Why Markets Go Down Irrespective Of Economists

December 12, 2011

Kitco

By Roger Wiegand

Global debts among the USA, Europe, and Asia have grown too large to manage and/or pay-off. The only choice remaining is to delay and repudiate debts, and print more currencies and bonds moving toward massive defaults.

In the USA, trillions in older, toxic derivative paper has not been dealt with in the aftermath of TARP I. Global banks that were buried under this mess are running two sets of books and banking authorities know it.

Those banks were not stopped after the first credit implosion and have gone back for more of the same, making new derivatives problems even worse. The stealing continues at levels twice what we saw in pre- 2007.

The elitists, primary large central bank operators, deliberately fomented these failures to crush their enemies and the USA society at large to install a one-world government and a one world currency. It won’t work for two reasons: (1) the internet is too free and open for the exchange of information (2) the soon-to-be-wrecked bond markets will destroy any remaining credit and value held by the perpetrator banks. (3) if force is used against consumers, and maybe even if its not, milions of armed Americans with about 500MM guns are ready to revolt.

We suspect the violent road, if indeed it ever happens, would be brief as the world and America turn to new paradigms in economics. It’s like a big war; but what happens if no one shows up to fight? In economics, what if the formerly, participating Sheeple refuse to participate rejecting and dropping-out of the system as we know it? The herd can be forced in some respects, but that force will only create violent backlash and further ruin the elitists’ plans.

The Super Committee was a child-like fantasy idealized by dumb politicians to fool the herd. We knew nothing would come of it and we know the mandatory cuts they’ve talked of never happen either. Do not expect any good decisions, or relief from any politician. They are determined to ruin America and plunder what they can personally, and corporately for backers-bankers before they’re voted out of office. That goes for both parties. Their objective is one currency and one government for all.

Inflation in 2012 will rise ever faster. Taxes will go up on the expiration of the Bush tax cuts. Over-taxed citizens will go to private trading and off-the-books black markets. Tax collections will fall dramatically since incomes do, too.

The USA Defense Department will be forced to undergo severe cuts and current Middle Eastern wars will cease, or slow temporarily until a newer, much larger World War III, begins in the aftermath of crashing economies.

Click here for the full report.

Economists Say the Threat of Recession is Rising

August 16th, 2011

The Raw Story

By: Agence France-Presse

The threat of a new recession is rising in the United States, economists say, as they slash their growth forecasts for the second half of the year.

Slowing global expansion, the plunge in US stock markets after Standard & Poor’s cut the country’s credit rating, and political pressure on the government to cut spending rather than stimulate growth are all putting the brakes on the world’s largest economy, they say.

Mostly negative data — though with a few bright spots — has reinforced feelings that the recovery from the 2008-2009 recession is in trouble.

And the Federal Reserve’s own warning last week of increased “downside risks” to growth in the second half has added to the gloomy picture.

Mark Zandi, the top economist for Moody’s Analytics, said Monday they had cut their growth outlook for the second half to 2.0 percent, from a 3.5 percent forecast just last month.

“The near-term economic outlook is significantly weaker than it was just a month ago,” he said in a new report.

“The odds of a renewed recession over the next 12 months are one in three, and rising with each 100-point drop in the Dow.”

Goldman Sachs said the economy appeared to be moving at less than “stall speed” after, at best, a mere 0.8 percent growth in the first half.

“With growth clearly below trend, the unemployment rate has crept up slightly, suggesting the possibility of a self-reinforcing deterioration in the economy,” Goldman said — also predicting a 33 percent chance for a recession.

A raft of poor economics statistics — on second quarter growth, layoffs and job creation, industrial production, consumer spending, and consumer and business sentiment — underpin the lower projections.

On Friday, a University of Michigan survey showed consumer sentiment at its lowest level since May 1980.

And on Monday, the Fed’s New York manufacturing survey for August also took a sharp downward turn.

The Fed gave no sense of optimism last week when it announced it would keep interest rates at ultra-low levels for two more years because of the weak economy.

After a one-day meeting, the US central bank’s policy board forecast growth at a “somewhat slower pace” over the coming quarters than it had estimated in June.

“Downside risks to the economic outlook have increased,” it added.

Also darkening the picture is the context, points out Goldman: the ongoing debt troubles in Europe, that are beginning to affect US financial institutions, and the expectation that Republicans will force more fiscal tightening domestically in the wake of the August 2 debt ceiling deal.

One key will be whether the government can push through any short-term stimulus measures, such as extending unemployment benefits or the payroll tax cut about to expire at year-end.

But S&P’s downgrade “has if anything increased the likelihood of fiscal restraint,” Goldman said.

The Fed hinted it was reviewing its tools to support growth, but nothing concrete has emerged and economists are skeptical it could add much of a short-term charge.

Aside from Europe, two other variables are important — first, the direction of unemployment, which if it worsens will slow consumer spending; and secondly, the markets.

Zandi says that if stock markets continue to fall, it will drag down wealth, confidence and spending.

“Since equity prices peaked in late April, well over $3 trillion in wealth has evaporated. Since every $1 decline in stock wealth is estimated to reduce consumer spending by three cents, the loss to date means spending will take a $100 billion hit over the coming year,” he said.

Not all are as pessimistic. Jeffrey Rosen at Briefing.com has grabbed onto positive retail sales data for July released last week as a rosier sign for the rest of the year.

With falling prices for fuel and food commodities, he said, inflation will ease and consumer spending will get a boost in coming months, Rosen predicted.

Briefing, an economics consultancy, boosted its forecast for the third quarter to 2.2 percent from 2.0 percent.

But Rosen warned that the US will find it hard to get growth back to more than 2.4 percent until consumers cut more of their debt — a process which he said could take another decade or more.

Click here for the full report from The Raw Story

Dow Plunges 500 Points

August 5th, 2011

DailyFinance

By: AP

Fears about the global economy led to the biggest panic in financial markets since the 2008 financial crisis. The Dow plunged nearly 513 points Thursday, its biggest point decline since Oct. 22, 2008. Only three of the 500 stocks in the Standard & Poor’s 500 index had gains. Oil fell by 6 percent. The yield on the two-year Treasury note hit a record low as investors sought out relatively stable investments.

All three major stock indexes are down 10 percent or more from their previous highs, a drop-off that is considered to be a market correction. A drop of 20 percent or more signifies the start of a bear market, an extended period of stock declines.

Investors are increasingly concerned about the possibility of another recession in the U.S. and a debt crisis in Europe.

“We are continuing to be bombarded by worries about the global economy,” said Bill Stone, chief investment strategist at PNC Financial.

The Vix, a measure of investor fear, shot up 36 percent. It is up 92.6 percent for the quarter, which began July 1.

The Dow Jones industrial average was down 512.61 points, or 4.3 percent, to 11,11,383.61. Thursday’s losses turned the blue-chip stock index negative for the year.

The S&P 500 – the benchmark for most mutual funds – lost 60.20, or 4.8 percent, to 1,200.14. It is now down 12 percent from its recent high of 1,363 reached on April 29. The Nasdaq composite shed 136.68, or 5.1 percent, to 2,556.39.

Oil dipped to $87 a barrel on worries demand will fall because of the slowing economy. It had traded over $100 as recently as June 9.

Nearly 20 stocks fell for every one that rose on the New York Stock Exchange.

European stocks also fell broadly because of concerns that Italy or Spain may need help from the European Union. The benchmark stock indexes in Italy, Germany and England each fell 3 percent.

Stock trading has been volatile this week because of concerns that the U.S. economy is weakening. Manufacturing, consumer spending and hiring by private companies are below levels that are consistent with a healthy economy. Those reports have called into question estimates from economists, including Federal Reserve Chairman Ben Bernanke, that the economy will grow more quickly in the second half of the year.

Money poured into investments that are seen as relatively safe when markets are turbulent. The yield on the 10-year Treasury note fell to 2.42 percent, its lowest level of the year. The yield on the 2-year Treasury note hit a record low of 0.26 percent. Bond yields fall when demand for them increases.

Mark Luschini, chief investment strategist for Janney Montgomery Scott, an investment firm in Philadelphia, said some clients are moving to cash “as a parking lot to sort things out.”

“With the scars of 2008 still fresh, some clients don’t want to miss the chance to pre-empt further damage should it come,” Luschini said.

Large investors have moved so much money into cash accounts at Bank of New York that on Thursday the bank said it would begin charging some clients a 0.13 percent fee to hold their cash.

“In the past month, we have seen a growing level of deposits on our balance sheet from clients seeking a safe-haven in light of the global interest rate and credit environment,” the bank said in a statement to The Associated Press. Bank of New York clients include pension funds and large investment houses.

“Investors are deciding that now is the time to take risk off the table,” said Brian Gendreau, market strategist for Cetera Financial Group. Gendreau said that some investors are now wondering whether stocks will have a prolonged slump similar to the aftermath of the Great Depression.

Technical trading, a term used to signify buying or selling based on the S&P 500′s prior highs and lows, also helped push stocks downward. The S&P 500 fell below 1,222, a so-called support level, early in the day. That signified to some traders that the stock market would continue to slide.

“Traders are respecting the technical levels even if they’re not technicians,” said Quincy Krosby, market strategist at Prudential Financial. “Even if you’re what we call a conviction buyer, you have to respect those levels.”

Companies that outperform when the global economy expands fell the most. Alcoa fell the most, with a 9 percent drop. Bank of America and Caterpillar were down 7 percent. Boeing ended down 6 percent.

Some traders are selling ahead of Friday’s employment report, which is expected to show that unemployment remained at 9.2 percent last month. A rise in the unemployment number would likely push stocks lower again.

The U.S. government said before the market opened that the number of people who applied for unemployment benefits for the first time was only slightly lower last week to 400,000. That’s still above the 375,000 level that economist say indicates a healthy job market. It was the latest indication of weakness in the U.S. economy.

All 10 industry groups in the S&P index fell. Energy, materials and industrial companies each lost 5 percent or more.

The sell-off comes at a time when corporate profits are growing. The forward price to earnings ratio of the S&P 500 has fallen to about 12, well below its long-term average of 16. That means that investors who buy now are paying less for each dollar in profits.

Based on what an investor now pays for corporate profits, stocks are now trading at their lowest levels in 20 years, said Tim Courtney, chief investment officer of Burns Advisory Group in Oklahoma City.

Few companies were spared in the sell-off. Just 3 of the 500 stocks in the S&P 500 moved higher. General Motors Co. fell 4 percent despite beating analyst’s earnings estimates.

The stock market as a whole had its biggest fall since the start of the current bull market in March 2009. The drop in the S&P was the largest since a 45-point decline on January 20, 2009. The Dow is down 1.7 percent for the year. The S&P 500 is down 4.6 percent. And the Nasdaq is down 3.6 percent. The Russell 2000, an index made up of small companies, has fared the worst. It was down 5.6 percent Thursday and is down 7.3 percent for the year.

Click here for the full report from DailyFinance.com

Bulldoze: The New Way To Foreclose

August 2nd, 2011

TIME

By: Stephen Gandel

Banks have a new remedy to America’s ailing housing market: Bulldozers.

There are nearly 1.7 million homes in the U.S. in some state of foreclosure. Banks already own some of these homes and will soon have repossessed many more. Many housing economists worry that near constant stream of home sales from banks could keep housing prices down for years to come. But what if some of those homes never hit the market.

Increasingly, it appears banks are turning to demolition teams instead of realtors to rid them of their least valuable repossessed homes. Last month, Bank of America announced plans to demolish 100 foreclosed homes in the Cleveland area. The land is then going to be donated back to the local government authorities. BofA says the recent donations in Cleveland are part of a larger plan to rid itself of its least saleable properties, many of which, according to a company spokesperson, are worth less than $10,000. BofA has already donated 100 homes in Detroit and 150 in Chicago, and may add as many as nine more cities by the end of the year.

And BofA is not alone. A number of banks are ramping up their efforts not just to rid themselves of their unwanted homes, but to fully dispose of them. Fannie Mae has a program to sell houses to local municipalities for around a few hundred dollars. Wells Fargo has donated 800 homes to be demolished since 2009. JPMorgan Chase says it was one of the first banks to begin donating houses it couldn’t sell, or didn’t think were repairable. Since 2008, the JPMorgan has donated or sold at a discount 1,900 houses to city or county officials.

The banks do the deals because once the properties are donated they no longer have to pay taxes or for upkeep. Tax experts say the banks may also be able to get a write off for the donation. That appears to be a better deal than trying to repair some of these homes, which according to a BofA spokesperson are more economical to demolish than fix up. The local governments like these deals because they get free land to develop or use for open space. Cleveland-based Cuyahoga County Land Reuntilization Corp., which inked the deal with BofA, has been one of the most aggressive local government organizations in striking these deals. Housing economists like these deals because they remove homes from the market that would otherwise sell for a low price or not at all, dragging down home prices in general. An oversupply of homes on the market has been once of the big problems plaguing real estate. At the end of June, it would take nine and a half months for the current number of homes on the market to sell. The housing market is considered healthy when supply equals six months of sales. So taking some of these homes off the market for good could remove some of the inventory drag.

The question is whether the banks will ever put up enough housing for demolition to make a difference. The Obama administration says it is working on its own plan to revamp its loan modification program in order to help keep more people in foreclosure in their homes, reducing the number of foreclosed properties on the market. Some areas of the country are looking at how to speed up foreclosures in an effort to return some normality to the market. It’s not clear that any of this will work. Certainly, the idea that we are at the point where banks would be better off knocking down houses that reselling them shows there is still something very wrong with the housing market. But what is clear is that banks and others are at the point where they are ready to try something new to boost the housing market. And that is a good sign for the future.

Click here for the full report from TIME

One In Five Recent Graduates Is Out Of Work

July 11, 2011

National Journal

By Jim Tankersley

Here’s a fact that should give economists—and maybe President Obama’s political team—heartburn: Two years after the Great Recession officially ended, job prospects for young Americans remain historically grim. More than 17 percent of 16-to-24-year-olds who are looking for work can’t find a job, a rate that is close to a 30-year high. The employment-to-population ratio for that demographic—the percentage of young people who are working—has plunged to 45 percent. That’s the lowest level since the Labor Department began tracking the data in 1948. Taken together, the numbers suggest that the U.S. job market is struggling mightily to bring its next generation of workers into the fold.

This is a dangerous proposition, economically (for the United States as a whole) and politically (for the president).

As The Atlantic’s Don Peck wrote last year, citing a litany of research from Yale University’s Lisa Kahn, college graduates who enter the labor force during a recession make significantly less money—in their first year and over the course of their careers—than grads who walk into an economic boom. Workers stuck in the unemployment line for an extended period risk watching their skills atrophy and face increasing difficulty finding new jobs. That’s particularly true, though, for people waiting and waiting and waiting to land their first job. The longer a whole batch of fledgling workers sits waiting to be hired, the more the economy risks losing young employees with valuable, high-end skills at a time when global competition is increasingly fierce.

Snowballing youth unemployment feeds social unrest. Exhibit A is the Middle East. Exhibit B is Europe’s periphery; in such countries as Spain, Greece, and Croatia, more than one in three young people is unemployed, a problem that The Economist magazine warned this week is “as great a challenge for these governments as protecting their tottering banks and slashing their budget deficits.”

Click here to read the full article from NationalJournal.com.

 

Dollar Drops to Almost Four-Month Low on Prospects for Fed, ECB

February 28th, 2011

BusinessWeek.com

By: Allison Bennett and Lukanyo Mnyanda

The dollar fell to its lowest since November against the currencies of six U.S. trade partners on bets Federal Reserve Chairman Ben S. Bernanke will signal to Congress the central bank plans to maintain economic stimulus.

The euro rose against the dollar on speculation European Central Bank President Jean-Claude Trichet may indicate this week a readiness to increase borrowing costs. Sweden’s krona climbed to a 30-month high after Riksbank Governor Stefan Ingves said the central bank may boost interest rates at every meeting this year. Canada’s currency reached a three-year high versus the greenback.

“The FX market will want to see the juxtaposition between Bernanke and Trichet this week,” said Greg Anderson, a currency strategist at Citigroup Inc. in New York. “The Riksbank comments are pretty critical and if you think that’s reflective of what the ECB and Bank of England would say and do, you’ve got to be pricing in more hawkishness on that side of the Atlantic than this side.”

IntercontinentalExchange Inc.’s Dollar Index, which tracks the greenback against currencies including the euro and yen, decreased as much as 0.7 percent to 76.756, the lowest level since Nov. 9, before trading at 76.801 at 10:20 a.m. in New York, compared with 77.275 on Feb. 25. The gauge has fallen 1.2 percent in February.

The dollar remained lower versus most major peers even after the Institute for Supply Management-Chicago Inc.’s business barometer unexpectedly rose to 71.2 this month, the highest level since July 1988, from 68.8 in January.

Consumer Spending Falls

U.S. consumer spending rose less than forecast in January, accelerating 0.2 percent amid increasing fuel and food costs, data from the Commerce Department showed today. Another report showed European inflation stayed above the ECB’s 2 percent target for a second month in January.

The Swedish krona appreciated as much as 2 percent to 6.2934 versus the dollar, the strongest level since August 2008, on the outlook for higher interest rates. It traded at 6.2954.

There is “an increased probability that the repo rate will be raised at all of the monetary policy meetings held this year,” Ingves said in the minutes of the bank’s Feb. 14 meeting, published today. The Riksbank raised its benchmark repo rate this month for a fifth time since July, to 1.5 percent.

The krona appreciated 1.5 percent to 8.7093 per euro, from 8.8353 on Feb. 25. It has climbed 4.9 percent this year, according to Bloomberg Correlation-Weighted Currency Indexes, which track the currencies of 10 developed nations. The euro has risen 1.3 percent, while the dollar has lost 2.3 percent.

ECB Meeting

An ECB governing council member, Mario Draghi, said on Feb. 26 that inflation pressures are forcing policy makers to focus more closely on the timing of future interest-rate increases.

The ECB, which has kept its key interest rate at 1 percent since May 2009, will hold its next policy meeting on March 3.

The 17-nation euro gained 0.5 percent to $1.3827, extending its monthly advance to 1 percent, and rose 0.7 percent to 113.16 yen. It was up for the first time in three days against the Swiss franc, gaining 0.4 percent to 1.2824. Japan’s currency slid 0.2 percent to 81.85 per dollar.

Bernanke is scheduled to deliver the Fed’s semiannual report on monetary policy to the Senate Banking Committee tomorrow and is due to testify before the House Financial Services Committee on the following day.

Fed Policy Makers

The Federal Open Market Committee affirmed last month plans to continue its program of buying $600 billion of Treasuries through June even as policy makers increased their projections for U.S. growth this year. The Fed has kept its benchmark interest rate at zero to 0.25 percent since December 2008.

Oil prices at almost a 29-month high and concern political turmoil that cut Libya’s output will spread have curtailed demand for currencies related to economic growth.

“We’ve had a pause for breath after the events of the past few days,” said Jeremy Stretch, executive director of foreign- exchange strategy at Canadian Imperial Bank of Commerce in London. While political instability in the Middle East “hasn’t spiraled out of control,” there are “still enough headwinds out there to be wary,” he said.

Crude oil for April delivery rose as much 2.1 percent to $99.96 a barrel in New York before trading at $97.29. It rose last week to $103.41, the highest level since September 2008.

Canada’s dollar touched its strongest level against the dollar since Feb. 28, 2008, after a government report showed the nation’s economy grew at a 3.3 percent annual pace in the fourth quarter, more than economists forecast.

The currency was headed for a 2.8 percent rally this month before tomorrow’s meeting of the Bank of Canada, which has expressed concern that its strength may stall growth.

Canada’s dollar appreciated 0.4 percent to 97.40 cents per U.S. dollar, from 97.74 on Feb. 25. It touched 97.28 cents.

Click here for the full report from Business Week

How Inflation Could Be 66% Higher Than the Fed Reports

February 17th, 2011

Daily Finance

By: Dan Burrows

Global food prices are at an all-time high, U.S. gasoline prices are at the costliest level ever for this time of the year and yet inflation, in the words of Federal Reserve Chairman Ben Bernanke, remains “quite low.”

By official reckoning, that’s certainly the case. On Thursday we’ll get the latest monthly inflation figures in the form of the consumer price index, which, to the Fed chief’s chagrin, is running too close to disinflationary levels. Economists, on average, expect January prices to increase at just a 0.3% rate. So-called core inflation, which excludes volatile food and energy prices, is forecast to rise just 0.1%.

As Bernanke testified before Congress last week, economists exclude food and energy prices because that core inflation rate “can be a better predictor of where overall inflation is headed.” By that measure, inflation was only 0.7% in 2010, compared with around 2.5% in 2007, the year before the recession began, the Fed chief explained.

Too bad those numbers don’t jibe with with most folks’ experience at the gas pump or checkout counter. As economist Ed Yardeni, president of Yardeni Research, told clients Tuesday: “I share the growing concern among the Fed’s critics that the official measures of consumer price inflation may be understating actual inflation and that excluding food and energy from these measures is OK as long as you don’t eat or drive.”

Alternative measures for inflation show a far more alarming picture of price increases than the official data suggest. One of the more intriguing approaches is The Billion Prices Project at the Massachusetts Institute of Technology, which collects daily price changes on about 5 million items sold by approximately 300 online retailers in more than 70 countries.

For U.S. price data, MIT tracks 550,000 products from 53 retailers. By this measure, annual inflation is currently running at a rate of 2.5% — or 66% greater than the official CPI figure. See the chart above.

Core inflation may have run at just 0.7% in 2010, as Bernanke says, which is the lowest reading on record gong back to 1960. Even if you add back in those pesky food and energy prices, the number rises to 1.2% — still no big deal. But by the Billion Prices Project’s reading, inflation in 2010 more than doubled to 2.5%. “The Billion Prices Project @ MIT is finding plenty of evidence that consumer prices are rising faster than the official price data,” Yardeni notes.

Whatever the latest data show Thursday, there’s a big difference between inflation as a guide for monetary policy and its real-world impact on conusmers’ pocketbooks.

Click here for the full report from Daily Finance

Foreclosures Go From Sluggish to Frozen

October 11th, 2010

Housing Watch

By: Alec Foege

Before four leading banks suspended foreclosures due to improper approvals, the process was already bogged down in the 23 states that require a judge to sign off on all foreclosure cases. In those states, the housing recovery has faltered, some economists claim. For example, in California there is no requirement for a judge’s approval of a foreclosure; the housing market there has been recovering for the last year. But in Florida, where a judge’s OK is required, home prices continue to decline. Some housing market experts argue that a moratorium on foreclosures may hurt as many homeowners as it helps — and the market as a whole will stagnate.

Click here for the full report from the Housing Watch

Stocks Fall After Jobs Report

June 4, 2010

CNBC

By Cindy Perman

Stocks tumbled Friday after a report showed fewer jobs were added to nonfarm payrolls than expected last month and most of those were temporary census workers.

The Dow Jones Industrial Average was down more than 180 points, or 1.8 percent, in late-morning trading. The S&P 500 and Nasdaq  shed more than 1.5 percent.

The selloff was so severe that decliners outpaced advancers more than 12 to 1 on the New York Stock Exchange.

Industrials, financials and consumer discretionary were the biggest decliners.

US employers added 431,000 jobs to nonfarm payrolls in May, but 411,000 of those were temporary census workers. The private sector added just 41,000 jobs: Manufacturing, temporary help and mining added jobs, while construction declined. That number was also well short of the more than 500,000 economists had expected. The unemployment rate, however, fell to 9.7 percent from 9.9 percent in April.

Click here for the full report.

Economic Recovery Slower Than Reported

May 27, 2010

My Way

By Jeannine Aversa

WASHINGTON (AP) – The economic rebound last quarter turned out to be slower than first thought, one of the reasons unemployment is likely to stay high this year.

The economy grew at a 3 percent annual rate from January to March, the Commerce Department said Thursday. That was slightly weaker than an initial estimate of 3.2 percent a month ago. The new reading, based on more complete information, also fell short of economists’ forecast for stronger growth of 3.4 percent.

The reasons for the small downgrade: consumers spent less than first estimated. Same goes for business spending on equipment and software. And, the nation’s trade deficit was a bigger drag on economic activity.

In a separate report, the Labor Department said Thursday that the number of newly laid off workers filings claims for unemployment benefits fell by 14,000 to 460,000 last week. The decline came after claims had risen by a revised 28,000 in the previous week, the largest gain in three months.

The latest level of claims is slightly higher than it was at the start of the year. That shows the nation’s workers are still facing tough times even though the overall economy is growing again.

During normal times, growth in the 3 percent range would be considered healthy. But the country is coming out the longest and deepest recession since the Great Depression. So economic growth needs to be a lot stronger – two or three times the current pace- to make a big dent in the nation’s 9.9 percent unemployment rate.

Click here for the full report.

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