Posts Tagged ‘double dip’


The Pragmatic Capitalist discusses RISKS TO THE OUTLOOK.  In addtition to listing David Rosenberg’s concerns, Pragcap adds one of his own — a double dip in housing. – Ilene 

Courtesy of The Pragmatic Capitalist 

Lightning striking miniature house

David Rosenberg provided a nice list of risk in this morning’s client letter.  The one major risk that Rosenberg and the market is largely overlooking at this juncture is the housing double dip. This has the potential to be THE most important story of 2011.  As I’ve previously explained, declining asset values are highly destructive during a balance sheet recession.  If the housing double dip surprises to the downside the problems that we’ve swept under the rug will quickly reemerge and this time there won’t be any political will for government intervention.

I still believe we are mired in a balance sheet recession that will result in below trend growth, deflationary risks and leaves us extremely vulnerable to exogenous risks that could exacerbate the current malaise. Rosenberg’s excellent list follows:

1.  China is getting more active in its policy tightening moves as inflation pressures intensify. It’s not just food but wages too. Headline inflation, at 4.4%, is at a 25-month high. The People’s Bank of China (PBOC) just hiked banking sector reserve ratios by 50 basis points to 18.5% — the second such increase in the past two weeks and the fifth for the year. This could well keep commodity prices under wraps over the near-term.

2.  European debt concerns will not be fully alleviated just because a rescue plan has been cobbled together for Ireland as it deals with its banking crisis. The focus will now likely shift to other basket cases such as Portugal and Spain. Greece has a two-year lifeline before it defaults. This saga is going to continue for some time yet.

3. Massive tightening in U.S. fiscal policy coming via spending cuts and tax hikes. This is the part of the macro forecast that is not given enough attention. See States Raise Payroll Taxes to Repay Loans on page A5 of the weekend WSJ.

4. Gasoline prices are about six cents shy of re-testing the $3-a-gallon threshold for the first time since mid October 2008. On a national average basis, prices at the pump are up 26 cents from a year ago — effectively draining about $25 billion out of household cash flow. Tack on the coming

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Double Dip Delayed, Not Derailed; Understanding Consumer Spending

Double Dip Delayed, Not Derailed; Understanding Consumer Spending

Courtesy of Mish 

The BEA Advance GDP for Third Quarter 2010 came in at +2.0%. However, Table 2. Contributions to Percent Change in Real Gross Domestic Product shows that Change in private inventories contributed +1.44 while real final sales contributed a mere .6.

How sustainable is that?

The answer is not very. This is likely the last hurrah for inventory replenishment even without factoring in upcoming cutbacks at the state level.

Not a V-Shaped Recovery

In terms of real final sales, this "recovery", is the weakest on record. Dave Rosenberg has some thoughts on that in Lunch with Dave.


The major problem in the third quarter report was the split between inventories and real final sales. Nonfarm business inventories soared to a $115.5 billion at an annual rate from the already strong $68.8 billion build in the second quarter — this alone contributed 70% to the headline growth rate last quarter. If we do get a slowdown in inventory investment in Q4, as we anticipate, it would really not take much to get GDP into negative terrain. We estimate that if the change in inventories slowed to about $94.0 billion in Q4 (about $22 billion below Q3 levels), GDP would contract fractionally. In other words, it won’t take much for GDP to slip into negative terrain.

The recession may have technically ended, but outside of inventories, and the best days of the re-stocking process look to be behind us, this has been a listless recovery. At 60 basis points above zero, real final sales are just a shock away from double-dipping — a shock like looming tax hikes, accelerating fiscal cutbacks at the state/local government level or the millions of “99ers” about to fall off the extended jobless benefit rolls at the end of November.

In terms of components, the good news was that consumer spending did accelerate to a 2.6% annual rate from 2.2% in the second quarter — the best performance since Q4 2006. Non-residential construction eked out a 3.8% annualized gain, the first advance since Q2 2008. But the good news pretty well stopped there.

It is also no surprise to see imports bulge when inventories did the same, but what caught our eye in the external trade portion of the GDP report was

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Slouching Towards Bethlehem: Double Dip or Banana Split?

Jesse’s introduction to Rick’s, at Consumer Metrics Institute, "Double Dip or Banana Split:"

Slouching Towards Bethlehem: Double Dip or Banana Split?


"If the 2010 contraction we are now monitoring in consumer demand for discretionary durable goods scales to the full economy as faithfully as the "Great Recession" did, the second dip will, at minimum, be 33% more painful than the first dip and will extend at least half again as long."

This is the case for trouble dead ahead, a worse decline in consumer activity and therefore GDP than the first, and the likelihood of further quantitative easing from the US Federal Reserve to patch over the inability of the political process to reform the financial system and balance the real economy because of their myriad conflicts of interest. These policy errors favoring a small minority will most likely result in a stagflation of the most pernicious and corrosive kind, high unemployment and a rising price of essentials, that may ultimately test the fabric of society. Obsession and sociopathy are not generally ruled or limited by the equilibrium of common sense and ordinary appetite, so I would not expect the powerful minority to draw back from the brink of this crisis voluntarily: a classic scenario for exogenous change. I would enjoy the moral irony of all this if I was watching from the distant future.

The good want power, but to weep barren tears.
The powerful want goodness: worse need for them.
The wise want love, and those who love want wisdom;
And all best things are thus confused to ill.

Shelley, Prometheus Unbound

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Double dip or global deflation?

Christopher Whalen writes about how the U.S. economy in first half of the 20th Century could be characterized as stagnant, with a brief growth spurt during WWI and a mirage of growth during WWII and the cold war:

Following the Crash of 1929, the pretense observed by both political parties that all was well in the U.S. economy evaporated into almost twenty years of economic stagnation. While the massive mobilization for WWII provided the appearance of a recovery, and the period of the Cold War extended this mirage on a sea of public debt and paper dollars, the basic issue of overcapacity remained.

The illusion continued through the 1970s when the housing sector took over defense as the main driver of economic growth. However, Chris argues, that what was perceived by most Americans as real growth was actually the result of deficit spending and "reckless monetary expansion" by the Fed, courtesy of Alan Greenspan and later Ben Bernanke. – Ilene 

Double dip or global deflation?

By Christopher Whalen 


The page proofs of my upcoming book, "Inflated: How Money and Debt Built the American Dream," just went back to the editors. One of the benefits of writing a book about U.S. financial history is that it forces you to take a long view of both economics and the political narrative used to describe it. It is the issue of language and labels, in my view, that is making it so difficult for Americans to understand the current state of the economy.

The National Bureau of Economic Research just declared that the “recession” that began in 2007 ended in the middle of 2009, making it the longest downturn since WWII. The only problem is that none of the people who work at NBER today, which is one of my favorite research organizations, are old enough to remember what the U.S. economy was like before WWII; before the age of Keynesian socialism and the use of debt to stimulate growth and employment became standard policy in Washington.

Let’s start with the term “recession,” which itself reflects the assumption that economic growth is always positive and the trend line is always upward sloping… 

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The Chances of a Double Dip

The Chances of a Double Dip 

Courtesy of John Mauldin at Thoughts From The Frontline 

I am on a plane (yet again) from Zurich to Mallorca, where I will meet with my European and South American partners, have some fun, and relax before heading to Denmark and London. With the mad rush to finish my book (more on that later) and a hectic schedule this week, I have not had time to write a letter. But never fear, I leave you in the best of hands. Dr. Gary Shilling graciously agreed to condense his September letter, where he looks at the risk of another recession in the US.

I look forward at the beginning of each month to getting Gary’s latest letter. I often print it out and walk away from my desk to spend some quality time reading his thoughts. He is one of my "must-read" analysts. I always learn something quite useful and insightful. I am grateful that he has let me share this with you.

If you are interested in getting his letter, his website is down being redesigned, but you can write for more information at If you want to subscribe (for $275), you can call 888-346-7444. Tell them that you read about it in Thoughts from the Frontline, and you will get an extra one month on your subscription. And now, let turn to Gary.

The Chances of a Double Dip

By Gary Shilling

Investor attitudes have reversed abruptly in recent months. As late as last March, most translated the year-long robust rise in stocks, foreign currencies, commodities and the weakness in Treasury bonds that had commenced a year earlier into robust economic growth – the "V" recovery.

As a result, investors early this year believed that rapid job creation and the restoration of consumer confidence would spur retail spending. They also saw the housing sector’s evidence of stabilization giving way to revival, and strong export growth also propelling the economy. Capital spending, led by high tech, was another area of strength, many believed.

Not So Fast

But a funny, or not so funny, thing happened on the way to super-charged, capacity-straining growth. In April, investors began to realize that the eurozone financial crisis, which had been heralded at the beginning of the year by the decline in the euro, was a serious threat to…
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Courtesy of The Pragmatic Capitalist 

Warren Buffett is seeing a broad recovery in his many Berkshire businesses.  In comments today at the Montana Economic Development Summit Buffett detailed why he is very bullish on America:

“I am a huge bull on this country.  We will not have a double-dip recession at all. I see our businesses coming back almost across the board.

I’ve seen sentiment turn sour in the last three months or so, generally in the media.  I don’t see that in our businesses. I see we’re employing more people than a month ago, two months ago.”

I don’t think Mr. Buffett has ever been too bearish about the long-term outlook of this country (and I entirely agree with that), however it is nice to see his increased confidence based on his underlying companies.  Buffett has amassed an impressive and broad group of companies through which he gauges economic growth.  His comments as always, carry a huge amount of weight.


Picture from Jr. Deputy Accountant 

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Consumer Metrics Institute Growth Index

Consumer Metrics Institute Growth Index 

Courtesy of Doug Short, based on the work of Rick Davis at Consumer Metrics Institute 

Note from dshort: Now updated through September 6th. I highly recommended the Institute’s public commentaries, especially Viewing the "Great Recession" in Hi-Def. Scroll down to the entry dated September 1. I’ve reprinted the concluding two paragraphs below as an inducement to read it in its entirety.

There probably hasn’t been two separate recessions in three years, simply one that has evolved in significant ways. But if this really is a "double dip" recession, then our data indicates that the "Great Recession" of 2008 was merely the precursor, and not the main event. It is this current dip that we should be really concerned about; the current contraction in consumer demand is about structural changes in consumer behavior, whereas the "first dip" was about short term loss of consumer confidence.

"This recession has been complex and constantly evolving in ways that policy makers have not been able to understand through their low resolution lenses. As a consequence their policy responses have been misguided, ineffective and wasteful. The Federal Reserve may be able to save the banking system by being the "lender of last resort", but it is powerless to change perhaps the one thing that John Maynard Keynes got right — and what he mischaracterized as a "Paradox of Thrift" — as over 100 million U.S. households become economic "loose cannons", acting exclusively in their own best interests in 100 million different ways.

For the past several months, the Consumer Metrics Institute’s Daily Growth Index has been one of the most interesting data series I follow, and I recommend bookmarking the Institute’s website. Their page of frequently asked questions is an excellent introduction to the service.

The charts below focus on the ‘Trailing Quarter’ Growth Index, which is computed as a 91-day moving average for the year-over-year growth/contraction of the Weighted Composite Index, an index that tracks near real-time consumer behavior in a wide range of consumption categories. The Growth Index is a calculated metric that smooths the volatility and gives a better sense of expansions and contractions in consumption.

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Freddie Mac Announces 95LTV loans, Re-bubble – With This Option You Too Can Join the Underwater Club In As Little As Three Months!!!

Freddie Mac Announces 95LTV loans, Re-bubble – With This Option You Too Can Join the Underwater Club In As Little As Three Months!!!

Courtesy of Reggie Middleton

This is part one of my update on residential real estate mortgages, whose credit conditions have seen a marked improvement over the past year. Of course (yes, you know  there is always a but), I believe the improvement is the result of the rampant government intervention in the mortgage markets. As we shall see in part two for this update, even with rampant intervention some of the major mortgage institutions are so sick as to appear to be beyond mere assistance. Brace yourself for Financial Meltdown 2.0, open source edition.

Is it really a Housing Double Dip if Conditions Never Stopped Getting Worse?

Many analysts have speculated housing would reenter a “double dip” courtesy of falling home prices, decreasing home sales, increasing housing inventory, and other issues that have not been resolved since the collapse of the housing market began nearly three years ago.  Inevitably, housing policy at the federal level has completely failed to support any regeneration of demand.

Mortgage Rates Can’t Find Rock Bottom: WSJ

  • The Freddie Mac survey of 30 year mortgage rates has shown new record lows in rates for 11 straight weeks
  • 15, 10, and 5 year rates have also continued their free fall as employment data fails to ease fear in the housing market

Figure 1: Courtesy of Freddie Mac

Figure 2: Courtesy of the Kansas City Federal Reserve Branch

Figure 3: Courtesy of the National Association of Realtors

Housing Prices Climb amid Falling Home Sales (the government’s hidden bid at work): CBS

  • Foreclosures continue to increase, July home sales fell by 27%, employment conditions are not getting better, and home prices found a way to rise 7%
  • Robert Shiller claims the San Francisco market is “booming” after climbing 21% since 2009 (but don’t ask about the record drops in 2008)
  • If you are wondering where your unemployed neighbor is spending all of his free time, check and see if there is a distressed homeowners convention in town

Figure 4: Courtesy of the National Association of Realtors

Federal Reserve Still Watching Foreclosure Data: International Market News

  • Average property vacancies have increased from 114 days in 2006 to 954 days in 2010

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Paul Farrell Expects No Recovery Until The End Of Obama’s Second Term… IF He Gets Reelected

Paul Farrell Expects No Recovery Until The End Of Obama’s Second Term… IF He Gets Reelected

Courtesy of Tyler Durden

Paul Farrell’s take on Jeremy Grantham’s recent essay Seven Lean Years (previously posted on Zero Hedge) is amusing in that his conclusion is that should Obama get reelected, his entire tenure will have been occupied by fixing the problems of a 30 year credit bubble, and if anything end up with the worst rating of all time, as the citizens’ anger is focused on him as the one source of all evil. "Add seven years to the handoff from Bush to Obama in early 2009 and you get no recovery till 2016. Get it? No recovery till the end of Obama’s second term, assuming he’s reelected — a big if." Also, Farrell pisses all over the recent catastrophic Geithner NYT oped essay, which praised the imminent recovery which merely turned out to be the grand entrance into the double dip: "In his recent newsletter, "Seven Lean Years Revisited," Grantham tells us why expecting a summer of recovery was unrealistic, why America must prepare for a long recovery. Grantham details 10 reasons: "The negatives that are likely to hamper the global developed economy." Sorry, but this recovery will take till 2016."

For those who have not had a chance to read the original Grantham writings, here is Farrell’s attempt to convince you that Grantham is spot on:

But should you believe Grantham? Yes. First: Like Joseph, Grantham’s earlier forecasts were dead on. About two years before Wall Street’s 2008 meltdown Grantham saw: "The First Truly Global Bubble: From Indian antiquities to modern Chinese art; from land in Panama to Mayfair; from forestry, infrastructure, and the junkiest bonds to mundane blue chips; it’s bubble time. … The bursting of the bubble will be across all countries and all assets … no similar global event has occurred before."

Second: The Motley Fools’ Matt Argersinger went back to the dot-com crash of 2000: Grantham "looked out 10 years and predicted the S&P 500 would underperform cash." Bull’s-eye: The S&P 500 peaked at 11,722; it’s now around 10,000. Factor in inflation: Wall Street’s lost 20% of your retirement since 2000. Yes, Wall Street’s a big loser.

Third: What’s ahead for the seven lean years? Wall Street will keep losing. Argersinger: "Grantham predicts below-average economic growth, anemic corporate-profit margins, and other

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Pragcap asks a good question: what is the value of a leading indicator that lags the market? – Ilene 


Courtesy of The Pragmatic Capitalist

After weeks of denying the potential of a recession and missing the entire stock market decline it now appears as though everyone’s favorite leading indicator is pointing to a double dip in the US economy. Lakshman Achuthan, managing director of ECRI, has consistently maintained that there was no double dip coming for the US economy and that this was merely a typical mid-recovery slowdown. He also emphasized the fact that a retrenchment in the ECRI would in fact be a warning signal of a double dip. With the ECRI’s leading index at a three week low and a retrenchment occurring Achuthan is sticking to his guns saying it is premature to say there could be a double dip (via Reuters):

“A measure of future U.S. economic growth fell to a 3-week low in the latest week, confirming the slow pace of the recovery, a research group said on Friday.

The Economic Cycle Research Institute, a New York-based independent forecasting group, said its Weekly Leading Index fell to 120.8 in the week ending August 20 from 122 the previous week.

That was the lowest since July 23, when it was 120.7. The index’s annualized growth rate rose to minus 10 percent from minus 10.2 percent a week earlier. That was the highest since July 9, when it stood at minus 9.8 percent.”


“With the WLI staying essentially flat for the last six weeks, following a nine-week plunge, it is premature to predict a new recession, though risks remain,” said Lakshman Achuthan, managing director of ECRI.

Unfortunately for equity investors, the admission that a double dip is on the table likely won’t come until well after the losses in stocks have occurred. At some point you have to wonder about the usefulness of a “leading indicator” that lags all market action… 

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Phil's Favorites

Will #deletefacebook become a thing?


Will #deletefacebook become a thing?

Courtesy of 

It’s always hard to tell whether or not people will follow through with these sorts of memes…

This is the cover of the new Bloomberg Business magazine:

And here is the accompanying story from Paul Ford.

This tweet is getting a lo...

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Zero Hedge

What Happens Next In The Global Trade War: A Q&A With Goldman Sachs

Courtesy of Zero Hedge

Today, according to Politico, the White House will unveil its plan to hit China with tariffs and other trade restrictions, one day ahead of schedule as President Trump is slated to outline the results of U.S. Trade Representative Robert Lighthizer's investigation into allegations that China violates U.S. intellectual property rights by forcing American companies to transfer valuable technology to Beijing.

Lighthizer’s office has determined that the US loses at least $30BN a year to China’s alleged forced technology transfers, and the administration is weighing a package of tariffs equivalent to that amount of Chinese imports; according to Reuters it could be as high ...

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Insider Scoop

20 Stocks Moving In Wednesday's Pre-Market Session

Courtesy of Benzinga.


  • Proteostasis Therapeutics, Inc. (NASDAQ: PTI) shares rose 12.4 percent to $5.80 in pre-market trading after the company reported withdrawal of equity offering due to market conditions.
  • China Auto Logistics Inc. (NASDAQ: CALI) shares rose 10.8 percent to $4.40 in pre-market trading after surging 15.41 percent on Tuesday.
  • Fennec Pharmaceuticals Inc. (NASDAQ: FENC) rose 8.9 percent to $10.38 in pre-market trading a... more from Insider

Digital Currencies

Why accountants of the future will need to speak blockchain and cryptocurrency if they want your money


Why accountants of the future will need to speak blockchain and cryptocurrency if they want your money


Courtesy of Anwar Halari, The Open University

If you haven’t already heard of Bitcoin, you either haven’t been paying attention or you’re a time traveller who just touched down in 2018. Because by now, most of us will have heard of Bitcoin and some of us have even jumped on the bandwagon, investing in cryptocurrencies.

But despite its popularity, many people still don’t understand the technology that underlines it: blockchain. In...

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Chart School

Bears Take Control

Courtesy of Declan.

More decisive action from bears today as markets lose support.  The S&P undercut the rising trendline and 20-day plus 50-day MAs in a move which looks like it could develop into a test of the February spike low and the 200-day MA again; support at 2,695 is looking critical here. Aggressive traders could look to buy at these levels but confidence in this holding would not be high.

The Dow also saw its 'bear flag' / consolidation triangle resolve to the downside. The two positives were the relatively light volume and the ...

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Peter Thiel: Need To Rethink Tariffs In Light Of Trade Deficit With China; SF Sucks, Bitcoin Rocks

By VW Staff. Originally published at ValueWalk.

PayPal cofounder Peter Thiel in a wide-ranging interview on President Trump’s trade tariffs, China’s economy, technology regulations and his outlook for bitcoin.


Check out our H2 hedge fund letters here.

Peter Thiel: Need To Rethink Tariffs In Light Of Trade Deficit With China

Peter Thiel On Leaving Silicon Valley For Los Angeles

Billionaire investor Peter Thiel argues Silicon Valley is is a ‘totalitarian place’ where people are not allowed to have dissenting views.


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Members' Corner

Cambridge Analytica and the 2016 Election: What you need to know (updated)


"If you want to fundamentally reshape society, you first have to break it." ~ Christopher Wylie

[Interview: Cambridge Analytica whistleblower: 'We spent $1m harvesting millions of Facebook profiles' – video]

"You’ve probably heard by now that Cambridge Analytica, which is backed by the borderline-psychotic Mercer family and was formerly chaired by Steve Bannon, had a decisive role in manipulating voters on a one-by-one basis – using their own personal data to push them toward voting ...

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How your brain is wired to just say 'yes' to opioids

Reminder: Pharmboy and Ilene are available to chat with Members, comments are found below each post.


How your brain is wired to just say ‘yes’ to opioids

A Philadelphia man, who struggles with opioid addiction, in 2017. AP Photo/Matt Rourke

Courtesy of Paul R. Sanberg, University of South Florida and Samantha Portis, University of South Florida


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Mapping The Market

The tricks propagandists use to beat science

Via Jean-Luc

How propagandist beat science – they did it for the tobacco industry and now it's in favor of the energy companies:

The tricks propagandists use to beat science

The original tobacco strategy involved several lines of attack. One of these was to fund research that supported the industry and then publish only the results that fit the required narrative. “For instance, in 1954 the TIRC distributed a pamphlet entitled ‘A Scientific Perspective on the Cigarette Controversy’ to nearly 200,000 doctors, journalists, and policy-makers, in which they emphasized favorable research and questioned results supporting the contrary view,” say Weatherall and co, who call this approach biased production.

A second approach promoted independent research that happened to support ...

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Swing trading portfolio - week of September 11th, 2017

Reminder: OpTrader is available to chat with Members, comments are found below each post.


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. 

Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.

To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here ...

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NewsWare: Watch Today's Webinar!


We have a great guest at today's webinar!

Bill Olsen from NewsWare will be giving us a fun and lively demonstration of the advantages that real-time news provides. NewsWare is a market intelligence tool for news. In today's data driven markets, it is truly beneficial to have a tool that delivers access to the professional sources where you can obtain the facts in real time.

Join our webinar, free, it's open to all. 

Just click here at 1 pm est and join in!

[For more information on NewsWare, click here. For a list of prices: NewsWar...

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Kimble Charting Solutions

Brazil; Waterfall in prices starting? Impact U.S.?

Courtesy of Chris Kimble.

Below looks at the Brazil ETF (EWZ) over the last decade. The rally over the past year has it facing a critical level, from a Power of the Pattern perspective.


EWZ is facing dual resistance at (1), while in a 9-year down trend of lower highs and lower lows. The counter trend rally over the past 17-months has it testing key falling resistance. Did the counter trend reflation rally just end at dual resistance???

If EWZ b...

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All About Trends

Mid-Day Update

Reminder: Harlan is available to chat with Members, comments are found below each post.

Click here for the full report.

To learn more, sign up for David's free newsletter and receive the free report from All About Trends - "How To Outperform 90% Of Wall Street With Just $500 A Week." Tell David PSW sent you. - Ilene...

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About Phil:

Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

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About Ilene:

Ilene is editor and affiliate program coordinator for PSW. She manages the site market shadows, archives, more. Contact Ilene to learn about our affiliate and content sharing programs.

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