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.

GLD is down to 1062 metric tons yesterday

So says Reuters, here:

"Holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, fell a further 0.3 percent to 1,062.30 tonnes or 34.15 million ounces on Monday - the lowest since August 2009."

Barack Obama: The Social-Democratic Philistine Who Embraces The State . . .

"WE GOT YOUR MONEY!"

. . . and fears the people.

Barack Obama, disappointment to true believers everywhere, here at Ohio State University, May 5, 2013:

"Unfortunately, you've grown up hearing voices that incessantly warn of government as nothing more than some separate, sinister entity that's at the root of all our problems. Some of these same voices also do their best to gum up the works. They'll warn that tyranny [is] always lurking just around the corner. You should reject these voices. Because what they suggest is that our brave, and creative, and unique experiment in self-rule is somehow just a sham with which we can't be trusted."

Friedrich Engels, March 18, 1891, here:

"And people think they have taken quite an extraordinary bold step forward when they have rid themselves of belief in hereditary monarchy and swear by the democratic republic. In reality, however, the state is nothing but a machine for the oppression of one class by another, and indeed in the democratic republic no less than in the monarchy; and at best an evil inherited by the proletariat after its victorious struggle for class supremacy, whose worst sides the proletariat . . . cannot avoid having to lop off at the earliest possible moment, until such time as a new generation, reared in new and free social conditions, will be able to throw the entire lumber of the state on the scrap-heap. Of late, the Social-Democratic philistine has once more been filled with wholesome terror at the words: Dictatorship of the Proletariat."

Aren't Keynesianism and Homosexuality Equally Forms Of Psychological Rebellion?

"Despite his Cambridge education, aristocratic manner and wealth, Keynes was also an outsider in his own way. He was an aesthete who enjoyed describing himself as an 'immoralist,' a leading member of that sparkling circle of British intellectuals known as the Bloomsbury group that defied Victorian mores in both art and love. Keynes was married but was also homosexual, a fact that automatically put him in defiance of social convention.

"Keynes's rebellion against economic orthodoxy, as he explained himself, was not derived from the political discontents of socialism and class conflict. It was based on a psychological insight: capitalism was ripe for unprecedented abundance, universally distributed, if only human society could get beyond the stern dogma of the Protestant ethic, the Calvinist ethos that insisted self-denial and suffering were good and necessary for the human spirit. Save for the future, the Calvinist creed taught, and you will be rewarded in the long run and certainly in heaven. 'In the long run,' Keynes observed, 'we are all dead.' Enjoy the here and now, he insisted. Pleasure is good. Suffering is mostly unnecessary."

-- William Greider, Secrets of the Temple: How the Federal Reserve Runs the Country (New York: Touchstone, 1989), p. 318.

Funniest Chart Ever From The St. Louis Federal Reserve

Someone had a fat finger on the "zero" when updating the not-seasonally-adjusted full-time jobs data for this chart on Friday morning.

The result: 66.48 billion full time jobs in the US in December 1969!

Alas, our country has fallen from a great height indeed.

Mish Is Wrong About Full Time Employment Being Down. It's Up.

seasonally-adjusted full-time, 2007 peak to now

Mish is wrong about full time employment being down. It's up.

Here's Mish:

"Voluntary plus involuntary part-time employment rose by a whopping 441,000 jobs. Take away part-time jobs and there is not all that much to brag about. Indeed, full-time employment fell once again, this month by 148,000."

In the seasonally-adjusted category, full-time is up 150,000 in April from March. In the not-seasonally-adjusted category, full-time is up 878,000 between March and April! Usually-part-time is flirting with its highs again but is not yet at a new high above the March 2010 level of 28.106 million.

That said, what really counts is that despite some improvement in the figures, the fact is full-time employment remains either 7.5 million off the 2007 peak in not-seasonally-adjusted terms, or 5.8 million off the peak in seasonally-adjusted terms. But part-time is not yet meaningfully above its peak levels to be able to say ObamaCare is part-timing the country at the expense of full-time jobs. The trend up in full-time has been in fits and starts and has been wholly inadequate, but it is up since 2010.

  

April Unemployment Drops To 7.5%, Full-Time Job Gains Ominously Slowing

The full unemployment report in pdf from the Bureau of Labor Statistics is here.

The official number of unemployed is unchanged from March at 11.7 million, while other broad categories are little changed from a month ago.

Part-time for economic reasons was back up almost 280,000 to 7.9 million while the average work week in April declined by 0.2 hours to 34.4 hours, a sign that part-timing may be an emerging trend as ObamaCare rules begin to percolate through the economy.

Job additions were relatively strong in April at 165,000 and a significant upward revision to March helped keep the prior twelve month average jobs gained figure to 169,000, unchanged from the last report.

Gains in full-time, year over year, took a huge jump in this month's report in the not-seasonally-adjusted category compared to last month's report when 880,000 full-time jobs were added from March 2012 to March 2013 (about 73,333 per month). For April 2012 to April 2013 the figure soars to 1,675,000 full-time jobs added year over year (about 139,583 per month).

As it turns out, that only looks like a big number compared to the last fifteen months of year-over-year full-time job additions, not-seasonally-adjusted:

April 2013/April 2012 = 1.675 million

March/March = 0.880 million

Feb/Feb = 1.604 million

Jan/Jan = 1.989 million

Dec/Dec = 2.029 million

Nov/Nov = 2.377 million

Oct/Oct = 2.589 million

Sept/Sept = 2.698 million

Aug/Aug = 1.928 million

Jul/Jul = 2.372 million

Jun/Jun = 2.769 million

May/May = 2.016 million

April/April = 2.155 million

March/March = 2.730 million

Feb/Feb = 1.856 million

Jan/Jan = 1.506 million.

In other words, for the current year 2013 to date the average report of full-time job gains year-over-year has been just 1.537 million January to April, down over 25% from the same period last year when the average was 2.062 million, and down nearly 32% from 2012's average report of 2.252 million full-time job gains year-over-year.

Whatever happy talk may be happening out there, the fact of the matter is that the pace of full-time job gains has definitely slowed to a significant degree while full-time employment remains over 6% off the July 2007 peak of 123.2 million.

Bad news.

ObamaCare Has Its Own Hitchhiker's Guide To The Galaxy Moment

ABCNews reports the following here:

The Kaiser Family Foundation released results of a non-partisan study today finding more than 40 percent did not even know the law was in place.

“Four in ten Americans (42%) are unaware that the ACA [Affordable Care Act] is still the law of the land,” the report says, “including 12 percent who believe the law has been repealed by Congress, 7 percent who believe it has been overturned by the Supreme Court and 23 percent who say they don’t know enough to say what the status of the law is.”

Bloomberg: Incompetent Cops Skipped Street Where Wounded Tsarnaev Hid In Boat

Here:

Sue Lund lives about five blocks from where police engaged in a wild shootout April 19 with the two Boston Marathon bombing suspects and about eight doors down from where the one who escaped alive was found 18 hours later.

Yet, during the all-day manhunt, she said police never searched her Franklin Street home or garden shed in Watertown, Massachusetts. Ten other neighbors had the same story and said they didn’t know of any homes that had been searched on Franklin, where Dzhokhar Tsarnaev was discovered by someone on the street about 30 minutes after an area lockdown was lifted. ...

How did hundreds of police who descended on the town fail to find a 19-year-old, who was unarmed and shot, lying under a tarp on a boat in the backyard of a house about 400 yards (366 meters) from where he had abandoned a car after fleeing the scene of the firefight? ...

Initial reports described the gunfire and grenade explosions as a firefight with a desperate fugitive. In fact, it was a one-sided shootout. Investigators didn’t recover a weapon from the boat, according to two federal law enforcement officials who asked not to be identified in discussing an active criminal probe.

Real Federal Spending Growth Since 2000 Has Outstripped Real GDP 3 To 1

Your government in action

People who keep saying government should spend more to grow the economy more don't want to confront the fact that despite the growth in real federal outlays between fiscal 2000 and fiscal 2012, real GDP growth has lagged far behind by a ratio of 2.77 to 1.

Federal outlays in fiscal 2000 (in 2005 dollars) were $2.0406 trillion, and $3.2125 trillion in 2012, according to the Tax Policy Center, here. That's an increase in real spending of 57.4% over the period.

Contrast that with real GDP. On October 1, 2000 real GDP stood at $11.325 trillion. Twelve years later it was only $13.6654 trillion, an increase in real GDP of only 20.7% over the same years.

If federal spending counts just as much as private spending for GDP, it's not self-evident from these numbers that the higher rate of spending is doing anything to boost real GDP. Quite the opposite.

A more prudent way to look at would be to say that maybe all those federal expenditures in excess of the 20.7% of real economic growth were wasted, even destroyed, and that in fiscal 2012 real federal spending should have been $750 billion less than it was.

Meanwhile the bureaucrats scream bloody murder over a lousy $85 billion across the board spending cut for 2013.

Cutting off a drunk is never pretty.

On the other hand, he probably won't remember who last put a foot in his ass, either.

Housing, Shmousing. Here's What's Really Been Happening.

RC Whalen, here, in January:

"[J]udicial states remain mired in foreclosure backlogs that still stretch ahead for years to come.  Because Barack Obama and Tim Geithner refused to restructure the truly sick parts of the US housing sector (and the zombie banks with these exposures), only sectors where speculative capital can be deployed quickly and easily are showing signs of life.  You don’t see private equity firms buying homes in Scarsdale, NY, or Greenwich, CT, now do you?  Even ignoring the horrible effects of SS Sandy, was NJ housing really recovering?"  

Mish Finally Calls This Economy Fascism

Took him long enough, here:

"In short, the problems we face are not the result of free market capitalism, but rather the results of Fed sponsored corporate and military fascism."

The instrumentality through which fascism is expressed in the United States today is the banking system reorganized in 1913 under the Federal Reserve. The brakes put on it with the Glass-Steagall Act in 1933 after it cracked-up the first time after only twenty years were released in 1999 with the passage of the Gramm-Leach-Bliley Act.

It took only nine years to crack up the second time.

Number One Insult Which Made Tamerlan Tsarnaev Angry

"Your mother just wears a suicide vest because she's flat."

Imagine A World Without Balloons? How About One Without Idiots?

Another remove-all-doubt moment from the irrepressible Rep. Hank Johnson of Georgia, here, on "helium", one of America's "real concerns".

We Need All The Global Warming We Can Get: An Ice Age Is Coming

So WUWT here:

"[T]here have been 5 interglacial events in the last 500,000 years. At ~10,500 years our current cooler but benign Holocene interglacial is coming towards its end and the reversion of our planet to a real ice age is foreseeable."

Big Deal: Debt To GDP Ratio Comes In At 105%

The debt as of 4/24/13 was $16.7943 trillion. GDP in the latest report was $16.0102 trillion. So the one divided by the other yields 1.05, or 105%. To which I say, Big deal.

In other words, the current annualized national income no longer is sufficient to cover what we owe. But there is no situation in which anyone stops consuming and simply works for a year to pay off everything one owes. At this you'd last maybe 40 days if you were Jesus Christ, but trust me, you aren't Jesus Christ. This is not the way to look at it. Instead, we should look at the debt like a mortgage.

Interest payments on this ever-growing debt in fiscal 2012 came to $360 billion, implying an interest rate paid of a little more than 2%. This rate is artificial. It is the result of manipulation afforded to us by the Federal Reserve's deliberate policy we affectionately call ZIRP, zero interest rate policy, which pushes long term interest rates down into the cellar. A more realistic rate would be double that, 4%, about a half point higher than current averages for 30-year mortgages (call it an extra penalty for having less than AAA status if you want). So, if one were to treat the total public debt outstanding like a mortgage amortized over 30 years at 4% fixed, our "mortgage" payment to pay off the debt would be $80.304 billion monthly, or about $964 billion a year. And you'd have to stop deficit spending.

In the current spending environment, $964 billion annually is about 25% of current government outlays of $3.8 trillion. Current government receipts, however, have lagged the outlays by about $1 trillion annually, so the "mortgage" payment would be closer to 35% of income.

Responsible persons all over this country pay off mortgages with that percentage of income devoted to debt service, and they do it all the time. It's high time the federal government started acting like them. In order to do so, however, current spending apart from the "mortgage" payment would have to be cut $1.96 trillion annually, or 48%, to $1.84 trillion annually for all programs. (That squealing you hear is the sound of stuck pigs).

Somebody get on this right away.     

Q1 2013 Real GDP First Estimate At 2.5%, Q4 2012 Remains At 0.4%

So reports the BEA here:

Real gross domestic product -- the output of goods and services produced by labor and property located in the United States -- increased at an annual rate of 2.5 percent in the first quarter of 2013 (that is, from the fourth quarter to the first quarter), according to the "advance" estimate released by the Bureau of Economic Analysis. In the fourth quarter, real GDP increased 0.4 percent.

Inflation-adjusted GDP under Obama continues to print in a narrow low range, averaging just 0.83% from 2009 through 2012, the worst on record in the post-war. With an average annual report of 2.04% under George Bush, economic growth was almost 2.5 times better under Bush than under Obama. GDP under Bush only seemed so bad because growth under Clinton's second term was so good at 4.5% per year.

In order to best George Bush's lacklustre record, Barack Obama is going to have to put up average real GDP numbers every year 2013 through 2016 of at least 3.5%.

At 2.5% in today's report, he's already off to a very slow start.

Central Bankers Buying Stocks: Is This Another Sign Of A Top?

Bloomberg reports here:

Central banks, guardians of the world’s $11 trillion in foreign-exchange reserves, are buying stocks in record amounts as falling bond yields push even risk-averse investors toward equities.

In a survey of 60 central bankers this month by Central Banking Publications and Royal Bank of Scotland Group Plc, 23 percent said they own shares or plan to buy them. The Bank of Japan, holder of the second-biggest reserves, said April 4 it will more than double investments in equity exchange-traded funds to 3.5 trillion yen ($35.2 billion) by 2014. The Bank of Israel bought stocks for the first time last year while the Swiss National Bank and the Czech National Bank have boosted their holdings to at least 10 percent of reserves. ...

Currency reserves among the world’s central banks climbed by $734 billion in 2012 to a record $10.9 trillion, according to data from the Washington-based International Monetary Fund. That’s about 20 percent of the $55 trillion market value of global stocks, data compiled by Bloomberg show. ... 

Even so, 70 percent of the central bankers in the survey indicated that equities are “beyond the pale.”

Notice how the first paragraph calls central banks "risk-averse investors", showing that the line between investing and banking has been completely erased in the popular reporting even as the evidence of the survey shows that for most central bankers the line remains boldly drawn. Banks don't invest, they bank.

Purchases of gold by central banks in recent years is interesting in that context. While buying stocks might mean investing to central bankers, something to be shunned, buying gold is not really investing, otherwise they wouldn't have been doing so much of it.

Gold reserves in the world now total roughly 31,000 tonnes, or about $1.5 trillion if gold is $1,500 the ounce. This amounts to 13.7% of the total forex reserves of $10.9 trillion mentioned in the article. In the context of the Basel III capital rules, that's considerably more hard collateral being set aside by the folks running the show as time goes by than by the downstream bankers who protest against building up to seven, eight or nine percent capital ratios.

I'm glad central banks are buying more gold. They should do even more of it. But investing in stocks by banks, central or otherwise, isn't banking. It's gambling, especially at these levels.

Compared to all of 2013, initial claims for unemployment are down 10% in the last month.

The 4-week moving average of raw first time claims for unemployment is 339,000. Today's initial claims  report is here, showing the contrasting seasonally adjusted figure at 358,000, about 6% higher than the raw numbers indicate is the situation over the last month.

The lower raw figure yields an annualized rate of 17.6 million in the last month, the higher seasonally adjusted figure an annualized rate of 18.6 million. Up until today the raw annualized rate for all of 2013 has been running at 19.5 million, so the trend is definitely lower, almost 10% lower, in the last four weeks and is positive for job gains. 

The Millions Who Lost Their Jobs, 2001-2012

What follows are first time claims for unemployment compensation, not-seasonally-adjusted, by year from 2001 through 2012, using Department of Labor figures, here, rounded to the nearest thousand weekly and totaled:

2001 20.9 million
2002 20.9 million
2003 20.8 million
2004 17.7 million
2005 17.7 million
2006 16.2 million
2007 16.7 million
2008 21.6 million
2009 29.5 million
2010 23.7 million
2011 21.7 million
2012 19.4 million.

George W. Bush, first term average = 20.1 million annually (387,000 weekly)
Barack H. Obama, first term average = 23.6 million annually (454,000 weekly)

George W. Bush, second term average = 18.1 million annually (348,000 weekly)
Barack H. Obama, second term average = ? (at 375,000 weekly for the first 15 weeks of 2013, that's an annual rate of 19.5 million to date)

George W. Bush, total average over both terms = 19.1 million annually (367,000 weekly)

FBI Can't Keep Track Of 27,000 Threats In TIDE Database, So Forget 159 Million On Visas

About 40% of illegal aliens in the US overstay their visas.

Reuters reports here:

The FBI found nothing to suggest [Tamerlan Tsarnaev] was an active threat, but all the same placed his name on the "Terrorist Identities Datamart Environment" list. The FBI has not said what it did find about Tsarnaev.

But the database, which holds more than half a million names, is only a repository of information on people who U.S. authorities see as known, suspected or potential terrorists from around the world.

Because of its huge size, U.S. investigators do not routinely monitor everyone registered there, said U.S. officials familiar with the database.

As of 2008, TIDE contained more than 540,000 names, although they represented about 450,000 actual people, because some of the entries are aliases or different name spellings for the same person. Fewer than 5 percent of the TIDE entries were U.S. citizens or legal residents, according to a description of the database on the NCTC website.

Janet Napolitano's System Works Again

Rich Liberals Pay People Under The Table. Doesn't Everyone?

The Washington Post has drunk the KoolAid offered up by The New Yorker that there is an enormous underground economy out there where child-walkers and nannies get paid under the table helping to account for as much as $2 trillion in unreported income. $2T! Imagine it!

This must be part of a softening up campaign underway to raise taxes on the middle class. After all, we can afford to pay, they lie to themselves. But in all my long life in the middle class, I have known exactly two persons who could afford a nanny, one of whom can't anymore. She is an MBA who worked in an industry that actually made things. People stopped buying those things, and she lost her very good job. The other one deals in trouble. She is a liberal insurance company lawyer who still has hers. As for the child-walkers, I have known exactly none. In fact, I've never even seen one, not in Colorado, not in Illinois, and not in Michigan where I now live.

This is a liberal fantasy projected onto the rest of the country. It is rich liberals, denizens of America's great cities, who hire the nannies and pay the child-walkers, all under the table. The rest of us drive our own kids to school or walk them to the bus ourselves, clean our own homes, and do all the other things of daily living for ourselves. We can't afford to hire anybody. In fact, we're plundering our retirement accounts just to maintain our former standard of living. You know, the one we had in the years B.O., Before Obama. For many of us in the years A.O., our income has been cut in half because we got fired after long, productive careers. The nearly 30 million people who filed first time claims for unemployment in 2009 were a response to the 2008 election, not the effect of you know who. Employers knew what was coming, and boy, were they right. That contractor I'd like to hire and pay cash to replace the windows with the broken seals will just have to wait, about four more years is my guess.

In 2011 over 80% of wage earners made less than $60K per year, but we are somehow supposed to be the ones paying all these people under the table for services we can't afford? That's 122 million wage earners out of 151 million who are shelling out all this dough? You know, the same ones who've canceled cable, stopped eating out, jacked-up all their deductibles and learned a hundred ways to make red beans and rice.  

They used to call it liberal projection syndrome back in the day when education was good enough to transmit subtlety. Now we just call it bull.

New Home Sales Under Obama The Worst Since 1960s

Unlike previous dips to the 400,000 level going back to the 1960s, there's been no sharp recovery in sales of new single family homes back up to the 800,000 level. In four out of six previous dives to the depths new housing sales quickly punched back up above 800,000.

We, by contrast, seem to remain stuck in the basement. The second graph shows new sales under Obama, also at the seasonally adjusted annual rate, averaging 374,000 in 2009, 321,000 in 2010, 307,000 in 2011, and 367,000 in 2012. That's a pathetic average of 342,000 new home sales annually during Obama's first term.

Pace Karl Popper, The Open Society Has Become The Enemy.

"Unlimited tolerance must lead to the disappearance of tolerance."

We don't make sure foreigners visiting our country legally actually leave, as reported here:

The Senate is discussing an overhaul that would require the government to track foreigners who overstay their visas. The problem is the U.S. currently doesn't have a reliable system for doing this. ...

Talk of illegal immigration often conjures images of people sneaking across the U.S. border from Mexico, but an estimated 40% or more of those now illegally in the U.S. entered with a valid visa. ...

In 2011, there were 159 million nonimmigrant visits to the U.S., according to the Department of Homeland Security. More than three-quarters were for pleasure. But millions also involved business travelers, temporary workers and students.

Sean Hannity Is Hopeless

Sean Hannity is hopeless.

He's playing as of yesterday in the opening to his radio program the excerpt of Boston Red Sox player David Ortiz shouting his profanity over the weekend, bleeped, of course.

What do you tell your kid when he asks, "Why'd they bleep that, daddy?" Not even talk radio can be left on in earshot of the children.

That's libertarianism for you, unable to conserve much of anything, including your kid's innocence.

Terrorists Win: Fascist Police Shred 4th Amendment In Watertown MA

Where are the Oathkeepers now, huh?

“The time is now near at hand which must probably determine, whether Americans are to be, Freemen, or Slaves; whether they are to have any property they can call their own; whether their Houses, and Farms, are to be pillaged and destroyed, and they consigned to a State of Wretchedness from which no human efforts will probably deliver them. The fate of unborn Millions will now depend, under God, on the Courage and Conduct of this army” – Gen. George Washington, to his troops before the battle of Long Island

After violating the 4th Amendment rights of just about everybody in Watertown, Massachusetts, the incompetent police couldn't find Tsarnaev, but the wretched of Watertown meekly groveled and even thanked their oppressors.

"Haende Hoch!" the Gestapo cries in the video, except in English. You'll be hearing this next at your local train station, bus stop and at road checkpoints manned by Obama's ever-expanding army of TSA goons, just as you do now at every airport. 

Video here.

Story here.

Incompetent FBI Interviewed T. Tsarnaev In 2011, Overlooked Travel In 2012

What we have after all these billons of tax dollars wasted by DHS, TSA, FBI and the rest of the federal alphabet soup is another case of the one that got away. The "security" was just theatre.

As one astute guest said yesterday on the Sean Hannity show, nobody at the FBI remembered a guy whom they interrogated personally in 2011 (after being alerted by the Russians in 2010) when they reviewed photo and video evidence of the bombing in Boston showing Tamerlan Tsarnaev in April 2013. That's right. It took a victim, Jeff Bauman, to finger Tamerlan's brother to get to Tamerlan Tsarnaev.

And now Sen. Lindsey Grahamnesty is claiming the exit of Tamerlan Tsarnaev to visit Russia in 2012 for what looks like six months of terrorist training was missed by the FBI because his name was misspelled.

That was the same problem with the Fruit of Kaboom bomber, who got on a flight to the US because even though he was supposed to be on a no-fly list his name, Abdulmutallab, was misspelled by a government employee, as reported here:

"Officials say the failed plot also tipped them off to the potentially serious consequences of a small mistake: a spelling error. The State Department incorrectly spelled Abdulmutallab's name on his visa application. When Abdulmutallab's father warned the U.S. embassy in Nigeria that his son had been radicalized, embassy staffers couldn't find Abdulmutallab's name in their visa database — because it was entered with an incorrect spelling."

That was months before the flight to Detroit.

As I've maintained before, people who can't spell are dangerous.

CBS story here.

Washington Times story here.

The New Yorker Magazine Engages In Pure Fantasy About The Underground Economy

This is your stereotypical New York look-down-your-nose-at-the-rubes dismissal of fly-over country where God, guns and cash deals are the bogeymen gussied up with an appeal to an ignorant authority even as real retail adjusted for population shows we are still over 8% below the 2005 peak:

Off-the-books activity also helps explain a mystery about the current economy: even though the percentage of Americans officially working has dropped dramatically, and even though household income is still well below what it was in 2007, personal consumption is higher than it was before the recession, and retail sales have been growing briskly (despite a dip in March). Bernard Baumohl, an economist at the Economic Outlook Group, estimates that, based on historical patterns, current retail sales are actually what you’d expect if the unemployment rate were around five or six per cent, rather than the 7.6 per cent we’re stuck with. The difference, he argues, probably reflects workers migrating into the shadow economy. “It’s typical that during recessions people work on the side while collecting unemployment,” Baumohl told me. “But the severity of the recession and the profound weakness of this recovery may mean that a lot more people have entered the underground economy, and have had to stay there longer.”

It's pure fantasy that $2 trillion in income (!) didn't get reported to the IRS based on nominal numbers of less than, for example, $5 trillion in retail sales in 2012, all generated by suddenly sidelined people (!), when real retail adjusted for population growth and ex-gasoline is still over 8% below the 2005 high:

(See Doug Short's discussion, here.)

That's right. The patriotic core of the country is a bunch of dishonest tax-evaders who are robbing the government blind with their vibrant, dishonest cash economy! They don't even have bank accounts, the pikers!

How dare they?!

The Line Of The Day Belongs To Rush Limbaugh

Rush Limbaugh parodied Rev. Jeremiah Wright today:

"Obama's Chechens . . . have come home . . . to roost!"

In Boston Bombing Case, The Score Is Actually Police 0, Citizens 2

Victim Jeff Bauman identified the bagman.

Boatowner Dave Henneberry bagged him.

Julius Genachowski's Favorite Baseball Player Talks Just Like The Terrorists' Friends

The Boston Red Sox' David Ortiz and Azmat and Diaz share a rather limited vocabulary.

Story here.

Julius Genachowski, Public Menace At The FCC

Obama's amoral commie at the FCC.

To Julius Genachowski, public menace:

Your statement excusing the public profanity of Red Sox player David Ortiz is completely unacceptable.

It's public officials like you who are responsible for advancing the decline of America pushed by its worst examples in sports and entertainment. You are supposed to enforce standards of public decency, but your disgusting rationalizations only mean our children will be exposed to more and more barbarity without our consent, degradations from which we find it increasingly difficult to protect them.

I can't say for whom I feel more contempt, David Ortiz, you, or the ne'er-do-well who gave you your job.

Signed,

A Patriot

Incompetent Government Couldn't Stop Tsarnaev Or Find Him Afterwards

Our incompetent government, after spending billions of our dollars to stop terrorists and shredding our liberties in the process through surveillance of email and cellphone traffic and body searches at airports, couldn't stop yet another massacre by a couple of determined punks.

And afterwards it couldn't find the last suspect, even though the rights of a free people were trampled with the imposition of a police state and the shut down of a great American city:

"Up until the younger man's capture, it was looking like a grim day for police. As night fell, they announced that they were scaling back the hunt because they had come up empty-handed," it was reported here.

Maybe we should rethink who we let in here and why, instead of what we are doing, which is acting more like the unfree world from which immigrants to our country flee.

Why A Hailstorm Of Gunfire If Tsarnaev Was Found By Homeowner Curled-Up In A Ball?

These reports don't add up:

CNN here, where the video doesn't show the boat covered in a blue tarp but white, casting doubt on the credibility of what the stepson says but CNN seems to accept as fact anyway:

Henneberry [the homeowner] climbed a stepladder to look inside. "He basically stuck his head under the tarp (and) noticed a pool of blood," Duffy said. It was dark under the tarpaulin, so the boat owner could only make out vague contours, "but he definitely noticed there was something crumpled up in a ball," the stepson said. A pool of blood; a manhunt in Watertown; time to call 911. Squad cars with lights flashing raced in and lined the streets. Officers fanned out around the house. ... Duffy said he tried frantically to call his mother and stepfather as he watched on TV while law officers unleashed a hailstorm of gunfire into the backyard.

UK Daily Mail here, whose photos clearly show not a blue tarp but white, quotes the police spokesman unaccountably ringing the same bell that Tsarnaev was too out of it to resist:

'He had lost a lot of blood. He was so weak that we were able to just go in and scoop him up,' state police spokesman David Procopio told the Boston Herald adding that the suspect was in 'serious if not critical condition'.

Another video of gunfire, here, which is mostly noteworthy for what you hear, not what you see:

Barack Obama Wants Us All To Become Yuri Zhivago

"Yuri Zhivago (Omar Sharif) is essentially apolitical but he is also an idealist and when he returns home from the war to Moscow to discover that the People have taken over his home and moved 15 families into it, he pauses to process this infomation and then says 'It's much better this way. More just.' When his slightly more cynical uncle (Ralph Richardson) laughs at this, Yuri insists, 'but it is more just!'"

-- Kyle Smith, here

"President Obama’s fiscal 2014 budget has a section prohibiting individuals from accumulating over $3 million in tax-preferred retirement accounts. It states: 'Individual Retirement Accounts and other tax-preferred savings vehicles are intended to help middle class families save for retirement. But under current rules, some wealthy individuals are able to accumulate many millions of dollars in these accounts, substantially more than is needed to fund reasonable levels of retirement saving. The budget would limit an individual’s total balance across tax-preferred accounts to an amount sufficient to finance an annuity of not more than $205,000 per year in retirement, or about $3 million for someone retiring in 2013.'"

-- Blake Hurst, here

Louis Woodhill: Gold As Money Is Inevitably Deflationary In Terms Of Its Supply

So says Louis Woodhill for Forbes, here:

"The most fundamental issue that determines the workability of a gold standard is whether it attempts to use gold as money.  Any gold standard system where the size of the monetary base is determined by the physical supply of gold will eventually suffer a deflationary collapse.  The economic catastrophe that occurred in 1930 was inevitable, given the design of the gold standard system in use at the time. ...

"The use of gold as base money would quickly become the biggest single source of demand for gold, just as was the case during the years prior to the Great Depression.  Sooner or later, this new demand for gold would cause the real price of gold to start rising.  This would automatically cause the real value of the dollar to rise, precipitating a financial and economic crisis.

"Our highly leveraged financial system simply cannot tolerate monetary deflation.  During a financial crisis, everyone tries to become more liquid at the same time.  That is, everyone tries to increase their holdings of money, because the possession of money itself is the only thing that can guarantee that you will be able to pay your debts.

"If gold is money, and money is gold, this means that, once a liquidity crisis started, the demand for gold would increase.  This would drive up gold’s real value even farther, intensifying the crisis.  A destructive feedback loop would develop, leading to a complete meltdown of the financial system and the real economy.  This is exactly what happened in 1930."

It should be added that a monetarist system, by way of contrast, cannot tolerate credit deflation, but that is exactly what the United States is now facing with total credit market debt outstanding slowing to a crawl of $1.17 trillion added per year between 2007 and 2012. At the very slowest it should be growing at a rate of $4.33 trillion per year by historical measures, and at its fastest by $8.31 trillion per year.

The United States at present is in the throes of a deflationary collapse of monetarist making, not of dollar currency but of credit money, and it is the principal reason for the collapse of GDP. One of the largest sources of the "currency" of credit money in recent years has been mortgages, which are now effectively unacceptable as collateral because of the rot permeating the system in the form of defaults and underwaters.

Federal Reserve policy has actually been removing such collateral from circulation, along with US Treasuries, by placing it on its balance sheet. But since there is nothing "real" behind the dollars the Fed replaces this collateral with, there is no corresponding expansion of credit in size to match the former vigor of the process.

So perhaps the Fed should QE gold instead of MBS and Treasuries to provide something real behind the money created which would give that money a surer basis in collateral.

Central banks around the world have been buying gold in quantities not seen in 30 years in order to fill the collateral gap. The Fed should join them.

Bob Pisani's Wrong: GLD ETF Is Much Larger Than He Says

Bob Pisani reported here on Monday that the ETF GLD "only has 1,300 tons of gold":

"The largest gold ETF, the GLD, only has 1,300 tons of gold. Compare that to the 8,000 tons the U.S. has."

But Bloomberg's Nicholas Larkin reported here on Tuesday it's twice that amount as recently as December, and still nearly 2,400 tons since the price drop:

"The metal’s drop wiped out almost $1 billion of hedge-fund manager John Paulson’s wealth in the past two days. The 57-year-old began the year with about $9.5 billion invested across his hedge funds, of which 85 percent was in gold share classes. He’s sticking with his thesis that gold is the best hedge against inflation and currency debasement, John Reade, a partner and gold strategist at New York-based Paulson & Co., said in an e-mailed statement.

"Paulson is the largest investor in the SPDR Gold Trust (GLD), the biggest bullion-backed exchange-traded product. Global holdings in the products declined 9.5 percent this year to 2,382.4 tons, according to data compiled by Bloomberg. Assets reached a record 2,632.5 tons in December.

"The cost of protecting gold from losses in the options market increased. Puts protecting against a 10 percent drop in the SPDR Gold Trust cost 4.28 points more than calls betting on a 10 percent gain, the biggest difference on record, according to three-month data compiled by Bloomberg."

GLD is a much larger market maker for gold than many people realize.

Forget The "Threat" Of Deflation. Its Crushing REALITY Means Monetarism Is Doomed.

Galactic hitchhikers know this is the answer to everything.

Ambrose Evans-Pritchard and Lars Christensen, here, think deflation is only an omnipresent threat:

The world is still in a contained depression. Sliding commodities tell us global money is if anything too tight. "There is a threat of deflation almost everywhere. A lot of central banks will have to follow the Bank of Japan, whatever they say now," said Lars Christensen from Danske Bank.

The era of money printing is young yet. Gold will have its day again.

I couldn't agree less. The threat isn't everywhere. The reality is everywhere.

Total credit market debt outstanding (TCMDO) for the five years ended on July 1, 2012 was up a paltry $5.83 trillion. Yes, I said paltry. For monetarism to continue working as it has in the past, TCMDO needs to double on average every 8.25 years. That's the historical experience of America going back to the beginning of the post-war. At the current rate since 2007, however, it's going to take until the year 2049 for TCMDO to double from July 1, 2007.

We've had periods of doubling as short as six years for TCMDO, and periods as long as 11.5 years, but at the current rate over the last five years continued into the indefinite future it's going to take 42 years to double. 42 years. Not 11.5 years. And not 6 years. 42 YEARS. America has hit a brick wall.

People who talk about an L-shaped recovery and decades of economic shrinkage ahead may not appreciate quite adequately enough just how right they are.

Deflation is on CNBC's radar.

Jeff Cox, here:

"What seemed like economic fantasy could soon become cold reality as the global economy wrestles with deflation despite hundreds of billions in central bank money creation."

Jim Cramer Gets It Right, Links Long Rise Of Commodity Prices To Creation Of ETFs

Think GLD, SLV, etc., as we've been saying.

Here:

"In the past two decades we have seen an unprecedented financialization, if you will, of all commodities. Pretty much everything is traded either through glibly created ETFs or through futures backed up by warehouses somewhere or through physical hoarding via tanker ships. The pools of money that have chosen to make commodities as an asset class is much larger than we can ever know because those funds aren't registered anywhere and pretty much report to no one.

"I am sure at one time, before the ETFs and the large pools of capital, you might have traded these commodities on actual supply and demand. ...

"What mattered was the financial buyer not the natural buyer."

So we all have been paying too much for this stuff for a long time already.

Same thing happened in housing, and commodities will end up just like housing, down big time.

Twelve Times Today's Silver Price Means $279 Gold

Louis Woodhill doesn't get there by the same rule, but he's in the same ballpark in this story from May 2012, when the average price of gold was $1,586:

[I]t only makes sense that the gold price be set by the application of a rule, and not via discretion exercised by “experts”.

It is possible to imagine catastrophic consequences to setting the value of the dollar in terms of either a gold price of $800 or $1600/oz.  In The Golden Constant, Roy Jastram argued that, over time, gold maintains its value in terms of the general price level.  If Jastram is correct (and he may well be), the gold price that would be consistent with today’s general price level would be around $225/oz.

Based on the average price of silver in May 2012, twelve times that yielded $343 gold.

Plato's Gold/Silver Ratio was 12, Founding Fathers' 15. At this hour it is 59.7!

Socrates

Now answer this further question: you say that if one acquires more than the amount one has spent, it is gain?

Friend

I do not mean, when it is evil, but if one gets more gold or silver than one has spent.

Socrates

Now, I am just going to ask you about that. Tell me,  if one spends half a pound of gold and gets double that weight in silver, has one got gain or loss?

Friend

Loss, I presume, Socrates for one's gold is reduced to twice, instead of twelve times, the value of silver.

Socrates

But you see, one has got more; or is double not more than half?

Friend

Not in worth, the one being silver and the other gold.

-- Plato's Hipparchus 231cd

First Time Claims for Unemployment In 2013 Still About Like Last Year: Bad

The raw number of first time unemployment claims averaged 336K per week in the last month in today's report. The seasonally-adjusted 4-week average number of first time claims for unemployment is higher at 361,000.

The raw figure of 336K yields an annualized 17.5 million, the seasonally-adjusted number 18.8 million. Both are still in excess of the annual actuals for 2006 or 2007, before the financial crisis, which were 16.2 million and 16.7 million respectively.

Actual claims for 2012 were 19.4 million, so we are right now in the last month still doing better than last year's overall rate of claims, at roughly 10% higher than pre-crisis averages. However, the average of all the raw claims for 2013 year to date is running at 375,000 per week, which annualized is 19.5 million, just slightly worse than last year.

At the height of the unemployment crisis in 2009 the raw number of first time claims totaled 29.5 million for the year, a rate of 567,000 per week.

Today's report is here. The link to past data which was unusually missing in last week's report got put back in today's.

Margaret Thatcher's Last Words

(here)