.com/2008/apr/02/business/fi-carsales2  Chryslers sales were down  21.2% in March 2008 from March 2007. http://www.autoobserver.com/2008/03/march-car-sales-down-j-d-power-report-says.html .

Having a year in which year to prior year sales drop 40%, after a nearly 20% drop in the prior year, is horrific.

The March 2009 sales drop is twice as large as the sales drop in 2008. You may be asking, what data did they base these incredible claims of increased car sales on – it is this – car sales increased from February 2008  to March 2008. The fact is Car sales always increase from February to March. Car sales last year, one of the worst years for car sales in memory, still reflected an increased number of sales between February and March. The important or meaningful comparison – March 2008 to March 2009 sales numbers. By that measurement sales are down by almost 40%. As to car sales, the economic elevator has not even begun to slow, it is still acelerating. To misrepresent this number does a disservice to everyone.  To claim that the data presents a picture of a recovering car market is false. Year to year sales are down 40%. In 2008 when sales were down 1/2 that amount(20%)  the press described the drop as “falling of a cliff”. Now that the sales drop is twice that large, it is being reported as signs of a turnaround. GM’s sale decrease between January 2008 and Jaunuary 2009 was 49%. http://www.thetorquereport.com/2009/02/gm_sales_plunge_49_percent_for.html GM’s auto sales in February 2009 were down 53.1% from February 2008. http://www.mlive.com/business/index.ssf/2009/03/auto_sales_continued_slide_gm.html   

 Home Sales:

First, some related news, “Modified Mortgage Refinances Continue to Re-default”, “US bank regulators continue to report escalating re-default rates on mortgage loan modifications. Data being assembled by bank regulators is showing a steady trend of rising month-over-month loan work-outs falling back into delinquency within six months.” “One very troubling point is that, whether measured using 30-day or 60-day delinquencies, re-default rates increased each month and showed no signs of leveling off after six months or even eight months,” John Dugan, head of the Office of the Comptroller of the Currency, said in a statement. Defaults rose consistently across all loan types, but subprime loans understandably had the highest re-default average.” http://www.mortgageloan.com/modified-mortgage-refinances-continue-to-redefault-2743

Mortgage refinancing is up, but refinancing does not indicate an increase in home sales. Real estate investment purchasing is down 18.1% from a year prior. http://news.nationalrelocation.com/2008/03/

Last year (March 2008) existing home sales fell 19.1%. The median home price was $200,700, down 7.7% from March 2007. http://www.realtor.org/press_room/news_releases/2008/04/existing_home_sales_slip_in_march  March 2009 home sales have declined 8.6% from last year. http://www.realestateabc.com/outlook.htm The median price of a home today is $170,3000. So despite a drop in price (Value) of the medican home by $30,000,(17%) sales continue to decline year to year. The percentage decrease is smaller this year, but I’m not sure that is a signal that the elevator is slowing. As mortgage defaults or forelcosures continue and as unemployment numbers continue to worsen, I don’t know that a housing recovery can be predicted. What doesn’t need to be predicted, it can be stated, Home Sales did not incease, they decreased again, from March 2008 to March 2009. The decrease was by 8.6%. Home sales were said to be at “crisis” levels in March 2008 and we have a further reduction so far this year. While there is no need to panic, these numbers so no signs of a pending recovery.

New home sales posted 331,000 seasonally adjusted annualized units in December. New home sales were off 13.9% from November’s pace and 44.8% below the pace in December 2007. http://www.garealtor.com/ConsumerInformation/LeadingEconomicIndicators/tabid/394/Default.aspx

Meanwhile US banks experienced a 149% increase in bad loans in 2008. http://news.yahoo.com/s/ap/20090402/ap_on_bi_ge/world_markets

“banks face many risks in the coming months due to souring loans and investments which will impair capital through large credit writedowns. The central tenet of this site is that writedowns = reduced capital = reduced credit = reduced growth prospects.” “Loan losses for U.S. commercial banks are expected to rise to 3 percent by the end of 2010, from 1.5 percent in the third quarter of 2008, hurt by an increased percentage of bad loans, greater consumer leverage and faster problem recognition by banks”, ” Loan losses might even surpass the 3.4 percent loss levels reached in 1934 during the Great Depression as the industry has taken on increased structural risk in addition to mortgages that should become more apparent during the cyclical slowdown” http://www.creditwritedowns.com/2009/01/deutsche-bank-loan-losses-will-double-in-2009.html

Unemployment

In it’s Budget Plan the Obama Administration predicted that the recssion would bottom out some time before year end 2009 or early in 2010. Unemployment levels were predicted to bottom out at 8.1%. This prediction was made 3 weeks ago, in early March 2009.  http://seekingalpha.com/article/124458-obama-s-unemployment-forecast-much-too-rosy . Those predictions have already proved to be overly optimistic as the February unemployment numbers (released in March) indicated that the unemployment rate had, in fact, already hit 8.1%. http://www.bls.gov/news.release/empsit.nr0.htm  An additional 651,000 jobs were lost in February 2009. Unemployment increased 1/2 a percentage point in February. Unemployment last year (February 2008) was 4.8%. Unemployment increased 60% in the 12 months between February 2008 & February 2009 . http://www.bls.gov/news.release/laus.nr0.htm

Preliminary unemployment numbers for March continue to be bleak. “There is no sign of even a temporary easing in the downward pressure on employment,”Ian Shepherdson, chief U.S. economist at High Frequency Economics, wrote in a client note. http://www.nydailynews.com/money/2009/03/19/2009-03-19_new_jobless_claims_fall_more_than_expect-2.html

Initial claims have topped 600,000 for seven straight weeks, a level that many economists say is consistent with another huge drop in net payrolls when the Labor Department issues its monthly employment report next month. Net job losses could top 700,000 in March, Shepherdson said, which would bring total losses to above 5 million jobs since the recession began in December 2007. http://www.nydailynews.com/money/2009/03/19/2009-03-19_new_jobless_claims_fall_more_than_expect-2.html
Unemployment for March 2009 may hit 9%. The unemployment rate in March 2008 was 5.1%. http://www.bls.gov/opub/ted/2008/apr/wk1/art01.htm
The unemployemnt rate has risen from 7.6% in January 2009 http://www.bls.gov/opub/ted/2009/feb/wk2/art02.htm to  what might be 9% at the end of March 2009, an increase of 1.4% in 90 days. The unemployment rate increased 2.7% (from 4.9% January to 7.6% in December) in all of 2008.

Unfortunately, the unemployment numbers show no signs of imporvement or that a recovery is at hand.“Reports from the twelve Federal Reserve Districts suggest that national economic conditions deteriorated further during the reporting period of January through late February.  Ten of the twelve reports indicated weaker conditions or declines in economic activity; the exceptions were Philadelphia and Chicago, which reported that their regional economies “remained weak.”  The deterioration was broad based, with only a few sectors such as basic food production and pharmaceuticals appearing to be exceptions.  Looking ahead, contacts from various Districts rate the prospects for near-term improvement in economic conditions as poor, with a significant pickup not expected before late 2009 or early 2010. http://www.federalreserve.gov/fomc/beigebook/2009/20090304/FullReport.htm

Economic Activity 

 

 

Economic Output

“US economic output slumps.” “The United States economy shrank at a rate of 3.8 per cent in the fourth financial quarter of 2008, formally plunging the country into recession, the US government has said. The figure marked a sharp drop compared to the third financial quarter, in which the growth rate fell by only 0.5 per cent, the commerce department said on Friday.” http://english.aljazeera.net/news/americas/2009/01/20091301517711306.html , http://www.cbo.gov/ftpdocs/99xx/doc9957/01-07-Outlook.pdf

World growth is projected to fall to ½ percent in 2009, its lowest rate since World War II. Despite wide-ranging policy actions, financial strains remain acute, pulling down the real economy. http://www.imf.org/external/pubs/ft/weo/2009/update/01/index.htm

Economic Report: Industrial Production: US industrial production, output at the nation’s factories, mines, and utilities, decreased a hefty 1.8% in the month of January, after falling a downwardly-revised 2.4% in December, according to the Federal Reserve. After declines in five of the last six months, production has decreased 10% in the past year, an astonishing number. The report was significantly below estimations, as economists were expecting a 1.5% decrease in output. Capacity utilization, a key gauge of inflationary pressures, fell to 72% from 73.6%. This is the lowest level since February 1983, and 9 percentage points below its average level from 1972 to 2007. Lower capacity usually leads to slower inflation, as producers compete with each other for work. http://alhambrainvestments.com/blog/2009/02/18/economic-report-industrial-production-3/

Global Business Cycle Indicators: Leading Economic Indicators declined in February. The weaknesses among the leading indicators have remained widespread in recent months. http://www.conference-board.org/economics/bci/pressRelease_output.cfm?cid=1

National Economic Update: “Recently released data indicate that the economic contraction has intensified at a pace associated with severe recessions. Two consecutive quarters of negative real growth, striking job losses and deep declines in both manufacturing and services output defined year-end 2008. While the economic outlook remains bleak for the first half of 2009, a few indicators suggest that the pace of contraction may slow in coming months.” http://dallasfed.org/research/update-us/2009/0901.cfm The rate of contraction “maybe” slowing in the months ahead – not that the descent on the economic elevator to hell is slowing at this time. 

Durable Good Orders Drop: Durable good orders also painted a grim outlook. “Demand for U.S.-made durable goods fell for the sixth straight month in January.  Orders for durable goods  such as PC’s,  planes,  and washing machines fell 5.2% in January. Orders fell in every major sector”. http://www.chartingstocks.net/2009/02/jobless-claims-jump-durable-good-orders-drop/ Early indications for March are not good. For both the Philly and New York Fed manufacturing reports, the new orders index fell in both February and March. Both surveys have data for a given reference month that overlaps two actual months (the March report includes data from both late February and early March). http://gain.econoday.com/byshoweventfull.asp?fid=437975&cust=gain

The datum does not suggest the recovery has started, but the descent into hell maybe slowing. We are still descending, but not as quickly. Lets hope the policies being implement are the correct ones and we don’t suddenly accelerate into oblivion. I, for one, doubt that we can spend our way out of recession or borrow our way out of debt.

Remember this, the Stock Market is not the “economy”. The Stock market can rise without any underlying economic improvement. During many of the years of the Great Depression (1929 – 1941) the Stock Market rose while Economic conditions deteriorated. In fact the DJIA increased in 6 of the 12 years of the Great Depression. http://www.nyse.tv/dow-jones-industrial-average-history-djia.htm

DOW 5000 – S & P to 500 – Will Dow Hit 5000 Before Easter

THE WALL STREET JOURNAL  

03/09/09

Dow 5000?

Just how low can stocks go?

Despite Friday’s small gain, the Dow Jones Industrial Average marked its fourth consecutive week of losses as it tumbled through the 7000-point mark and spiraled to new 12-year lows. The Standard & Poor’s 500-stock index is trading below 700 for the first time since 1996.

As earnings estimates are ratcheted down and hopes for a quick economic fix fade, the once-inconceivable notion of returning to Dow 5000 or S&P 500 at 500 looks a little less far-fetched.

A decline to 500 on the S&P is 183.38 points and 27% away. The index already has …

 http://online.wsj.com/article/SB123654810850564723.html

Futures Signal More Stock Losses

By STEVE GOLDSTEIN

Futures activity suggested that stocks would slide at the open on Monday after four straight weeks of losses that have pushed major market indexes to 12-year lows.

About 15 minutes before the start of trading in New York, futures on the Dow Jones Industrial Average were lower by about 132 points. S&P 50 futures were down by more than 13 points; Nasdaq futures were down more than 15 points. Changes in futures don’t always accurately predict early market moves after the opening bell.

The pressure on U.S. futures came amid another cascade of selling in markets overseas. In Asia, Japan’s Nikkei 225 dropped 1.2% to a 26-year low after data showed that the highly export-dependent nation ran a current-account deficit in January, its first in 13 years. Banking stocks also fell, with Shinsei Bank sliding by nearly 9%. The Nikkei is at less than a fifth of its all-time high of 38915.87. Stocks in China and Hong Kong also fell. The Shanghai Composite slid 3.6%.

Markets in Europe were also weaker. The FTSE 100 was down 1.5% after the British government’s confirmation that it was taking a majority stake in Lloyds Banking Group in exchange for its insuring potentially more than $367 billion of shaky assets. U.S. shares of Lloyds were down more than 9%. The shares of HSBC Holdings, another troubled British bank, were down 11%.

Observers continued to express concern about the global economic outlook. Warren Buffett said in an interview on CNBC television that the economy has “fallen off a cliff.” The World Bank said the global economy is likely to shrink for the first time since World War II. Global industrial production by mid-2009 could be as much as 15% lower than 2008 levels, it said.

http://online.wsj.com/article/SB123659458995869643.html

Bank woes to hit Wall Street

“What’s dragging global markets across the board, it’s financials. We’re concerned about HSBC, Lloyds is getting hit, and AIG came out and warned its failure will cripple world banks,” said Art Hogan, chief market analyst at Jefferies & Co in Boston. “If you look at everything that’s been done so far, there’s been a lack of detail.”

S&P 500 futures fell 10.30 points and were below fair value, a formula to evaluate pricing taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures slid 121 points, and Nasdaq 100 futures shed 14.50 points.

In an interview on CNBC television, billionaire investor Warren Buffett said the current environment was an “economic Pearl Harbor”

http://news.yahoo.com/s/nm/20090309/bs_nm/us_markets_stocks_3

World stocks spiral lower on fresh financial woes

LONDON (AFP) – World stock markets fell sharply Monday as banking and economic woes returned to haunt investors, with Tokyo tumbling to a fresh 26-year low and London striking six-year depths.

European equities plunged, with London reeling after the British government took a majority stake in Lloyds Banking Group (LBG) over the weekend in a deal to insure its toxic assets.

The British capital’s FTSE 100 leading shares index slumped to 3,487.13 points in early deals, marking the lowest point since March 14, 2003. It later recovered slightly to 3,492.97 points, down 1.07 percent from Friday.

Elsewhere, Frankfurt’s DAX shed 1.35 percent in value and in Paris the CAC 40 was down 1.77 percent.

Most Asian markets sank after news of Japan‘s first current account deficit in more than a decade. Tokyo’s Nikkei-225 index shed 1.21 percent to end at 7,086.03, the lowest close since October 6, 1982.

Hong Kong stocks dived 4.8 percent as shares in banking giant HSBC dropped dramatically, with investors spooked by the group’s US exposure and plans to raise fresh capital, dealers said.

“The FTSE 100 fell … as the banking sector continued to weigh,” said Joshua Raymond, market strategist at spread-betting firm City Index.

“We saw HSBC fall in Asia … and concerns regarding their exposure to US toxic debts are likely to weigh for some time.”

http://news.yahoo.com/s/afp/20090309/ts_afp/financeeconomyworld_20090309131003

McAuleys World – Stop treating the symptoms and treat the problems.

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