Brian Wesbury is already making excuses for 2Q2014 GDP

Here:

"The 2.9% drop in real GDP during the first quarter was a fluke caused by a brutal winter and some one-off events. With much of the monthly data in for Q2, it looks like the US will see that drop almost completely reversed.

"Normally, we would expect a bigger bounce as pent-up demand (lost to the weather) returned and added to growth already in train. But, not this time. In recent years, tax rates have been hiked, regulations have increased and government spending has expanded. All of these are a burden on the economy that creates slower potential growth."

-------------------------------------------------

Almost completely? Does that mean "not completely"? As in less than 2.9%?

Excuse me, but government spending boosts GDP, and with divided government spending growth remains flat to non-existent with Republicans in control of the purse strings in the US House. Brian Wesbury can't have it both ways, later acknowledging that real government purchases will add .4 to 2Q GDP. Which is it, a drag on growth or a contributor? Meanwhile Canada grew in the first quarter in real terms. We did not. Winter. My. Foot.

Funny how fxstreet has a consensus estimate already yesterday of 2.9%, same as Wesbury's.

Safe, very safe.

Mirror Mirror: Consensus for first estimate of 2Q2014 GDP, just eight days away, is +2.9%

That's a complete mirror image of 1Q2014 GDP from the third and final estimate at -2.9%.

HaHaHaHa...Ha. The average of the two is still nutin honey.

Japan: What to expect in America if interest rates are kept at 0.25% indefinitely?

Japan has kept its benchmark interest rate near 0% since 1996, nearly 18 years. Japan's stock market has not come anywhere near to recovering its 1989/1990 highs, nearly a quarter of a century ago. Real GDP in Japan is growing at a glacial pace, less than 1.0% on average annually since 1999.

Minus 2.9% GDP has never occurred outside of a recession: They're ignoring it like 2008

Jeffrey Snider, here:

The most recent example of this, in a larger scale setting, was the first quarter's GDP estimate. Rather than embrace the information that might be relevant to what is actually taking place, the entire orthodox economics profession is busy trying to convince everyone that there was nothing useful in that result. It was, as has been repeated over and over, an aberration of no significant value; an error term to be denied a full place in the analysis of where the economy might actually be headed.

A GDP figure of nearly minus three percent is decidedly rare, however, so unusual that it has never taken place outside of a recession. But that is precisely what we are supposed to ignore when being counselled to take no notice of it. Actually, counsel is too slight and too soft of a word, as what is really occurring is nothing short of a demand. The surety at which the orthodox profession, especially those of monetary disposition, exercises such confidence about forecasting is very much descriptive of ideology rather than science.

Ambrose Evans-Pritchard oddly unaware high CO2 coincides with 17yr+ pause in global warming

Ambrose Evans-Pritchard, here:

[Shale] has whittled down the US current account deficit, now just 2pc of GDP [approximately $340 billion?]. Cheap gas costs - a third of EU prices and a quarter of Asian prices - has brought US industry back from near death, perhaps for long enough to give America another two decades of superpower ascendancy. But making money out of shale is another matter.

Even if the fossil companies navigate the next global downturn more or less intact, they are in the untenable position of booking vast assets that can never be burned without violating global accords on climate change.

The IEA says that two-thirds of their reserves become fictional if there is a binding deal limit to CO2 levels to 450 particles per million (ppm), the maximum deemed necessary to stop the planet rising more than two degrees centigrade above pre-industrial levels. It crossed 400 ppm threshold this spring, the highest in more than 800,000 years.

-----------------------------------------------------------------------------

Ambrose's problem is that he has insufficient skepticism: There is no binding deal, and we couldn't stop developing nations from spewing even if we wanted to. Ambrose has become a co-dependent in the climate scare and is trafficking in last year's news:

If CO2 was at the same level as of 800,000 years ago, why are we cooler by 5-10 degrees and sea levels lower by 75-120 feet? This would indicate there’s no CO2/temp/sea level relationship.

Indeed, as the picture has unfolded in the last year, we are well past the 17 year milestone for no temperature anomaly. All that extra CO2 is doing nothing, except maybe producing too much vegetation.

So I bought a lawn tractor to mow it all down.

Josh Brown must be nuts: valuations are high, markets are exuberant and growth is as pathetic as 2007

Is Ritholtz paying him to say this stuff?

Here:

"Valuation is not going to tell you when the run ends. We were reasonably valued in 2007. The economy fell off the cliff," he said. Brown also said he agreed with Yardeni that there was "no sign of a recession."

"Those are usually what coincide with the end of a bull market," he said. "I'm not telling you P/E expansion takes us significantly higher, but earnings growth could, revenue growth could, and in the second half of this year, we should be seeing a meaningful uptick based on what analysts are expecting at the moment. So, I think it's smarter to be constructive than to be worried about the next 5 percent in either direction."

--------------------------------------------------------------------

In late September 2007 the Shiller p/e was high, in the range of 26/27, the S&P500 was making new all time highs, and 1Q2007 GDP had just been finalized at 0.6% after a 2.1% and a 1.1% print for the two previous quarters of 2006. That's growth of more or less just 1.2% over three quarters.

The 3.8% 3rd estimate for Q2 at the time arguably contributed to the blow off market top at 1565 within days of the announcement, but growth in the economy had been pathetic up to that point. People thought things were looking up again, but within a year we were almost scraping people off the sidewalks of Wall Street.

Today valuations are similarly high at 26, the market has made new all time highs, and we've just booked a horrible NEGATIVE GDP for the first quarter. The average of the last three quarters is now the same as it was in late September 2007: 1.2%.

Valuations are reasonable? There's no sign of a recession? Both may very well be coinciding right now to signal the end of a bull market, just like in 2007.

GDP less interest payments on the debt 2006-2012 is net positive $44.1 billion, that's all

Nominal GDP, not seasonally adjusted, for the seven years 2006-2012 totals $2,941.8 billion.

Nominal interest payments on the debt for all the same fiscal years totals $2,897.7 billion.

And people wonder why we're not growing when all we've got is a measly $44.1 billion to show for it.

Interest payments on the massive debt of $17,609 billion are gobbling up economic growth.

Think of it this way. The seven year average interest payment on the debt, $414 billion annually, represents a simple interest rate of 2.35% on today's balance. That's what the economic growth rate should look like. Instead, last quarter it was -2.9%, down almost $74 billion seasonally adjusted, and negative $118 billion real.

The huge public debt is the drag on the economy, and would be the knee on the chest of the heart attack victim if the Federal Reserve didn't suppress interest rates the way it is doing. 

Total nonfarm is up 288,000 in June: Why I'm yawning

Unemployment in June falls to 6.1% and total non farm employment is up 288,000, seasonally adjusted, to finish the second quarter. Not seasonally adjusted, the figure is an impressive sounding 582,000 newly employed.

So Q1 GDP at -2.9% is meaningless, right? We're really doing much much better than that number indicates, yes?

That's what fellow traveler Rex Nutting thinks over at MarketWatch in "The payrolls report is right, and GDP isn't". He goes so far as to say that even 2008 negative GDP was meaningless:

"Take, for instance, the first quarter of 2008, just as the Great Recession began. The first estimate of quarterly GDP was 0.6% growth. In mid-2008, that was revised to 0.9%. A year later, however, GDP was revised to a 0.7% decline. The most recent estimate is that the economy shrank 2.7%. It’s madness to think this number means anything."

Spoken like a true believer in the success rate of Soviet 5-year plans. At least "shrank" shows he's educated.

And even John Silvia of Wells Fargo says the jobs report shows "economic growth is far better than the Q1 GDP report indicates".

Oh really? I don't think so. The employment gains aren't telling us anything indicative of a break out to the upside either for jobs or for the economy. To see this you have to stop comparing apples to oranges by comparing monthly change in jobs to GDP which is measured on a quarterly basis.

When you look at the jobs figures on a quarterly basis, you see that total nonfarm always takes a dive in Q1, good economy or bad economy, and it always rebounds in Q2, good economy or bad economy. It tells you almost nothing about the economic trend that in Q2 you always get an increase. So we should expect the jobs numbers to go up in the spring, and they always do. Go all the way back in the not seasonally adjusted data to 1981 and you will see that this is true, in the awful year 1982 when the gain was a lousy 1.0%, and even in the dreadful year of 2009. When 2009 was over there were nearly 30 million first time claims for unemployment, yet between Q1 and Q2 that year total nonfarm went up 138,000, a paltry 0.1% but still completely counter trend. The worst was over. Not.

In 2014 we have just witnessed total nonfarm go up 2.805 million jobs between the end of Q1 and the end of Q2, the most since Obama has been president. But guess what? That's an increase of barely 2.06%. Obama's actually done better, for example in 2011 when the increase was 2.09%, his best Q1 to Q2 gain on record. But we don't point to that number today as a sign of the economy turning around at that time, especially since the measure has been weaker since, and GDP has actually gone negative since.

It's instructive to compare Obama's recent 2.06% quarter on quarter gain with past presidents' records for the same period from winter to spring.

How high was the best record Q1 to Q2 since 1980, for example? You would be surprised that it's barely 29% higher than Obama's best to date. Reagan, of boom fame, holds top spot at just 2.69% in 1984. Clinton comes in second with 2.56% in 1994. George W. Bush comes in third with 2.14% in 2005. Obama comes in fourth in 2011 at 2.09%. And George Herbert Walker Bush brings up the rear in 1989 at 1.92%.

But the best record isn't a very good predictor of economic growth ranking. Best GDP to worst was Clinton, Reagan, Bush I, Bush II, and then Obama (so far), not Reagan, Clinton, Bush II, Obama, Bush I.

The overall jobs record between Q1 and Q2 seems like a better predictor of likely economic growth ranking. Clinton, first for GDP, averaged 2.22% over eight years while Reagan, second, averaged 2.07% for the increase in total nonfarm between the winter and the spring. In third is George Herbert Walker Bush at 1.69% (third also for GDP), followed closely by Obama at 1.68% (last for GDP so far) and George W. Bush bringing up the rear at 1.3% (fourth for GDP).

It's entirely possible that Obama already peaked for jobs increases from winter to spring in 2011. Each of the other four presidents peaked early or mid-term. It would be unusual for Obama to do better this late in his term. And so far he hasn't, and has just two more opportunities to prove me wrong.

Overall Obama has lost his momentum, his aura and his credibility, and his lately shrill tone sounds more like a dying bunny the cat got in the backyard than a statesman presiding over the final years of a successful term. I think that means it's likely Obama's overall jobs performance is going to remain weak, as will his GDP.

US Debt to GDP ratio, nominal, record date 3/31/14 (3rd estimate of GDP 6/25/14)

$17.6 trillion
-----------------------     = 1.035
$17.0 trillion

Market cap to GDP ratios March 2009 vs. March 2014 flash valuation warning

Probably the broadest measure for stock market valuation purposes is total stock market capitalization divided by GDP. Warren Buffett uses it and John Hussman has spoken approvingly of the measure.

But because we have to wait for GDP numbers for at least a month after the quarter end, the ratio cannot be a real-time valuation tool. And given that revisions to GDP can be substantial in the 2nd and 3rd estimates, as well as in the annual summer revisions, precision using the 1st estimate is also wanting. Nevertheless the calculation provides a big picture snapshot of where we have been in the market cycle, and gives forward guidance for long term investors. Presently it appears to counsel taking chips off the table and waiting in cash for a better opportunity to invest. 

For the following I use nominal figures for GDP as revised in the most recent updates from bea.gov and calculate market cap using the popular Wilshire 5000 (level x $1.2 billion) as close to March 31 as practicable.

A comparison of March 2009 to March 2014 is instructive, since March 2009 was a pretty good buying opportunity both in terms of the absolute level of the stock market after its decline and the coincident Shiller p/e valuation which was about 13.3 on March 1. The ratio has almost doubled in the interim, indicating that now is probably not a good time to commit large new sums to stock markets. The current Shiller p/e begins the day at 26.31, which is also nearly doubled from five years ago.

That said, the 10 year Treasury presently pays just 69 basis points more than the dividend yield of the S&P500. At the October 2007 stock market high, the 10 year Treasury paid 276 basis points more than the dividend yield of the S&P500. You could argue the Fed caused the markets to crash by taking rates much too high in 2006 and 2007 and that Janet Yellen is bound and determined not to let that happen again anytime soon, meaning stock markets could have higher to go. Keep in mind that the inflation-adjusted all-time high of the S&P500 was 2045.09 on August 1, 2000. We're at 1962.46 this morning. 

March 30 2009

$10.32 trillion market cap

---------------------------------------------- = 0.72

$14.38 trillion GDP

March 31 2014

$23.99 trillion market cap

---------------------------------------------- = 1.41

$17.02 trillion GDP

The first three months of 2014 were worse than the whole 2001 recession

Jeffrey Snider, here:

"The first quarter of 2014 is worse than anything seen during the 2001 recession – which the worst contraction then was -1.2% in the third quarter of 2001. In raw GDP terms, that would make the first three months of 2014 worse than the whole of the 2001 recession."

Tyler Durden of Zero Hedge is crazy, but you knew that

The website that specializes in the economic wacky, lately popular on the right as a rhetorical club against Obama which Tyler Durden exploits to gain eyeballs, says today here that ObamaCare spending is the cause of the total collapse in 1Q2014 GDP. You know, like ObamaCare is responsible for all you full-timers getting part-timed.

ObamaCare, the heart of all darkness.

That's funny, because in April Zero Hedge maintained ObamaCare spending was the sole cause of the rise in 1Q2014 GDP.

Well which is it?

In other words, in April ObamaCare was the only thing responsible for positive GDP ihao, but in June it is the only thing responsible for negative GDP. This is because we're supposed to believe that healthcare services spending evaporated in the final estimate of GDP (a swing from +$39.9 billion in the 2nd estimate to -$6.4 billion in the 3rd), evidently accounting for $46 billion of lost spending in the Zero Hedge world of weird math between Q4 and Q1. The swing negative caused the personal consumption expenditures collapse, he says, which fell almost $60 billion inflation-adjusted Q4 to Q1.

Of course, that's comparing apples to oranges. Healthcare services spending in Q4 was positive $24.4 billion. That makes the swing barely $31 billion from positive into negative territory, not $46 billion.

From that you wouldn't know that PCE was still positive in the 3rd estimate: $27.7 billion. Nor that goods consumption collapsed $24.5 billion from Q4. Nor that spending on utilities was up a whopping $23 billion because of the cold weather. Nor that the output of nonprofits swang nearly $28 billion into negative territory from positive, while receipts for goods and services of nonprofits suffered a similar swing, $29 billion from positive to negative. Schwing!

Does he read the report?

The inflation-adjusted decline in GDP totaled just over $118 billion, $81 billion of which was from a decline in private domestic investment from positive $16 billion in Q4, mostly inventories, and $58 billion of which was from a decline in net exports of goods and services, from a positive $37 billion in Q4. That's where the real decline was, a total swing of over $190 billion from just those two categories.

Maybe the silliest thing Durden predicts is that all that "lost" ObamaCare spending will magically reappear in Q2.

Which leads us to ask: What if ObamaCare actually did reduce healthcare services spending in Q1? Isn't it conceivable that a bunch of people, now qualifying for subsidies under the program, had significantly reduced costs? Who knows, the $6.4 billion drop might actually be the first and only drop we're ever going to see in healthcare services spending under ObamaCare.

I'll bet on that before I'll bet on a 5% GDP print from Obama.

Obama vs. Bush on GDP

Bush's average quarterly report of GDP: 2.1%. Obama's average quarterly report of GDP through today's final number for 1Q2014: 1.6%.

Too hot to shop: There goes Q2 GDP

Keeping the people ignorant of their poverty: Obama's media shills bury the awful GDP story

NBC briefly had a red banner headline at the top of the page and then moved the GDP story to the top left but not among the page lead stories.

ABC buried the story near the bottom left.

CBS buried the story near the bottom right.

GDP tanks 2.9% in first quarter, CNBC shills for Obama calling it disappointing, doesn't even put GDP in headline

Consensus estimate for GDP has worsened to -1.7% from -1.6% at fxstreet

Bob Brinker mentioned the consensus estimate for GDP this last weekend on his radio program Money Talk at -1.8%. fxstreet.com had had the consensus estimate at -1.6% as recently as last week, but now shows it at -1.7%. Very curious.

How did the winter get so much worse in the last month for its impact on GDP? After all, everyone has blamed the -1.0% print in the second estimate on the bad winter. But somehow things are much worse than we thought because of the weather? 70% or 80% worse than we imagined?

It's not because of the winter, dear friends. It's because your master wants you to suffer, wants to cut you down to size, wants to destroy your aspirations.

He is succeeding.

How does it feel to be a slave?

Run away: Today's total market capitalization/GDP ratio is 1.46

$25.003 trillion
-------------------  = 1.46 (June 23, 2014: a really bad time to invest)
$17.101 trillion


$10.222 trillion
------------------- = 0.71 (April 6, 2009: a pretty good time to invest)
$14.381 trillion













h/t John Hussman, Warren Buffett

Blaming negative GDP on the harsh winter is already forecast to get worse

The consensus estimate of the third and final report of 1Q2014 GDP, coming out on Wednesday next week, is already 60% worse than the actual second report at -1.6%. What, is the late winter suddenly become worse in the last month?

The first estimate, you will recall, came in at +0.1%, and was quickly downgraded in various places to something ranging between -0.2% and -0.4%. When the second estimate came in at a much worse -1.0%, just about everyone blamed the harsh winter for the pathetic print, including the White House, which incredibly credited GDP from spending on utilities at the same time it debited GDP because people weren't traveling (which isn't true--just examine the government's miles-traveled reports over the winter), weren't vacationing and weren't spending money on hotels and restaurants, and other such drivel.

Having it both ways, it seems, only applies south of the Canadian border, where real GDP was a negative almost $40 billion. North of it real GDP was actually positive, despite the winter, at about $4.7 billion US. A much smaller economy Canada's is, to be sure, but for that reason you'd think it more vulnerable to the harshest winter in decades whereas our much larger, more varied economy ought to be more resilient.

But up against an Obama, you would be wrong. He is secretly happy that things are going as poorly as they are, because it means that the middle class is steadily shrinking and soon will no longer be able to stand in his way, and the Democrat Party's way, of remaking America into a few haves and a lot of have-nots.

In this they are assisted by the libertarians who have successfully infiltrated the Republican Party as conservatives, who see this as their natural mission, too. Politically speaking, they are out to defeat Republicanism just as much as the Democrats are. The successful individual lone ranger is the sine qua non of their vision, after all, whose fabulous wealth is the only object of their affection. And the only thing standing in his way are people who believe in something bigger than themselves.

People who believe in something larger than themselves in America today occupy the extremes of the left and the right, and seem to be getting fewer in number as we speak, a fact noted in a recent article in The New Republic. Between them are a mass of social and economic libertines who are already the slaves of the elites, for whom neither the economic nor the moral restraint of the Protestant founders which built our country are a value. Unless we recover something of the latter the America of the past will cease to exist, if it hasn't already.

And persistently poor GDP proves it.

Fertility drops in 2013: Maybe some demographers are under the ILLUSION of economic recovery

They're puzzled by the total fertility rate dropping and staying below the replacement rate.

Reported here:

But the total fertility rate, or TFR, the average number of children a woman would have during her child-bearing years, fell to just 1.86 [in 2013], the lowest rate in 27 years. TFR is considered the best metric of fertility. A TFR of 2.1 represents a stable population, with children replacing parents as they die off.

Demographers expected the fertility rate to fall during recession, as financially strapped families put off childbearing. But what has surprised some demographers is both the depth of the decline and the fact that fertility has continued to drop even over the course of the country's five years of slow but steady recovery. The rate has fallen steadily each year since 2007, when it stood at 2.1 percent. ...

[T]he U.S. only reached a TFR above 2.1 in 2006 and 2007, at the height of the housing bubble years.

----------------------------------------------------------------------

The total fertility rate in the US has been below the replacement rate since 1971 except for the two years noted. This is the real reason behind the immigration liberalization push by Republicans, who didn't have enough children themselves and still don't understand as a political party that it's impossible for America to look like it did in the past, now or in the future, without having done so. They are as guilty as liberals in eschewing family.

It raises the question of what comes first: the GDP or the population which goes on to consume it. Arguably, just as banks create money by writing loans, not by the Fed printing dollars, people actually create future economic growth by having children in the present. It really isn't the other way around, but we haven't been smart enough as a culture to grasp this. Women naturally grasp this. They not only naturally want children on a time schedule dictated by human biology, but also grandchildren. But the liberal war on this natural instinct has succeeded in killing off the goose that laid the golden egg of American greatness. It should not come as a surprise that GDP was negative again.

We do not live. We just survive.

A little Larry Norman from 1973, from the not coincidentally entitled "Nightmare Number 71":

We kill our children swap our wives


We've learned to greet a man with knives


We swallow pills in fours and fives

Our cities look like crumbling hives

Man does not live he just survives

We sleep till he arrives


Love is a corpse we sit and watch it harden


We left it oh so long ago the garden