Personally, I think Rex Nutting's a commie, but he couldn't be more right about the fake news of "not in the labor force"

Rex Nutting is right. Our side has been trafficking in this piece of fake news for years, a factoid originating with Zero Hedge and endlessly repeated by the Goodyear blimp of gasbags Rush Limbaugh, touching all and sundry from Donald Trump on down to little known radio hosts on low power stations in Michigan like Steve Gruber in Lansing. Correct it try though you may, every attempt to stop it fails. It's embarrassing, not in the least because it exposes the endemic inability to think critically and the proclivity to believe in authorities which share your political opinions.

For all the good it will do, Rex Nutting goes once more unto the breach, here, with excellent links and a good graph, too:

There are a lot of “fake statistics” bandied about in service of some ideology or another, but I’d like to focus on just one example in which I have expertise from my work covering the monthly employment report over the past 20 years: The idea that there are 95 million Americans who are out of work but not counted as unemployed.

This statistic pervades the conservative discourse about our economy (or at least until Jan. 20). The implication of this statistic is that the government and media are lying to us. Instead of an economy that’s slowly improving as President Barack Obama has been telling us, our economy is actually a catastrophic failure, unable to provide any work for nearly 100 million people. ...

This is the perfect fake statistic, because it’s absolutely true. And completely meaningless.

Caroline Baum should be Treasury Secretary: She knows there's no reason even to think defaulting on the debt is possible

. . . unlike the rogues running the place currently, who are playing chicken with the full faith and credit of the US government.

Once again Caroline Baum cuts through the silliness and explains that there's plenty of revenue to pay what must be paid, here:

'The U.S. Treasury can’t cover all its monthly payments with incoming monthly revenue. But it can avoid default . . .. In any given month, the tax revenue flowing into the Treasury far exceeds interest payments — by a lot. Last month, for example, the Treasury took in $365 billion in tax receipts and made $21 billion in interest payments. For fiscal 2015, which ended Sept. 30, those figures are $3.2 trillion in tax receipts versus $402 billion in net interest. The U.S. government’s ability to service its debt — the principal can be rolled over — should not be an issue. But Treasury has made it one, claiming in 2011 and 2013 that it lacks the authority to prioritize debt payments, something households do all the time. ... [I]n written communications with the House Financial Services Committee in May 2014, the Treasury admitted that it would be “technologically capable” to prioritize debt payments.'

Obama says America is great right now, on same day his own Census Bureau reports people are 6.5% poorer than in 2007

Obama here.

Marketwatch here:

"The Census Bureau reported that median household income was $53,657 in 2014. That’s less than the 2013 median of $54,462, but not statistically different. What is of significance is that, when adjusted for inflation, the median household generated 6.5% less than they did in 2007, the year before the recession."

Obama's $500 tax relief is so George W. Bush 2.0

Obama is to announce tonight not even inflation-adjusted George W. Bush-type tax relief to middle class families, as reported here, but just another gimmick:

"Among the highlights of President Obama’s State of the Union address plans to pull the American family out of economic plight is a $500 tax credit for two-earner families."

George W. Bush bookended his administration with similar gimmicks.

OK, the first one wasn't exactly a gimmick. The first was part of the then-temporary tax reduction passed by the Congress. You know the one. The check in the mail was a result of the implementation of the tax rate schedule which existed for the rest of Bush's presidency but was set to expire by the time of Obama. Obama finally agreed to make that schedule permanent, something George W. Bush wasn't able to make happen but Speaker John Boehner was. (Why is that? And how come no one except maybe two people on the planet recognize and applaud that? I am one of them. A Forbes columnist, Ralph Benko, is the other. But I digress.)

Flashback to the San Francisco Chronicle in June 2001, here, just six months after Bush assumed office after the narrowest presidential election victory in living memory:

Bush signed the $1.35 trillion tax cut -- which includes soon-to-be-mailed rebate checks of up to $600 -- amid the kind of presidential pomp he usually disdains: a formal ceremony in the East Room, with a Marine band playing "Hail to the Chief." ... In Congress yesterday, a few Republicans talked about making the current bill permanent. One of its odd features is that it expires on Dec. 31, 2010, a sunset provision put in because of congressional rules governing spending more than a decade into the future.

Bush's second and real gimmick came at the end of his presidency in 2008, just before all hell broke loose in the economy with massive bank failures, massive bankruptcies, massive foreclosures, massive job losses, and massive stock market declines. It was a minor echo of Herbert Hoover trying to stop the Great Depression, double, triple, and quadruple-downed on by his successor FDR but to no avail.

Market Watch had the story here in February 2008, detailing the very liberal character of the Republican stimulus plan, which at the time met with no criticism from candidate Obama (why? because it was Obama's brand of liberalism also):

President Bush signed a $168 billion economic stimulus package on Wednesday that will extend rebates to U.S. taxpayers, give tax breaks to businesses and make more-expensive mortgages available through the government and government-sponsored mortgage-finance companies. ... Bush said the U.S. economy has clearly slowed but that the package is "a booster shot for our economy." Approved by lawmakers last week, the package provides a tax rebate of up to $1,200 per working couple, plus $300 per child. ... Taxpayers will not have to apply for the rebate; it would come automatically based on their 2007 tax return. ... Democratic presidential candidate Barack Obama wove the stimulus package into a speech in Janesville, Wisc., on Wednesday, touting a plan he offered a few weeks ago. He proposed sending each working family a $500 tax cut and each senior a $250 supplement to their Social Security check. "Neither George Bush nor Hillary Clinton had that kind of immediate, broad-based relief in their original stimulus proposals, but I'm glad that the stimulus package that was recently passed by Congress does," Obama said.

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These crumbs from the Master's table aren't going to help Americans do anything except survive as dependents, maybe for a week. What Americans need is jobs, decent jobs, and the decent wages which go with them, and liberals know nothing about how to provide them with those.

Index fund flows in 2014 may indicate the top is in, or nearly in

Seen here:

The impact of index funds has been revolutionary. When John Bogle, the founder of Vanguard, introduced the first vehicle designed to passively track the performance of a stock index about 40 years ago, it was derided as “Bogle’s Folly.” Today the fund’s successors, at Vanguard and elsewhere, hold $2 trillion in assets. ...

Actively managed funds still hold a majority of total stock fund assets, 63% at the end of September. But in the first nine months of 2014, actively managed stock funds attracted $2.5 billion, while $173 billion found its way into index funds, or 98.6% of the total.

This flood of money into index funds came after the market already had recorded substantial gains. [James] Stack contends that such lopsided affection for passive investing — and the lack of concern for risk that he infers from it — hints at an approaching top, as does the evidence of history.

“Generally, the times when index investing reaches the highest popularity are in aging bull markets or near market peaks,” he says.

There's the poverty level, and then there's "the working poor": United Way releases ALICE data

Key to ALICE calculations is assessing when more than a third of income goes to rent/housing, which usually happens when a good job goes away and is replaced by a lower-paying one, making the mortgage or the rent suddenly unaffordable. Rents have risen and become less affordable at the same time as the housing market has recovered from the 2011 lows. In the summer it was reported here that 52% of Americans have had trouble in the last three years covering either the rent or the mortgage. 

The Florida data is discussed here, where fully 45% of the households are in rough shape:

While 15 percent of Florida households are below the poverty level, another 30 percent are financially insecure — a figure that also applies to Sarasota and Manatee counties — based on a new measurement developed by the United Way. ... Florida's large number of financially fragile households is rooted in a number of economic trends, including housing affordability and other cost-of-living concerns. But the main driver is the dearth of middle-class jobs.

The Connecticut data is discussed here, where 35% of the households are struggling:

In Connecticut, the new report said, 10 percent of all households fall under the poverty level, and 25 percent are between the poverty level and the ALICE [asset-limited, income-constrained, employed] threshold. ... Similar ALICE reports have been done in a limited number of other states by their United Way organizations. Northern New Jersey was the first to shine a light on the ALICE population, and this year, for the first time, Connecticut, California, Florida, Indiana and Michigan United Ways have commissioned their own studies. Connecticut has the lowest proportion of residents below the federal poverty level and the lowest combined total in the ALICE category and below the poverty line of any of the states.

The housing riot: Average time in mortgage delinquency is 2.7 years nationwide, 4 years in New York State

Lawlessness and mayhem isn't just for po folk in Ferguson, Missouri, where law enforcement was overwhelmed by the bad actors doing millions of dollars in damage on the streets. Same goes for freeloaders in judicial mortgage states like New York where the authorities do not have the capacity to deal with the widespread problem of non-payment.

From Michael Sincere, here:

Millions of homeowners are already seriously delinquent. “The average length of time that houses remain delinquent nationwide is 995 days,” [Keith] Jurow says. “The worst culprit is New York State. The average delinquency period there is four years.” Many homeowners are aware that banks are not in a rush to file foreclosures, so they stay in their houses mortgage-free. “The banks are not initiating foreclosure proceedings because once the servicer forecloses, the lender takes a hit on earnings,” Jurow says. “They also have to manage the property, and most banks don’t want to do that.”

Rex "The Nut" Nutting commits drive by shooting of American savers, misunderstands excess reserves

The resident communist at MarketWatch weighs in here:

Sure, people need to keep some money handy to pay their bills and some folks might have a few hundred or a few thousand in a rainy-day fund, but no one needs immediate access to the equivalent of 11 months of income. In essence, there’s $10.8 trillion stuffed into mattresses. That $10.8 trillion hoard represents a failure of Fed policy. Since the Fed began quantitative easing in September 2012, U.S. households have socked away $1.17 trillion in their low-yield accounts. That means that 95% of the Fed’s $1.24 trillion QE3 ended up not in bubbly markets but in a safe and boring bank account.

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The $1.17 trillion since September 2012 is nicely represented in "excess reserves of depository institutions", which are up $1.21 trillion since that time. So sorry, Rex, the banks are holding on to that cash, not households. The reason? They must, to help comply with increased capital requirements under Basel III rules in the wake of the panic of 2008. That's the reason for QE, but no one wants to call it the continued bank bailout that it is while the rest of us continue to suffer without bailouts of our own. People might actually revolt if they did that, so it's best to call QE and its evil twin ZIRP necessary measures to prop up housing, employment and the like. To call it a bank bailout would just give it away, and we can't have that, now can we?

Savings deposits, meanwhile, are up less than $1 trillion since September 2012, to which, by the way, no one has "immediate access". Savings deposits are not "demand deposits" like checking accounts. It can take up to 30 days to get all your money out of savings, which now totals $7.38 trillion. Demand deposits at commercial banks, on the other hand, are up just $220 billion since September 2012, to $1.18 trillion, and total checkable deposits are up just $320 billion to $1.66 trillion. Not exactly a lot of money in a $17 trillion economy.

These savings, such as they are, aren't a failure of Fed policy. They are actually a repudiation of it by a part of the population which still possesses a cultural memory of the basis of capitalism.

Wake up and join the revolution, Rex.

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.

January Margin Debt Was 5th Record High In A Row

Reported here:

Margin debt hit record levels at the end of January, according to New York Stock Exchange data. Margin debt at the end of January reached $451.3 billion, its fifth record month in a row. Margin debt returned and surpassed record levels set in July 2007 back in April when it topped $384.37 billion.

And Now A Word From The Paternal Fascists At Wells Fargo

Seen here:

“Retirement security is a shared responsibility between government, business, and individual and a system that is designed to motivate all stakeholders will drive the best outcome for Americans to achieve retirement security, said Joe Ready, director of Wells Fargo Institutional Retirement and Trust.

In the good old days your retirement was no one's responsibility but your own.

Both Shiller p/e and Tobin's q warn stocks are seriously overvalued

As reported by Brett Arends, here:

Smithers found that over the past century the Shiller PE had an R-squared to subsequent returns of 0.52, the “Pseudo-Indicator” one of 0.61, and the q an astounding 0.79.

So if the past is any guide, if you want to get a good estimate of the future returns from today’s stock market you should completely ignore the low yields on cash, certificates of deposit, or bonds. You should pay more attention to the Shiller PE, and you should pay the most attention to the Tobin’s q.

And what do these tell you? “As at the 31st December, 2013,” says Smithers, the “q indicated that U.S. non-financial equities were overvalued by 73% and CAPE indicated an overvaluation of 76% for equities, including financials.”

Home Buyers Using All Cash Hits All Time High

So says the National Association of Realtors, here:

Walt Molony, a spokesman for the National Association of Realtors, says that the association’s estimates of the share of the market made up by all-cash buyers are lower than the others, at 31% in July, but that they’re still at an all-time high. ... Molony says that investors make up 35% of all-cash buyers (70% of all investors pay cash), while retirees who’ve built up equity in their homes or paid off their mortgages account for 12%. The rest include vacation-home buyers and foreign buyers.

Old Yeller, New Yellen?

“When the time has come, am I going to support raising interest rates? You bet.” 

Janet Yellen, quoted here.

Cyclically-Adjusted p/e Above 20 Forecasts Near-Zero 10yr Returns

As discussed here by Mark Hulbert:

Where does the CAPE stand today?

It currently is at 23.3, which is 41% higher than its historical average. While the CAPE’s current level is not as high as the 40+ readings that were registered at the top of the internet bubble, it does not bode well for the next ten years. On average over the last century, the S&P 500 has produced a 10-year inflation-adjusted return of close to zero whenever the CAPE has been above 20.

To be sure, note carefully that this is a 10-year forecast. Even if it turns out to be accurate, it doesn’t mean the market will decline in a straight line between now and 2023. It wouldn’t be inconsistent with this forecast for the market’s impressive recent rally to continue for a while longer, for example.

politicalcalculations.blogspot.com

Hulbert is right. On March 1, 2000 the Shiller p/e stood at 43.22. For the thirteen years from March 2000 to March 2013, your return in the S&P500, adjusted for inflation and with all dividends re-invested, as been exactly +0.05% per annum.

Sort of like investing in a money market fund right now.

Ouch.

By the way, the Shiller p/e this morning stands at 24.14.

Paul Farrell's Latest AntiCapitalist Mess At MarketWatch Ridiculed Good

In the comments section, here.

"William Sisco" and "J.D." obviously know their stuff.

Zillow Recognizes 2012 Housing Value Increase Is Double The Norm

The final three months of 2012 marked five consecutive quarters of U.S. home value appreciation, and the near 6% annual jump is roughly double the historical average that has home values climbing about 3% a year, Zillow said.

“Good news for homeowners after years of poor performance,” Stan Humphries, Zillow’s chief economist, said in a statement. But Humphries cautioned consumers against expecting 2012-like gains in the future, saying we expect this recovery to continue into 2013, but at a more sustainable pace.”

The rest is here.

Without a driver for jobs, I see no reason for housing to appreciate at even 3% per year. In fact, prices today are within that percentage of the historical top of their range prior to the bubble. In other words, prices are still too high, historically, but Zillow isn't going to tell you that, at least not that way.

Buyer beware, imho.

Flashback 2008: McCain Called For Spending Freeze During Crisis. In 2012 Romney Won't.

Who is the more conservative, Mitt Romney, who has said he won't cut spending dramatically in his first year for fear of causing another recession, or John McCain, who was quite radical by current standards in calling for a freeze on spending?

September 26, 2008|Russ Britt

LOS ANGELES (MarketWatch) -- Sen. John McCain proposed a possible spending freeze on virtually every federal program except the Department of Defense, for veterans and entitlement programs in a presidential debate with rival Barack Obama Friday night. Obama countered that approach is too broad-based, saying it was the equivalent of "using a hatchet where you need a scalpel."

Anybody seen the scalpel? The debt back then was $10 trillion. Now it's $15 trillion. And we're no longer AAA.

Video here.

Central Bank/Institutional Gold Demand Is Running at 630 Tonnes Annualized

The pace of gold acquisition by central bankers and institutions looks to have picked up over 50 percent in Q2 2012 over the 400 tonne-pace set between March 2011 and March 2012, according to this story:

Demand for gold from central banks and official sector institutions more than doubled in the second quarter of this year to 157.5 metric tons from the same quarter a year ago, according to a World Gold Council (WGC) report released Thursday.

That marked a record quarter for central bank buying since the sector began recording net purchases in the second quarter of 2009, according to the WGC report. Central banks in Kazakhstan, Russia, Ukraine and South Korea were among the big buyers.

Can We Call It A Depression Yet?

2008 GDP in 2005 dollars didn't recover until 2011, and only just barely so. 

Per the latest revisions from the Bureau of Economic Analysis here, real GDP in 2005 chained dollars:

2008 $13.162 trillion

2009   12.758

2010   13.063

2011   13.299

2012   13.558.

I've written that I think we had a depression starting in 2008 when GDP declined from the previous year 2007, and that the depression ended based on reports of real GDP, but perhaps looked at from the point of view of chained 2005 dollars the depression ended just last year and not in 2010 as I've maintained previously.

Al Lewis for MarketWatch here disagrees:

The Great Depression that Federal Reserve Chairman Ben Bernanke claims to have averted has been part of the background radiation of our economy since at least 2008.

It’s just that like radiation — it’s invisible.

We’ve called it the recovery, the jobless recovery, the slogging recovery and more recently the fading recovery. We’ve measured modest growth in our nation’s gross domestic product to record that our so-called Great Recession ended in June 2009. And now we are saying that if this disappointing growth suddenly disappears, as currently feared, we will be in a new recession.

There is nothing more depressing than hearing about a new recession when you haven’t fully recovered from the last one. I take heart in suspecting that in a still-distant future, historians will look back with clarity and call this whole rotten period a depression.


Lewis' remarks at least show that calling what we've been through a "depression" is now possible in polite company.

I'd call that . . . progress!