It’s Labor Day. The markets are closed. Those working for government, banks, schools etc have the day off. All totaled, 17.3 million citizens do not have a job today nor a job they can return to on Tuesday. Another 8.9 million will not work as many hours as they would like, this week, next week, or the week after that.
How NOT to End the Great Recession
In a New York Times Op-Ed, Robert B. Reich, a secretary of labor in the Clinton administration, and professor of public policy at the University of California, Berkeley comes to all the wrong conclusions about where we are, how we got here, and what to do about it. (Robert Reich’s "The Real Lesson of Labor Day" here.)
Reich: THIS promises to be the worst Labor Day in the memory of most Americans. Organized labor is down to about 7 percent of the private work force. Members of non-organized labor — most of the rest of us — are unemployed, underemployed or underwater.
Mish Comment: When organized labor is at 0%, both public and private, we will be on our way to prosperity. Organized labor in conjunction with piss poor management bankrupted GM and countless other manufacturing companies. Now, public unions, in cooperation with corrupt politicians have bankrupted countless cities and states.
Reich: The Labor Department reported on Friday that just 67,000 new private-sector jobs were created in August, while at least 125,000 are needed to keep up with the growth of the potential work force.
The national economy isn’t escaping the gravitational pull of the Great Recession. None of the standard booster rockets are working: near-zero short-term interest rates from the Fed, almost record-low borrowing costs in the bond market, a giant stimulus package and tax credits for small businesses that hire the long-term unemployed have all failed to do enough.
That’s because the real problem has to do with the structure of the economy, not the business cycle. No booster rocket can work unless consumers are able, at some point, to keep the economy moving on their own. But consumers no longer have the purchasing power to buy the goods
Homeownership has let us down. For generations, Americans believed that owning a home was an axiomatic good. Our political leaders hammered home the point. Franklin Roosevelt held that a country of homeowners was "unconquerable." Homeownership could even, in the words of George H.W. Bush’s Secretary of Housing and Urban Development (HUD), Jack Kemp, "save babies, save children, save families and save America." A house with a front lawn and a picket fence wasn’t just a nice place to live or a risk-free investment; it was a way to transform a nation. No wonder leaders of all political stripes wanted to spend more than $100 billion a year on subsidies and tax breaks to encourage people to buy.
But the dark side of homeownership is now all too apparent: foreclosures and walkaways, neighborhoods plagued by abandoned properties and plummeting home values, a nation in which families have $6 trillion less in housing wealth than they did just three years ago. Indeed, easy lending stimulated by the cult of homeownership may have triggered the financial crisis and led directly to its biggest bailout, that of Fannie Mae and Freddie Mac. Housing remains a drag on the economy. Existing-home sales in July dropped 27% from the prior month, exacerbating fears of a double-dip. And all that is just the obvious tale of a housing bubble and what happened when it popped. The real story is deeper and darker still.
For the better part of a century, politics, industry and culture aligned to create a fetish of the idea of buying a house. Homeownership has done plenty of good over the decades; it has provided stability to tens of millions of families and anchored a labor-intensive sector of the economy. Yet by idealizing the act of buying a home, we have ignored the downsides. In the bubble years, lending standards slipped dramatically, allowing many Americans to put far too much of their income into paying for their housing. And we ignored longer-term phenomena too. Homeownership contributed to the hollowing out of cities and kept renters out of the best neighborhoods. It fed America’s overuse of energy and oil. It made it more difficult for those who had lost a job to find another. Perhaps worst of all, it helped us become casually self-deceiving: by telling ourselves that homeownership was…
The Obama plan is exactly backwards in its approach to systemic risk. It will increase systemic risk.
As pointed out by one of the leaders of econophysics, Eugene Stanley (here), one of the prime results in the exploding field of network theory is that densely connected networks are chaotic and unstable compared to sparsely connected networks.
This only makes sense. If every part of a network affects every other part of a network it becomes very easy for large perturbations to propagate through the network, and rebound, and so on.
The Obama-Summers-Geithner solution to our problem of systemic risk is evidence of an intellectual obtuseness that is breathtaking.
The Fed created or permitted by neglect of its duties the systemic risk that caused this crash, and the Great Depression before it. Mish got this right.
The obvious solution given that systemic risk is a characteristic of the structure of the financial system is to change the structure of the system to reduce systemic risk. Break up investment banks and commercial banks. Eliminate financial institutions that are big enough to create systemic risk all by themselves (no more “too big to fail”). Make it impossible for the system to become densely connected by limiting leverage. The plan does increase capital requirements but not enough. And it leaves the trading of CDSs, the densely-linked network of derivatives that largely caused the supposed near melt-down of the system last fall, lightly regulated and less than transparent.
You can’t leave the TBTF institutions in place, or they will capture the regulators again. Or perhaps it’s better to say they’re not letting them go at this time.
Glass-Steagall and the other laws that the neocons undid over the past thirty years worked. They kept the system stable for sixty years.
Kvaerner sells its onshore construction business in North America to Matrix Service Company for an enterprise value of USD 80.3 million. The divestment enables Kvaerner to focus its efforts on further developing its upstream oil and gas business. "This transaction is an important step in our strategy to focus our operations. All of Kvaerner's operations will now be focused on delivering offshore installations and onshore plants to our upstream oil and gas customers. The sale also provides us with increased strength to further develop Kvaerner's position in our target markets," says Jan Arve Haugan, President & CEO of Kværner ASA. A definitive agreement was signed between Kværner AS and Matrix Service Company (Nasdaq: MTRX). In the tra...
The President’s speech yesterday on inequality avoided the “R” word. No politician wants to mention “redistribution” because it conjures up images of worthy “makers” forced to hand over hard-earned income to undeserving “takers.”
But as low-wage work proliferates in America, so-called takers are working as hard if not harder than anyone else, and often at more than one job.
Yet they’re still not making it because the twin forces of globalization and technological change have reduced their bargaining power and undermined their economic standing — while bestowing ever greater benefits on a comparative few with the right education and connections (and whose parents are often best able to secure these advantages for them).
From Bernanke's infamous 2008 "not forecasting a recession" call to Fannie Mae CEO Franklin Raines 2004 "subprime assets are riskless" commentary, the following 10 "predictions" - as opposed to Wien "surprises" - will go down in infamy for their degree of errant-ness...
10) Ben Bernanke, 10th January 2008 - "The Federal Reserve is currently not forecasting a recession."
A few months later, United States entered one of the wort recessions ever.
9) Herbert Hoover 1928: "The United States are nearer to the final triumph over poverty than ever before in the history of any land."
It's time again for my weekly gasoline update based on data from the Energy Information Administration (EIA). Rounded to the penny, Regular and Premium were unchanged. Regular and Premium are down 52 cents and 45 cents, respectively, from their interim highs in late February.
According to GasBuddy.com, no state is averaging above $4.00 per gallon, and only Hawaii is averaging over $3.80. Five states (Oklahoma, Missouri Kansas, Minnesota and Montana) are averaging under $3.00, up from three states last Monday.
How far are we from the interim high prices of 2011 and the all-time highs of 2008? Here's a visual answer.
Today, with very little market moving news, the S&P 500 closed at 1808.4, yet another new closing daily high. The index did touch the 1811 area on at least three distinctly different time slots creating a new resistance level. But after last week’s bevy of positive economic surprises, the sharp gain of 1.1% on Friday, leaving the index just a tiny point away from its ninth consecutive up week, we can’t be too quick to suggest today was a topping rally. For one thing, volume was quite low as traders seemed to be trying to sort out the odds on the earliest date of Fed tapering. Estimates range from this month to March and even later. But it’s going to happen…so why so much emphasis on when? Perhaps protection of end-of-the-year profits in so many fund managers portfolios? ...
Investors sent the S&P 500 to a record-high close despite speeches by Federal Reserve officials hinting that the taper could begin this month.
Monday’s trading action suggested that investors finally overcame their fear that the FOMC could vote to taper the Federal Reserve’s bond-buying on December 18. The S&P 500 reached a new, record-high close, despite the fact that three Federal Reserve officials gave speeches on Monday, suggesting that the tapering program could begin this month. Dallas FedHead Richard Fisher, Richmond FedHead Jeffrey Lacker and St. Louis FedHead James Bullard gave speeches on Monday, wherein each discussed the possibility that the cutbacks to the Fed’s bond-buying could begin in December. Is a Fe...
OSIS – OSI Systems, Inc. – Options volume on OSI Systems today is well above the average daily level for the stock, with upwards of 7,500 contracts in play as of midday in New York versus average daily volume of 57 contracts. The surge in options trading on OSI Systems coincides with a 40% decline in the price of the underlying shares to $39.00 today, the lowest level since October of 2011. The company provided an update on a recent $60 million order cancellation by the Transportation Security Administration (TSA). Call options are more active than puts, with the call/put ratio hovering near 2.0 as of 12:40 p.m. EST. Some traders appear to be selling out of the money December and January 2014 expiry calls, while others step in to buy the contracts perhaps in the expectation that shares rebound in the...
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This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).
We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options.
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These rallies are becoming familiar. In early July we saw a streak of 12 of 13 sessions in a row up, early September 11 of 12, and mid October 11 of 13 (current streak). It is a bit uncanny the similarities and how the escalator goes straight up in vertical ascent as we see indexes come out of mini corrections during QE. So we are about at the same stage where the last two began to tire, so it will be interesting if this is similar or if the current consensus of the market that there is nothing to worry about until next year as the Fed and D.C. are both off the table and this 3% annual growth rate in earnings we are now seeing in the S...
Welcome to the fouth update of the IRA Virtual Portfolio. First I am going to summarize the current state of the Portfolio then I will get into all the activity we had during September expiration.
Profit and Loss – Net of closed positions the portfolio is up a total of $769
Market Commentary – Last expiration I said, "I would like to put a total of $20,000 to work by the end of SEP expiration. If the VIX pops up to around 20 I plan to put about $50,000 total to work." The market didn't quite reach the goal but I did manage to deploy $15,000 of buying power. I still feel the market is too high and expect a correction during October. If the vix pops up to around 20 I still plan to put about $50,000 to work. If a correction doesn't happen I still plan to have a total of $25,000 in buying power put to work by October expiration. Now on to the act...
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Come and get it! Read all about it! Biotechs, biotechs and more biotechs to buy buy buy for your portfolio! To date, almost 30 biotech companies have hit the market. Most of the time, there are fewer than 10-12!
For the last five years, biotechs have had issues obtaining offer prices above expectations. In 2013, that trend looks to be broken. According to BiotechNow, the offer prices are 4% above expectations! In addition, biotechs are going public with little more than a wing and a prayer (pre-clinical or Phase 1 data only). Really? What this means is that the drug or technology looks good in mice, rats, or dogs, etc, but there is no smidgen of evidence that it will work in humans. That's what is called an appitite for RISK!
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