Winter GDP under Obama has underperformed everyone who came before him for 50 years by 74%

There's nothing wrong with GDP that a change of leadership at the top couldn't fix. I'll bet Caligula's favored horse Incitatus, whom the crazed Roman emperor wanted to install in the consulship, could have done better, that's how bad Obama has performed.

To date we've had five first quarters outside of recession under Obama and the average nominal GDP addition in the first quarter from the preceding fourth quarter has been just +0.60%. From coldest to warmest here the five are: 2014 (-0.20%), 2010 (+0.80%), 2011 (+0.1%), 2013 (+1.00%), 2012 (+1.1%). Incidentally, 2014 was the 10th coldest first quarter since 1946, but 2012 was the hottest, and Obama still couldn't pull out a decent performance from that advantage.

It's not the fault of the weather. It's Obama.

GDP measured in exactly the same way before Obama and going back to 1947 has averaged +2.3% in the first quarter, which means that under Obama GDP has lagged the average by 73.9%. In fact, Obama's record in winter is so bad that he's pulled down the long-term average by 0.2 from 2.3% to 2.1%.

But wait, it gets worse.

America actually posts better GDP when winters are colder, and poorer GDP when they are warmer.

The twelve warmest winters since 1946 have added just 1.5% to nominal GDP on average, but the twelve coldest added an average 2.7%.

For a president, and economists, to blame cold weather for poor economic performance shows a level of ignorance and intellectual laziness which is shameful.

America can do much better than Obama, and it will. 

The libertarian free-traders in both parties have killed the American middle class: Reagan, the Bushes, Clinton, Obama

From Patrick J. Buchanan, here:

The average U.S. family has not seen a rise in real wages in 40 years. This is directly traceable to the loss of more than one-third of all U.S. manufacturing jobs. And that loss, that deindustrialization of America, is directly tied to the $10 trillion in trade deficits since Bush I. Writers who celebrate how U.S. imports have risen in this month or that year almost never mention the trade deficit for this month or that year. Perhaps that is because the United States has not run a trade surplus in four decades, whereas, in the first 70 years of the 20th century, we never ran a trade deficit. Trade surpluses add to GDP; trade deficits subtract from GDP.

And when in a company town the company closes the factory, the town often dies. And all the little satellite businesses—bars, diners, food stores, pharmacies—that rose around the factory, they die, too. The tombstones of countless dead towns across America should read: Killed by Free Trade. Tenured economists on college campuses call this “creative destruction.”

The stagnant wages of two generations of U.S. workers also help to explain the crisis of Social Security and Medicare. For, as workers’ wages fail to rise, or fall, so, too, do their contributions in payroll taxes. If, as Simpson-Bowles contends, our largest entitlement programs are heading for insolvency, free trade played a lead role in that American tragedy. And where is the liberal morality in passing laws to ensure U.S. workers a living wage and clean and safe conditions, and then, through fast track and free trade, signaling their bosses that they can evade these laws by shutting factories here, moving their plants to Asia, paying coolie wages, and subjecting Asian workers to conditions that would earn a U.S. industrialist a tour in Leavenworth?

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I've checked Buchanan's math and he's exaggerating a bit. The total is precisely $9.5 trillion . . . if you go back as far as 1982 under Reagan, but you get the point.

Winter in Grand Rapids Michigan was 23% colder in 2014 than in 2015

Grand Rapids, Michigan, was 3.2 degrees F below normal on average in March 2015, bringing the cumulative anomaly for the first three months of 2015 to -19.9 degrees F. The corresponding deficit from normal in 2014 was -24.4 degrees F, almost 23% colder. 

Illinois Republicans are a joke, grossly overestimating the cost to deport millions of illegals

Seen here:

Five Illinois Republican lawmakers are reviving the call for Congress to act on comprehensive immigration reform that includes provisions to expand visas for high skill, low skill and agricultural workers, and a path to citizenship for the undocumented population. At an immigration reform panel discussion sponsored by the Illinois Business Immigration Coalition (IBIC), Reps. Aaron Schock (R), Adam Kinzinger (R), Bob Dold (R), Sen. Mark Kirk (R) and Gov. Bruce Rauner (R) remarked that it was time to their colleagues in Congress to move on a comprehensive immigration bill.

“It’s naive to think that the 11 to 12 million people are going to disappear,” Schock said, citing a new right-leaning American Action Forum study, which reported that mass deportation of 11 million immigrants would cost the government anywhere between $400 billion and $600 billion. The study found that the impact on real gross domestic product would drop by about $1.6 trillion.

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As I've shown before (here) the cost to round up and deport 11 million illegals should run no more than $500 million per year. 

Republicans today just don't have any imagination like they did in the era of Eisenhower.

The American Action Forum, incidentally, is run by Douglas Holtz-Eakin, John McCain's economic advisor, and Norm Coleman, who was defeated for his Senate seat from Minnesota by a comedian.

The Euro for Europeans but Germany, Raus!

Seen here:

German actions have not themselves been entirely pure. In 2002, Germany, along with France, began the process of easing the strict rules of the Maastricht Treaty when it was able to get an exemption from the cap on budget deficits at 3 percent of GDP, essentially scrapping the Stability and Growth Pact. German banks also had their eyes wide open in awarding loans to Greece and the other weaker European economies, throwing prudential caution aside. In fact, some major financial and corporate entities have allegedly facilitated deceptions by earlier Greek governments or to have been involved in outright corruption in connection with some loans. Then, there is also the inconvenient fact that outstanding German debt is itself well above the 60 percent cap in the euro zone ground rules. Another inconvenient fact is that just 11 percent of the facilities extended to Greece have been used to support the Greek state, as the facilities have ultimately been used to prop up the banking sector in the lending countries.

Although Germany was not responsible for the financial collapse of 2008 that set the stage for the long crisis in the euro zone, its neo-mercantilist economic and trade policies, which one Philippe Legrain dubbed Merkelism, has exacerbated the situation and impeded an effective response. Germans take justifiable pride in the excellent quality of their industrial products, which produced yet another record trade surplus of €215 billion in 2014, second only to China. Yet, large balance of trade surpluses in Germany mean that other European countries are running large balance of trade deficits, which exert downward pressure on those other economies. The counter that other countries should attempt to be more like German industry rings only partially true. Once again, Germany is itself not adhering to European rules in that a trade surplus of 7.4 percent of GDP well exceeds the target cap under the Macroeconomic Imbalance Procedure. Even worse, that cap was set abnormally high as, on the flip side, euro zone countries are not supposed to run trade deficits greater than 4 percent of GDP. The very rules build in and sanction a balance of trade advantage to Germany. This advantage is enabled not just by German industrial competitiveness but by the fact that the euro confers a much more favorable exchange rate than were Germany still operating under its own independent Deutsche Mark. This fact has led some commentators to brand Germany a stealth currency manipulator and even for the country itself to be removed from the euro zone.

Great Lakes Ice Cover is 25% ahead of this time last year: a warning for GDP?

Last year on this date the total ice cover was just 67%, when GDP was going negative supposedly because of the terrible winter we were having. The year before, ice cover on this date was 74.3%. As of yesterday, ice covers 84.4% of the Great Lakes, 25% ahead of last year.

Will GDP tank in 1Q2015 because of this?

We won't have what passes for complete knowledge about this until the end of June.

Data here.

S&P 500 market capitalization/GDP ratios the years before plus-20% crashes

http://www.advisorperspectives.com/dshort/commentaries/CAPE-at-Market-Peaks.php

1955: 104*
1956: 101
1957:   84

1960: 107
1961: 123
1962: 103

1965: 120
1966:   96

1967: 109
1968: 107
1969:   88
1970:   84

1972:   89
1973:   66
1974:   43

1979:   40
1980:   45
1981:   37
1982:   41


1986:   52
1987:   49

1999: 148
2000: 126
2001: 107
2002:   79

2006: 101
2007: 100
2008:   62
2009:   77

*The ratio is the S&P 500 level at the end of the calendar year divided by 4Q final GDP in trillions of dollars. The average peak ratio in the series is 99. The average trough ratio is 71. The average spread between peak and trough ratios in the series is 27%. The ratio through 3Q2014 is 112, 13% above the average peak in the series.

The chart from Doug Short gives the Shiller p/e ratios on the record dates. The average peak of these is 22.6, the average trough is 14.2, and the average spread between them in the series is 35%. The Shiller p/e ratio at the end of 3Q2014 was 25.16, 11% above the average peak in the series. 

"Retail and Food Services Sales" falls 0.94% in December, which is cautionary for GDP

The drop is not that odd for a December.

In December 2007 we had a drop of 0.6%, in December 2008 a drop of 2.5% (part of the big whopper decline of 12.25% between summer 2008 and March 2009), and in December of 2011 a drop of 0.3%.

The drop in January 2014 when GDP went severely negative was 1.26%, so the 0.94% magnitude this time does not augur well for 4Q2014 GDP.

On GDP Mish sounds just like Ambrose Evans-Pritchard five years ago

Here is Mish in 2015:

"Effectively we have borrowed current growth from the future. Looking ahead, growth surprises will be predominantly on the downside for years to come."

Here is Ambrose in 2010:

"Debt draws forward prosperity, which leads to powerful overhang effects that are not properly incorporated into Fed models. That is the key reason why Ben Bernanke’s Fed was caught flat-footed when the crisis hit, and kept misjudging it until the events started to spin out of control."

John Early's model predicts 4Q2014 GDP between -1.2% and +1.4%

See John Early's "5 Reasons GDP Growth in Q4 May be 0%" at Seeking Alpha, here.

Top 10 investing years for subsequent 10 year returns since 1965 to date

1988: 18.80% nominal per annum average from the S&P500 12/'88-12/'98

1987: 18.15%

1989: 17.99%

1990: 17.57%

1979: 17.27%

1981: 16.53%

1982: 16.16%

1978: 16.14%

1977: 15.02%

1985: 14.98%

These years have an average total S&P500 market capitalization to GDP (in trillions) ratio of 48.

The ratio at the end of 3Q2014 was 112, which historically produces 10 year returns averaging about 3.24% nominal.

Rush Limbaugh is back for 2015 and he's dumber than ever, just like Zero Hedge

Here:

And the second thing I saw was the economy is growing at this 5% rate.  By the way, do you know how that happened, folks?  Do you know what the bulk of the economic growth -- I mean, what is the economy?  The economy is consumer spending, essentially, consumer spending and consumption, commerce.  You know what the majority of spending was in the fourth quarter was people spending money on Obamacare, mandated by law.  The vast majority of our economic growth -- this was made public by Tyler Durden at -- I forget the website.  It's off the top of my head.  Well-known business website.  Over half of the spending in this country in the fourth quarter was you and me and everybody else spending money on health care. ... Well, some economic growth, when over half of it is essentially required by the government? 

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Aside from the fact that the quarter in question is stated in error as the fourth, the idea that "the majority of spending . . . was people spending money on Obamacare" is ludicrous.

Line 17 in the snapshot above from the GDP report shows that 3Q2014 healthcare spending was $2.0089 trillion. Line 2 shows the total of all personal spending at $12.002 trillion. Healthcare spending thus represented just 16.7% of that in 3Q. And that percentage is identical to the percentage spent also on healthcare in 2013. Healthcare spending is not anywhere near "over half of the spending in this country in the fourth [sic] quarter".

ObamaCare hasn't suddenly driven up healthcare spending in 2014 at all. Maybe after the fourth quarter is over and we get the final number for that in March 2015 we will be able to say that Obamacare has driven up healthcare spending overall, but so far we cannot say that. So far such increases have been born by too small a percentage of the adult population to show up in the data.

What we can say is that so far healthcare spending is growing at a pace slightly behind the pace of the overall economy, which grew at 4.96% annualized in 3Q. Healthcare spending grew at a slightly less robust 4.6% rate.

It is likewise incorrect to say as Rush Limbaugh says that healthcare spending accounts for "the bulk of the economic growth" in 3Q. Healthcare spending grew $88.6 billion in 3Q2014 from 2013, which represents just 10.65% of the $831.7 billion overall increase in GDP over 2013 in the latest report. Over 89% of the increased growth thus came from other categories.

Conservatism is not about fighting lies with more lies.

What does stock market valuation in 2014 portend for the future?

Using the S&P 500 index level at the end of 3Q2014 divided by the final report of GDP in trillions of dollars you get a ratio of 112. 

To put that in its proper context from 1965, the mother of all buying opportunities at the end of 1981 produced a level of 38 and the outlier year at the other end of the scale was 1999 at the end of which the level stood at 152. So 112 is well north of the Mason-Dixon line of 95 for this analysis.

The nominal average return per annum for the ten years from the end of 1981 was 16.53% with dividends fully reinvested, but from 1999 it was . . . wait for it . . . -0.73%.

Similar levels to 2014 have obtained at the end of 2001 (108), 1997 (113), 1968 (110), and 1967 (112). The respective subsequent 10 year average returns have been 2.79%, 6.02%, 2.81% and 3.49%, for an average of these of 3.78%.

In other words, the future doesn't look so hot. 

Stock market valuation illustrated by total market capitalization to GDP ratios, selected years

"Steven Goddard" has a little fun with WaPo for Alaska temperature alarum

Yeah, where are all the stories about last winter? All gone, down the memory hole.

Here:

"The US recorded [in 2014] the most nights below zero since 1989, but Anchorage now represents the global climate."

Market valuation in 2014 is 15% above the 2007 level

Average market cap to GDP in 2006 and 2007 came in at 1.23, and then fell to 0.74 by the end of 2008.

As of the end of 3Q2014, the ratio has risen to 1.415, which is 15% above the level seven years ago before the stock market crash, and 91% above the 2008 level.

Current valuation is about 17.5% below the stratospheric level of 1.715 reached at the end of 1999, and almost 195% above the 1981 level at 0.48, the mother of all buying opportunities in our lifetimes.

Happy talk from Robert Lenzner of Forbes misses the 180 month bear market in performance

Robert Lenzner of Forbes, here, is only off by an order of magnitude (18 months vs. 180):

Bull markets last on average about 97 months each and gain an average of 440 points in the Standard & Poor’s 500 stock index. By comparison bear markets since the 1930s have an average duration of only 18 months and an average loss in value of about 40 percent.

Let's talk the most recent bear market in performance.

If you invested your nest egg in the stock markets fifteen years ago in a total stock market index fund, your average return annually, say in VTSMX, would be 4.75% through 2014, per Morningstar.

On the other hand, if you had taken the safe route and invested everything in an intermediate term bond index fund, say in VBIIX, your average annual return would be 6.52% through 2014, also per Morningstar.

DESPITE THE PHENOMENAL PERFORMANCE OF STOCK MARKETS SINCE 2011, WHEN THE S&P500 REVISITED THE 2008 CLIFF LEVEL BEFORE THE BOTTOM IN 2009, STOCKS ARE STILL IN A BEAR MARKET. NO ONE REALISES HOW BAD THEIR CONDITION STILL IS.

Only fools are investing in the stock market today. Returns from stocks 10 years from now will be similarly disappointing as they have been since 1999. If you have physical gold, keep it, imho. And if you can, raise cash, imho. Opportunities for riches to agile investors who are prepared to scoop up bargains as in the 1930s are in the offing.

As everyone should know by now but doesn't, 1999 was a blow off top period leading up to the previous inflation-adjusted stock market peak of August 2000.

Valuations today have still not reproduced themselves in comparison to the end of 1999 on a total market cap to GDP basis, but they are way above the 2007 levels and represent an historically exceptionally rarefied level of valuation. Valuation at the end of 2014 based on total stock market cap to GDP will be relatively certain with the second report of 4Q2014 GDP at the end of February.

Stay tuned.

Healthcare spending through three quarters of 2014 has been only average

Healthcare spending through three quarters of 2014 has been only average, despite what you may have heard about a government conspiracy trying to hide massive spending for political reasons.

Healthcare spending's contribution to GDP in 1Q was -0.16, in 2Q +0.45, and in 3Q +0.52, for an average of three final quarterly reports of healthcare spending on an annualized basis totaling just +0.27 in 2014.

This number is completely within the historical norm for the previous four years, 2010 through 2013, when we had positive contributions of 0.15, 0.28, 0.37 and 0.24, averaging 0.26.

Expect to hear alarm bells sounded again if the 4Q number is high in the first estimate at the end of this month, but you should ignore them. The only proper comparison is with the third and final revision, for which we will have to wait until the end of March 2015.

That's just the way it is.