by Chart School - February 29th, 2012 11:35 pm
Courtesy of Doug Short.
Note from dshort: The charts in this commentary have been updated to include the Q4 GDP Second Estimate.
The chart below is my way to visualize real GDP change since 2007. I’ve used a stacked column chart to segment the four major components of GDP with a dashed line overlay to show the sum of the four, which is real GDP itself.
My data source for this chart is the Excel file accompanying the BEA’s latest GDP news release (see the links in the right column). Specifically, I used Table 2: Contributions to Percent Change in Real Gross Domestic Product.
Over the time frame of this chart, the Personal Consumption Expenditures (PCE) component has shown the most consistent correlation with real GDP itself. When PCE has been positive, GDP has been positive, and vice versa. The contribution of PCE came at 1.52 of the 2.98 real GDP. This is an improvement over the 1.24 PCE contribution to the 1.82 Q3 GDP. But the largest GDP contributor in Q4 was gross private domestic investment.
Note: GDP is normally rounded to one decimal place, currently at 3.0. The 2.98 GDP in the chart above is the sum of the four components expressed to two decimal places in Table 2. Real GDP calculated to two decimal places based on the BEA chained 2005 dollar amounts in Table 3 of the Excel file is likewise 2.98.
For a long-term view of the role of personal consumption in GDP and how it has increased over time, here is a snapshot of the PCE-to-GDP ratio since the inception of quarterly GDP in 1947.
I’ll update these charts when the Third Estimate of Q4 2011 GDP is released on March 29th.
by Zero Hedge - February 29th, 2012 11:32 pm
Submitted by Tyler Durden.
A month ago, Zero Hedge readers were stunned to learn that unemployment among Europe’s young adults has exploded as a result of the European financial crisis, and peaking anywhere between 46% in the case of Greece all they way to 51% for Spain. Which makes us wonder what the reaction will be to the discovery that when it comes to young adults (18-24) in the US, the employment rate is just barely above half, or 54%, which just happens to be the lowest in 64 years, and 7% worse than when Obama took office promising a whole lot of change 3 years ago.
And while technically this means 46% are unemployed, or the same percentage as in Greece, the US ratio, which comes from Pew, shows the ratio as a % of the total population: a very sensitive topic now that every month we see another 250,000 drop off mysteriously from the total labor force. However, unlike those on the trailing age end, young adults by definition are the labor force in their age group demographic, so it would be difficult to explain away this horrendous number by claiming that ever more 24 year olds are retiring. Although, yes, we agree that some may be dropping out of the labor force in order to go to college, incidentally the locus of the latest credit bubble, where they meet a fate worse even than secular unemployment: they become debt slaves of the Federal System, with non-dischargable debt at that, which even assuming they can get a job would take ages to pay back!
But wait: there’s more – of all age groups, this is the one that has actually seen its wages drop the most under the Obama administration.
So not only are they unemployed, young adults are at least poor.
Net result: double the change, zero the hope.
by Zero Hedge - February 29th, 2012 10:35 pm
Submitted by Tyler Durden.
While hardly needing a full-on onslaught by an Austrian thinker, when even some fairly simplistic reductio ad abusrdum thought experiments should suffice (boosting global GDP by a few million percent simply by building a death star comes to mind), Diapason’s Sean Corrigan has decided to take MMT, also known as “Modern Monetary Theory”, to the woodshed in his latest missive in a grammatical, syntaxic (replete with the usual 200+ word multi-clause sentences) and stylistic juggernaut, that only Corrigan is capable of. So sit back in that easy chair, grab your favorite bottle of rehypothecated Ouzo, and let the monetary hate wash through you.
Money, Macro and Markets
by Sean Corrigan of Diapason Commodities Management, and author of the excellent Santayana’s Curse
As regular readers of these scribblings have hopefully come to appreciate, this is not the place to come to slake your thirst for mechanistic ‘models’ and fancy-dan macro-correlation studies (for the technically-minded, this is precluded by the subjectivist, methodological individualism of the Austrian School to which we adhere).
The only exception to this—if, indeed, an exception it is—is to be found in out penchant for mapping out developments in money supply and, in particular, real money supply and relating these to potential changes in the revenue stream percolating through the economic structure and, hence, to their implications for income, returns on invested capital, and the supportability or otherwise of the accumulated debt burden.
To an Austrian, the credit cycle IS the business cycle, while, more generally, the many disruptions to the progressive delivery of greater material satisfaction we suffer —outside of those forcefully visited upon us by the political process—are almost inevitably the result of some unlooked-for departure in the rate of provision of new money from that to which people had become accustomed. Just occasionally it is not the supply itself, but rather some unwonted alteration to the eagerness with which money’s recipients hold on to that which comes their way which brings about these changes. In other words, every once in a while it may be a question of a changed appetite for, rather than a changed helping of, cash-at-hand which occasions a disruption. Such departures are hard to pick up from an inspection of the raw data, making their interpretation both more challenging and more a matter of…
by Zero Hedge - February 29th, 2012 8:40 pm
Submitted by Tyler Durden.
Here’s a chart you won’t see anywhere in the mainstream media – not the right, and certainly not the left. According to Rasmussen’s 2012 Presidential Election Matchups, which pit Obama against any of the four GOP presidential candidates, while the balance of challengers certainly appear to have no chance of defeating the incumbent (something we touched upon yesterday), today, for the first time, Ron Paul has managed to unseat the standing president, by a thin margin of 43 to 41, for the first time in this series.
Source: Rasmussen Reports (premium subscription required)
On the survey methodology: “Surveys covering three days are of 1,500 Likely Voters and Surveys of Two Days are of 1,000 Likely Voters. All Surveys Have a Margin of Error of +/- 3% .”
Some more from today’s Rasmussen blog:
The Rasmussen Reports daily Presidential Tracking Poll for Wednesday shows that 25% of the nation’s voters Strongly Approve of the way that Barack Obama is performing his role as president. Forty percent (40%) Strongly Disapprove, giving Obama a Presidential Approval Index rating of -15 (see trends).
Just 19% favor increased U.S. involvement in Syria. The Obama administration receives mixed reviews for handling that situation to date.
On the energy front, 58% believe that free market competition is the best way to get gas prices down. Just 27% think government regulations are a better approach. However, 67% believe that oil companies are using bad news to gouge customers.
In a possible 2012 matchup, Mitt Romney earns 45% of the vote, while the president attracts 44%. If Rick Santorum is the Republican nominee, the president leads by three, 46% to 43%. Matchup results are updated daily at 9:30 a.m. Eastern
What is oddly missing is that Ron Paul earns 43% of the vote, to Obama’s 41%.
So on one hand Ron Paul defeats the president head to head, and on the other, the GOP itself tells us he is a distant third to two frontrunners who frankly make one question the sanity of every American voter?
by Zero Hedge - February 29th, 2012 8:23 pm
Submitted by Tyler Durden.
Submitted by Mark McHugh from Across the Street
And The Douchebag Of The Year Award Goes To……
Unless February 29th is the new April Fool’s Day, I’m pretty sure Alan Dlugash locked up DOTY with this remark:
People who don’t have money don’t understand the stress. Could you imagine what it’s like to say I got three kids in private school, I have to think about pulling them out? How do you do that?”
Dluglash is describing the horror of scraping by on $350,000 a year. Really. How could you lucky bastards ever understand?
Ordinary Americans, with their fancy foodstamps and foreclosure notices, are increasingly turning a blind eye to the plight of the people who outsourced their jobs. You just don’t get it, do you? These people are light years smarter than you, and they work really hard. Now things are so dire, some are actually considering sending their kids to school with your germy kids. It’s bad.
Some have even been forced to shop for discount Salmon. How could people who enjoy cat food ever understand that kind of humiliation? If someone doesn’t halt this death spiral soon they may have to settle for Microsoft products (which even poor people hate).
This is all a joke, right? Cause if it’s not, wait ’til they find out about Walmart….
UK Parliament Member Lord James of Blackheath Alleges 15 Trillion Dollar Fraud Involving the Fed and Imaginary Gold
by Zero Hedge - February 29th, 2012 7:55 pm
Submitted by George Washington.
British Parliament member Lord James of Blackheath has alleged in a speech before Parliament an elaborate fraud involving the US government lying about hundreds of thousands of tons of imaginary gold, illegal wire transfers and loans totaling $15 trillion:
We have no idea whether Lord James is onto something big … or has fallen prey to the equivalent of a Nigerian internet scam.
As the Independent notes:
The House of Lords was treated to a 10-minute speech last week by Lord James of Blackheath, from whom we have not heard much since he announced in 2010 that he was in touch with Foundation X, a “genuine and sincere” secret organisation that wanted to lend the British government £75bn.
David James was a City businessman commissioned by the Tories, in opposition, to report on ways of eliminating government waste. Last week, the 74-year-old peer was exercised about a story he has picked up that $15trn – that is $15,000,000,000,000 – belonging to “the richest man in the world”, Yohannes Riyadi, was deposited in 2009 in the Royal Bank of Scotland. Lord James said he remains baffled after a two-year pursuit of the story, but has all the information on a memory stick, which he is offering to hand over to the Government.
His documents include a letter from the Bank of Indonesia telling him the whole story is a “complete fabrication”. He took his concerns to the Treasury minister, Lord Sassoon, who said: “This is rubbish. It is far too much money. It’d stick out like a sore thumb and you can’t see it in the RBS accounts.”
And an alert Financial Times blogger said that had Lord James googled “Yohannes Riyadi”, the first item to come up would be a warning from the Federal Reserve Bank of New York that the name is part of an internet scam designed to get money from the gullible. Two agents are trying to trace who is behind it. Perhaps Lord James should offer his memory stick.
by Zero Hedge - February 29th, 2012 7:44 pm
Submitted by Tyler Durden.
There are those who voraciously, and blindly, read any and all hedge fund reports, allowing the already useless information to enter one brain hemisphere and exit the other, just so they can brag that they read such and such’s monthly or year end letter. Frankly, we pity them, especially when in their attempt to ape success they confuse luck (which is responsible for 99% of hedge fund outliers) for skill, and in doing so constrain their minds even more. At least hopefully they don’t spend money on self-improvement books. As for trading recommendations, by the time an idea is in writing, the time to implement it is long gone. Anyway, for precisely this subet of people we provide the Paulson 2011 year end letter. Which is 102 pages. It is amazing how when one is printing money, one can get away with two paragraphs of year end ruminations and the LPs will be delighted. When, however one has brought AUM from $32 billion to under $20 billion net of redemptions, much more reading material is required to justify the 2 and 20, especially if the proceeds are used to invest in AAPL (and speaking of Apple, we wonder how long before the company starts charging a fee of 2 and 20 from all of its shareholders). We won’t spend much time dissecting the letter of a fund which blindly invested nearly half a billion in a company that two kids with an office exposed as fraud, suffice to copy and paste the following gem: “We believe this outperformance demonstrates our superior security analysis and selection due to our research edge.” Yup, mmmhmmm. All this and much more in the enclosed paperweight.
Incidentally, when we said 10 days ago that we have “Horrible News For Goldbugs – Paulson Is Bullish On Gold Again“, we were not kidding:
And so the Paulson overhang is back. Couldn’t Paulson just go ahead and buy Bank of America or some other worthless biohazard again? All that remains is for Roubini to say he prefers gold over spam (and always has, he was merely “misunderstood”) and the crash will be imminent.
Or perhaps we will learn following the next $1000 up move in gold that Gartman will have been long gold in
by ilene - February 29th, 2012 7:36 pm
Courtesy of Jesse's Cafe Americain
As Janet Tavakoli said the other day, the media coverage of this scandal has been a comedic lightweight fly by that no one in the know could possibly take seriously.
And as Chris Whalen said, we always have known where the money ended up. And that is a big part of the problem. Corzine is Too Big to Jail and the Banks are Too Big To Fail.
Perfect illustration of the credibility trap that is destroying the economy.
Now the elite New York Times chimes in with its own version of the mysteriously vaporizing, blameless money meme. Maybe someone should look in Judge Crater's pockets, or Jimmy Hoffa's wallet.
Et tu, Gray Lady?
As I said, I have now given up all hope of justice being done in this case. But I think obtaining some of the stolen customer money back from the banks and MF Global Holdings is still possible.
We're not in Kansas anymore, Toto. Smells more like 1920's Chicago.
What we need are The Untouchables, honest public servants not compromised in the web of a credibility trap.
Doubtful Signs of a Criminal Case Against MF Global
By AZAM AHMED and BEN PROTESS
February 28, 2012, 8:45 pm
Federal authorities are struggling to find evidence to support a criminal case stemming from the collapse of MF Global, even after a federal grand jury in Chicago has issued subpoenas.
Investigators, unable to find a smoking gun amid thousands of e-mails and documents, increasingly suspect that chaos and poor risk control systems prompted the disappearance of more than $1 billion in customer money, according to several people involved in the case. (Are these the emails that the lawyer for the Creditors in the bankrputcy case had sole possession of for months? Vaporization by honest sloppiness – Jesse)
When the money first went missing, prosecutors in New York and Chicago scrambled to stake a claim. Now, four months later, both Preet S. Bharara, the United States attorney in Manhattan, and Patrick J. Fitzgerald, his counterpart in Chicago, are shying away from leading the case, one of those people involved in the case said.
Indeed, a number of federal prosecutors have expressed doubts to others involved in the case that anyone at MF Global — including the firm’s chief executive, Jon S. Corzine, and back-office employees in Chicago — intentionally
by Chart School - February 29th, 2012 7:35 pm
Courtesy of Doug Short.
Note from dshort: This morning we learned that the Second Estimate for Q4 real GDP came in at 3.0%, up from the Advance Estimate of 2.8%. The latest data does not significantly change the long term view of real per-capita GDP, but it did slightly decrease the recession warning implicit in the latest real GDP year-over-year percent change, now at 1.62%, a fractional improvement over the Advance Release YoY 1.56%, which was an improvement over the 1.46% YoY as of the Third Estimate of the previous quarter.
My monthly updates on GDP and its revisions feature column charts illustrating real GDP. These have the advantage of highlighting the patterns of change and the correlation between negative GDP and recessions.
Real GDP Per-Capita Growth
For a better understanding of the historical context, here is a chart of real GDP per-capita growth since 1960. For this analysis I’ve chained in current dollars for the inflation adjustment. The per-capita calculation is based on the mid-month population estimates by the Bureau of Economic Analysis, which date from 1959 (hence my 1960 starting date for this chart, even though quarterly GDP has is available since 1947). The population data series is available in the FRED series POPTHM. I used quarterly population averages for the per-capita divisor. Recessions are highlighted in gray. The logarithmic vertical axis ensures that the highlighted contractions have the same relative scale.
The real per-capita series gives us a better understanding of the depth and duration of GDP contractions. As we can see, since our 1960 starting point, the recession that began in December 2007 is associated with a deeper trough than previous contractions, which perhaps justifies its nickname as the Great Recession. In fact, at this point, 14 quarters beyond the 2007 GDP peak, real GDP per capita is as far off the all-time high as the trough that followed the recession in the early 1990s. We can also see…
by Chart School - February 29th, 2012 7:35 pm
Courtesy of Doug Short.
Valid until the market close on March 30, 2012
The S&P 500 closed February with a gain of 4.06% from the January close. All three index signals indicated an invested position. See the specifics here.
The Ivy Portfolio
The table below shows the current 10-month simple moving average (SMA) signal for each of the five ETFs featured in The Ivy Portfolio. I’ve also included a table of 12-month SMAs for the same ETFs for this popular alternative strategy.
Backtesting Moving Averages
Over the past few years I’ve used Excel to track the performance of various moving-average timing strategies. But now I use the backtesting tools available on the ETFReplay.com website. Anyone who is interested in market timing with ETFs should have a look at this website. Here are the two tools I most frequently use:
Background on Moving Averages
Buying and selling based on a moving average of monthly closes can be an effective strategy for managing the risk of severe loss from major bear markets. In essence, when the monthly close of the index is above the moving average value, you hold the index. When the index closes below, you move to cash. The disadvantage is that it never gets you out at the precise top or back in at the very bottom. Also, it can produce the occasional whipsaw (short-term buy or sell signal), such as we’ve experienced this summer.
Nevertheless, a chart of the S&P 500 monthly closes since 1995 shows that a 10- or 12-month simple moving average (SMA) strategy would have insured participation in most of the upside price movement while dramatically reducing losses.
The 10-month exponential moving average (EMA) is a slight variant on the simple moving average. This version mathematically increases the weighting of newer data in the 10-month sequence. Since 1995 it has produced fewer whipsaws than the equivalent simple moving average, although it was a month slower to signal a sell after these two market tops.