Wow, a 6% GDP!
I’m guessing as it’s only 7:30 but WOW! What an amazing economy this must be in the fantasy-land where they concoct these numbers. Let’s see, we have 138M working people so we must have added 8.6M jobs, right? NO??? Well, then the people who are working must be putting in a lot of overtime, right? No? I know, everybody must be making 6% more money than last year! No? Well, then it must be coming through in benefits, right? No? Hmm, this is a hard game isn’t it? I KNOW!!! Housing prices – with China-like GDP growth our housing market must be red hot and surely our homes are up 6% in value! No? Damn, I feel like I’m playing deal or no deal and I picked the case with the penny…
Just like our discussion about what total BS the CPI was – GDP is no different. GDP is the sum of Consumption, Investment, Government Spending and Net Exports which means a combination of inflation and government spending can boost our GDP even as real consumption falls and the rising dollar papers over export losses. In other words – I buy $100Bn worth of Toyotas (5M at $20,000 each) from Japan with the dollar at 85 Yen. Now the dollar rises to 93 Yen and I’m "only" buying $90Bn worth of Toyotas (5M at $18,000 each) and our GDP for that segment is up 10%. Wow – FANTASTIC!
Are we happy? Are more Americans working? Is there more shipping? Are there more sales at the Toyota dealership? No. Is Japan happy? Not at all, they are getting less money for the same cars. Another group that hasn’t been happy are the oil exporters, who shipped us an average of 10.5 Million barrels a day at an average price of $60 last year ($630M) and are now shipping us just 8.5Mbd at $80 last week ($680M). Sure they are still getting their $680M a day by choking off production and creating false supply shortages, but they miss the days when they were able to charge us $100 for 11Mbd.
Don’t worry my OPEC pals, JPM and the other oil manipulators are working very hard to make sure you once again have Billions of more American dollars that you can funnel to terrorists and this Democratic Congress turns the same blind eye to the shenanigans as the previous administration did so happy days will soon be here again as our leaders have the unmitigated gall to get up and tell us that paying more money for the same stuff is a sign of economic growth rather than the destruction of middle class wealth it really is.
So Japan gets less money for the same cars and that offsets OPEC getting more money for less oil as our idiotic GDP system tells us that a mother who buys a gallon of milk for $5 is richer than a mother who buys a gallon of milk for $3. Isn’t economics great? I’m not going to get into a huge thing on this but here’s an interesting article on "What’s Wrong with the GDP" that makes for interesting reading. There’s a great paper on this in the Journal of Economic Psychology called "The GDP Paradox" and, of course, our man Joe Stiglitz argues for scrapping the whole system of measurement and starting from scratch – something that does not sit well with our friendbuddypal Jim Cramer, who’s head is currently so far up GS’s collective ass that I’m surprised he is still able to breathe.
Of course Stiglitz is one of the most noted critics of Goldman Sachs and the great global scam they are running and he has the ear of the EU – even as lap dogs like Cramer try to discredit his work in the US.
8:30 Update: OK, the official GDP number is 5.9%, I am the king of mising by 1 this week but as long at that 1 is 0.1% – it’s not too bad! Inventory builds added 3.88% of the 5.9% so good job not selling stuff America! There was an encouraging build in software and equipment investment but let’s keep in mind this was Q4 GDP and THANKS TO THIS 5.9% GAIN – our 2009 GDP was only -2.4% overall. Consumer spending rose 1.7%, which is nice but it was forecast to rise 2% and in Q3 it was up 2.8% so we’re heading the wrong way just a bit. Consumer spending accounted for 1.23% of our growth so that’s 1.23% for buying and 3.88% for stuff that was built but wasn’t bought on the assumption that someone will buy it eventually. It will be sad if that assumption proves incorrect…
Asia had a nice bounce this morning with the Hang Seng gaining 209 points (1%) back to 20,608 while the Nikkei inched back to the 10,200 mark with a 24-point gain to end the week at 10,126. The Shanghai and BSE were flat. A huge rebound in commodity prices sent Asian and Emerging Market commodity pushers higher and fortunately we took our money and ran on yesterday’s move down as we have learned a greedy bear is quickly turned into a bear-skinned rug in this market. Fundamentally, metal traders are ignoring the massive red flag of 90 Million Metric Tons of Steel that are stockpiled in Chinese Warehouses, “There is so much steel lying around that the warehouses are full,” Huang said in an interview today. “Ships coming in have no more places to unload and are piling up at the ports.”
Don’t worry commodity speculators, just because there is a 2-month oversupply of steel in China I’m sure that doesn’t mean you are being idiots paying $3.25 for copper (even more oversupplied) or $1,110 for gold. Don’t mind us while we short your positions – as Cramer says, we’re just prudently hedging and we simply forgot to make the upside bet!
Europe is nice and bouncy, up about 1% ahead of the US open. The FTSE held our 5,250 target yesterday so we expect a bounce back to at least a retest at 5,400 but it don’t mean a thing if the DAX can’t get back to the 5,750 mark (now 5,576). Europe is also rallying on miners and oil producers so we’ll be looking to go a little short into the weekend but we do expect a rally today to take us back to par for the year, which will be 10,428 on the Dow and 1,115 on the S&P – anything less than that will be a very poor showing after all this effort to push the markets higher.
Chicago PMI is going to be our big obstacle at 9:45 and then we have a dangerous Michigan Consumer Sentiment Poll at 9:55 and Existing home sales at 10. If we can get through those potential land-mines, we may be able to whip out the stick and rally back to green levels for 2010 and that will give the funds some good spin as we head into the last month of the quarter – which is what it’s really all about, right?