Posts Tagged ‘government stimulus’

Sand Castle Stimulus Reclaimed by the Tides

Sand Castle Stimulus Reclaimed by the Tides

Courtesy of Joshua M Brown, The Reformed Broker 

We were promised stimulus, programs and policies that would have lasting effects.  What we got instead was a trillion dollar sand castle.  Now that the inexorable tides have eroded away our leadership’s best-laid (and funded) plans, someone needs to be held accountable. 

Haven’t you noticed the subtle shift in the rhetoric?  It used to be about creating jobs, but lately they’ve been banging the drum about how many jobs they’ve "saved". 

Not that John Boehner and the Republicans have put out any world-stopping ideas either (cut taxes for a change?)…but still, they are right:  This Obama administration "economic team", or what’s left of it, couldn’t create a single net job if their careers depended on it.

"President Obama should ask for – and accept – the resignations of the remaining members of his economic team, starting with Secretary Geithner and Larry Summers, the head of the National Economic Council," Boehner said in the morning speech to business leaders at the City Club of Cleveland. The mass dismissal, he added, would be "no substitute for a referendum on the president’s job-killing agenda. That question will be put before the American people in due time. But we do not have the luxury of waiting months for the president to pick scapegoats for his failing ‘stimulus’ policies."

Somehow the Council of Economic Advisors member Austan Goolsbee (a Dickensian aptronym is ever there was one) got left out of this screed.  Goolsbee shouldn’t even get out of bed these days…All those contentious, pitbull-like television appearances pre- and post-election, defending the Boss and his Keynes-On-HGH plan against any and all comers.  All those fiery retorts of Goolsbee’s have amounted to nothing as the White House has gone from taking credit for statistics that could be spun positively to blaming the Republicans for the latest stats – the ones that are now so bad that even Obama can’t talk his way around them.

In hindsight, virtually all of the fiscal stimulus and extraordinary programs adopted by this administration now look like they merely forestalled the inevitable.  Hiring has not happened and in the meantime, housing is headed down another leg and the almost-resillient consumer is back to playing hard-to-get. 

Name a program, look at the lack of lasting results: What you’ll find is that the moment artificial stimulus or policy props were pulled away, that…
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US Rail Traffic “Statistical Recovery”

US Rail Traffic "Statistical Recovery"

Courtesy of Mish

US Rail traffic is improving on a year over year basis, but looks are deceiving as the comparison is against very feeble 2009 traffic. Let’s take a look at Railfax Data through April 24, 2010.

Total US Rail Traffic

The table shows the 4 week rolling average of auto traffic is up 32% from a year ago. However, auto traffic is still down 31.8% compared to 2008.

The same holds true for metals, up a whopping 71% from a year ago, yet down 18.5% from two years ago.

13 Week Rolling Averages – Year Over Year Comparisons

Please refer to the article for still more charts.

Traffic is up, but only based on anemic comparisons. This is what’s known as a statistical recovery. By the way, it took trillions of dollars of global stimulus to generate that "recovery". Guess what happens when the stimulus stops?

Mike "Mish" Shedlock

 


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UPDATING OUR OUTLOOK ON HOUSING

UPDATING OUR OUTLOOK ON HOUSING

Courtesy of The Pragmatic Capitalist 

In 2006 when housing prices were at their peak I wrote:

“The credit driven housing bubble remains the greatest risk to the equity markets at this time.”

Since the government stimulus programs kicked in around late 2008 I turned mildly bullish on U.S. housing.  With the understanding that government backstops would likely bolster the market I said:

“Housing [will remain] in a steep decline, though the rate of decline slows substantially by the middle of 2009.  The market does not rebound, but false hope of a sharp turnaround appears possible by the end of 2009.”

Earlier this year I wrote:

“While we believe housing markets could show signs of life this Spring we continue to think the recovery in housing is almost entirely stimulus based and the long-term bear market in housing is still very much alive.  The laws of supply and demand have been temporarily lifted as the government attempts to price-fix a broken market.  In the long-run, however, the market is likely to return to its negative trends as the second round of mortgage resets and inventory overhang impose their will on a still very fragile U.S. consumer.  All of this adds up to a potentially bullish H1 in housing followed by a potentially treacherous 2011.”

In our 2010 outlook I said the government’s stimulus programs would continue to bolster asset prices (including equities).   But with the housing tax credit coming to a close in the next few days it’s finally time to take a look at these markets for what they really are and not what the government has been making them out to be.  In other words, the laws of supply and demand will come back to some semblance of reality.

As I’ve maintained, the price stability in housing has been primarily government induced.  The “false dawn” we have been seeing has been primarily due to in incentives bolstered market and government spending that papered over the weakness in the private sector.   Housing is notoriously seasonal and in my opinion the government couldn’t be stepping aside at a much worse time.

Although we’ve seen some certain signs of stability in recent months we’re also beginning to see some signals that could be forecasting the next leg down in the housing market.  The following chart shows the housing loan performance index compared to the Case…
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GURU OUTLOOK: FELIX ZULAUF & THE SECULAR BEAR MARKET

GURU OUTLOOK: FELIX ZULAUF & THE SECULAR BEAR MARKET

Courtesy of The Pragmatic Capitalist

guruThis week’s Guru Outlook brings us the brilliance of Felix Zulauf.  Zulauf is the founder of Zulauf Asset Management based in Switzerland and is well known for his appearances in Barron’s annual roundtable.   Zulauf has nailed the secular bear market downturn and 2009 upturn about as well as anyone.  More importantly, he has been nearly flawless in connecting the dots in the macro picture.  From the de-leveraging cycle that led to the downturn to the government stimulus that led to the upturn – Zulauf has been remarkably prescient.

At the 2008 roundtable Zulauf recommended investors purchase gold and short stocks due to concerns with the consumer.  He remained bearish throughout the year.  At the 2009 roundtable Zulauf said stocks would bottom at some point in the second quarter after making a new 2009 low.  He got aggressive and said stocks would rally after that.  His recommendations to purchase oil, gold and emerging markets were home runs.

Zulauf’s macro outlook hasn’t changed all that much.  He still believes the de-leveraging bear market cycle is with us and that we’re in the early stages.  Zulauf sees a number of similarities with Japan and says the consumer is in the process of long-term balance sheet repair:

“we are in the early stages of a deleveraging process, which is marked by a shift from maximizing profits to minimizing debt. It is a multiyear process. The U.S. consumer is in bad shape, and the U.K. consumer is even worse.”

But Zulauf hasn’t turned bearish in the short-term yet.  He says the markets have another 10% of upside before concerns over the end of the stimulus begin to weigh on the markets:

“Central bankers themselves are somewhat afraid of what they have been doing. Politicians are worried about public-sector debt. Therefore, the authorities will try to step away slowly from their stimulation efforts, because this policy isn’t sustainable. That’s the risk for the markets.  The U.S. stock market has enough momentum to rise another 10% or so. But the authorities will start leaning the other way as they see signs of economic growth in the first two quarters, and possibly a jump in inflation. That could push the market down.”


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Pimco’s Bill Gross Sees 2010 as Year of Reckoning

Pimco’s Bill Gross Sees 2010 as Year of Reckoning

Bill Gross - TIMEBy John Curran, courtesy of TIME

Pimco managing director Bill Gross not only oversees the world’s biggest bond fund, his views often sway markets. In a late December interview with TIME’s John Curran, Gross pointed to the second half of 2010 as a period when investors large and small will reckon with a new reality of poor economic growth and a Federal Reserve that is hard pressed to offer much help.

TIME: Where do you see the economy going over the next 6 to 12 months?
Bill Gross: The economy should be relatively strong in the first half of 2010 then weaken in the second half. That’s not to say we’ll return to recession but we’ll see weakness as opposed to a continuation of what will probably be a decent first half.

What will make the first half of 2010 so good?
The first half will be dominated by government stimulus and by inventory accumulation or a lack of [inventory] liquidation among businesses. I expect nothing from consumer [spending] and nothing really from housing or really any of the standard cyclical leading sectors. It’s hard to put a number on GDP growth rates, but let’s say 4% in the first half and then 2% in the second half, which would basically call for some additional help.

You’re talking about a second shot of federal stimulus?
Yes, something else is probably needed if the [government's] thrust is really reducing unemployment below double digits and re-normalizing the economy.

What does this say about the Federal Reserve’s hopes to start pulling its added liquidity out of the markets, either by raising short-term rates or just getting out of buying bonds, which has been keeping long rates low?
I think the Fed’s statements suggest that they really want to exit in some fashion from the buying program. The first step in that direction, logically, would be to stop buying and our sense is that they’re at least going to try that. But based on our forecasts for the second half of the year they may have to re-initiate it, and that will be difficult to do once they stop because it then becomes a political hot potato.

All that said, I think they’ll stop buying mortgage agency securities, and the trillion-and-a-half dollar check that’s been written over…
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Service Sector ISM Back In Contraction; Stimulus Fades Already

More signs pointing the way to the double-dip scenario. – Ilene

Service Sector ISM Back In Contraction; Stimulus Fades Already

Fairy

Courtesy of Mish

Inquiring minds are reading the November 2009 Non-Manufacturing ISM Report

Economic activity in the non-manufacturing sector contracted in November after two consecutive months of expansion, say the nation’s purchasing and supply executives in the latest Non-Manufacturing ISM Report On Business®.

What Respondents Are Saying …

  • "Capital markets remain very tight; lenders are not releasing funds for development projects, limiting expansion." (Accommodation & Food Services)
  • "Fourth quarter still looking grim, but potential upturn for Q1 2010." (Professional, Scientific & Technical Services)
  • "No one trusts that the recovery is real. Seems everything and everyone is in a holding pattern." (Public Administration)
  • "Business is still flat." (Wholesale Trade)
  • "U.S. business remains better than 2007 levels, although it’s been through personnel and cost reductions that we are now profitable. Business continues to be about 8 percent below 2008 levels." (Real Estate, Rental & Leasing)

[click on table to enlarge]

Non-Manufacturing ISM History

Is This A Recovery?

Take good look at the chart immediately above. After sloshing around $trillions in bailouts and stimulus packages the NMI could barely get above break-even and topped in September.

New orders are up, but much of that is front-loaded government stimulus efforts. With government spending and reflation efforts by central bankers worldwide, it should not be surprising to see prices rising. Yet, employment is not confirming the pickup in business activity.

Double Dip Recession Warning

Paul Krugman is waking up to a possibility that I think is nearly a given. Please consider Double Dip Warning.

I’ve never been fully committed to the notion that we’re going to have a “double dip” — that the economy will slide back into recession. But it has been clear for a while that it’s a serious possibility, for two reasons. First, a large part of the growth we’ve had has been driven by the stimulus — but the stimulus has already had its maximum impact on the growth of GDP, will hit its maximum impact on the level of GDP in the middle of next year, and then will begin to fade out. Second, the rise in manufacturing production is to a large extent an inventory bounce


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Weaker Data and the “Nascent Recovery”

A "mirage" of recovery, dependent on government stimulus programs, is not exactly a recovery in the normal sense of the word.  And publicizing incorrect numbers, only to revise them down later, appears to be good for public mood and the stock market. - Ilene  

Weaker Data and the "Nascent Recovery"

recoveryCourtesy of Mish

After spending $trillions one would have hoped to see something more than an expected GDP revision of 2.8%. Looking ahead MarketWatch is asking Do weaker data show recovery is stalling?

Last week, a "reality check" rippled through the markets following weak data on housing starts and industrial production, said Nigel Gault and Brian Bethune, U.S. economists for IHS Global Insight. They expect further "mixed and somewhat ambiguous" reports in the coming week, but, on whole, they say "the evidence is still positive and continues to point to a nascent recovery" that will need "strong policy support" for some time.

Housing

Even four years after the peak, the state of the housing market remains central to the medium-term outlook.

Construction, sales and prices picked up over recent months after hitting generational lows, boosted in part by federal policies and in part by improvement in some of the fundamentals. But the weakening in the October data ahead of the anticipated expiration of the federal home-buying subsidy has put the strength of those fundamentals to the test.

The home-buyer tax credit, of course, has now been extended and even expanded. But buyers and builders didn’t know that in October.

Last week, we found out that builders cut back on permits and starts on single-family homes in October, in anticipation that the tax credit would expire on Nov. 30.

GDP revisions

The other big story for the week could be the revision to third-quarter growth figures. Last month, the Commerce Department said real gross domestic product grew at a 3.5% annualized rate, the first gain in a year. On Tuesday, that figure is likely to be revised to about 2.8%.

The largest source of revisions will come from nonresidential construction spending and net exports. Spending on nonresidential structures was weaker than first thought, while imports were stronger than believed, suggesting that more of the gains from increased sales in the third quarter accrued to foreign producers, rather than domestic companies. Inventories will be revised lower.

"Despite the likely downward revision, we still believe that the third


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GE CEO Plays Kiss Ass With Obama

No, we’re not all democrats now, some of us are just plain disgusted. – Ilene

GE CEO Plays Kiss Ass With Obama

kiss assCourtesy of Mish

GE, the financial company masquerading as a manufacturer, has its eyes on the Pot of Government Stimulus Gold.

The financial crisis hasn’t been kind to General Electric Co. Its stock has lost almost half its value, the government has stepped in to prop up its enormous financial arm, and sales have slumped in core industrial businesses.

But Chief Executive Jeffrey Immelt now has his eye on a huge new pool of potential revenue: Uncle Sam’s stimulus dollars. Mr. Immelt, a registered Republican, quips about the shift in thinking in the nation’s corner offices: "We’re all Democrats now."

GE has high hopes for the strategy. It says that over the next three years or so it could bring in as much as $192 billion from projects funded by governments around the globe, such as electric-grid modernization, renewable-energy generation and health-care technology upgrades.

The company is just starting to see a payoff. Last month, for example, President Barack Obama announced $3.4 billion in government-stimulus grants for power-grid projects. About one-third of the recipients are GE customers. GE expects them to use a good chunk of that money to buy its equipment.

"The government has moved in next door, and it ain’t leaving," Mr. Immelt said at the International Economic Forum of the Americas in Montreal in June. "You could fight it if you want, but society wants change. And government is not going away."

The 53-year-old executive supported the presidential campaign of Sen. John McCain, yet scored an invitation onto the President’s Economic Recovery Advisory Board, led by former Federal Reserve Chairman Paul Volcker. Inside GE, he pushed his managers hard to devise plans for capturing government money.

As part of that effort, GE has promoted policy proposals such as a government-backed power-grid modernization, and pressed the government to increase the size of stimulus grants for that purpose. It also has helped customers design projects and apply for government money, with the expectation that those customers will then buy GE equipment.

GE isn’t in agreement with the Obama administration on some proposals. Its GE Capital financial unit, which contributed nearly half of its earnings in recent years, received government backing for its debt when


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Phil's Favorites

Ending the pandemic will take global access to COVID-19 treatment and vaccines - which means putting ethics before profits

 

Ending the pandemic will take global access to COVID-19 treatment and vaccines – which means putting ethics before profits

Indian health workers doing health checks in Mumbai, June 17, 2020. AP Photo/Rafiq Maqbool, File

Courtesy of Nicole Hassoun, Binghamton University, State University of New York

As COVID-19 surges in the United States and worldwide, even the richest and best insured Americans understand, possibly for the first time, what it’s like not to have the medicines ...



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Biotech/COVID-19

Ending the pandemic will take global access to COVID-19 treatment and vaccines - which means putting ethics before profits

 

Ending the pandemic will take global access to COVID-19 treatment and vaccines – which means putting ethics before profits

Indian health workers doing health checks in Mumbai, June 17, 2020. AP Photo/Rafiq Maqbool, File

Courtesy of Nicole Hassoun, Binghamton University, State University of New York

As COVID-19 surges in the United States and worldwide, even the richest and best insured Americans understand, possibly for the first time, what it’s like not to have the medicines ...



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Kimble Charting Solutions

Is the Nasdaq 100's Out-Performance Nearing a Top?

Courtesy of Chris Kimble

Is the latest ramp higher and Large-cap tech stocks have been the clear market leader, out-performing the broad market for months.

In today’s chart, we look at the Nasdaq 100 to S&P 500 performance ratio in an effort to answer the question: Is the ramp higher in tech stocks and severe out-performance sustainable?

While we may not be able to answer that question today, the ratio IS at an inflection point. And following today’s ratio chart should help us answer that question.

As a reminder, the ratio rises when the Nasdaq 100 is out-performing the S&P 500. Note also that it is a longer-term “monthly” price chart.

Important Br...

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Zero Hedge

Homebuilder Optimism Explodes Higher As Mortgage Rates Plunge To Record Lows

Courtesy of ZeroHedge View original post here.

US Homebuilders’ Confidence index soared higher in July (to 72 from 58 last month), back to March (pre-COVID) levels.

  • Measure of present single family sales rises to 79 vs 63 last month

  • Future single family sales gauge rises to 75 vs 68 last month

  • Prospective buyers traffic measure rises to 58 vs 43 last month

...

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ValueWalk

Whitney Tilson Is Bullish On Bank Stocks

By Jacob Wolinsky. Originally published at ValueWalk.

Whitney Tilson’s email to investors disucssing him being bullish on bank stocks; the bear case; Doug Kass with the bull case.

Q2 2020 hedge fund letters, conferences and more

Earnings Season For The Big Banks

1) It's earnings season for the big banks this week.

Citigroup (C), JPMorgan Chase (JPM), and Wells Fargo (WFC) reported this morning... Goldman Sachs (GS) is up tomorrow... and Bank of America (BAC) and Morgan Stanley (MS) round things out on Thursday.

The sector has been decimated this year. The Invesco KBW Bank Fund (KBWB) is down 35% year to date, vast...



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Digital Currencies

Bill Gates, Elon Musk, Jeff Bezos, Bloomberg, Kanye, Apple Twitter Accounts All Hacked In "Nigerian" Bitcoin Scam, Over $100,000 Stolen In Minutes

Courtesy of ZeroHedge

The twitter accounts of two of the world's richest men, Bill Gates and Elon Musk (and perhaps others) were hacked late on Wednesday, in what appears to be a version of a "Nigerian" bitcoin scam.

At 440pm ET, Musk tweeted the following:

Microsoft founder Bill Gates had a similar tweet.

As did Jeff Bezos:

...



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The Technical Traders

Second Phase Real Estate Collapse Pending

Courtesy of Technical Traders

Real estate, especially commercial real estate, is likely to be the first segment of the real estate market to enter the second phase of an extended collapse.  The COVID-19 virus has created an atmosphere where continuing operations for retail, restaurants, and many other business segments is virtually impossible to maintain.  Without the ability to earn sufficient income, thousands of restaurants and other retail businesses have already closed or are in the process of closing.  This has pushed the commercial real estate market into turmoil.  We believe the residential real estate market will follow the commercial market because consumers are going to suffer as commercial real estate collapses....



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Chart School

Dow 2020 Crash Watch - Update

Courtesy of Read the Ticker

Like 1929 the markets have bounced. This time it is on the back of the FED $6.5T money printing.

Previous Post: Dow 2020 Crash Watch 

But can the FED blow $6T every time the market rolls down to test support.

Yes, maybe before the US 2020 elections the FED will do 'what it takes'. But post elections not so much, the year 2021 is a long way from the next election (presidential or congress) and defense of the markets may not be so supportive at $6T or $10T per market smash. The FED may hesitate, and that will be window for stocks to break lower.

The 36 month simple moving a...

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Lee's Free Thinking

These Charts Show COVID 19 Is Spreading in the US and Will Kill the Economy

 

These Charts Show COVID 19 Is Spreading in the US and Will Kill the Economy

Courtesy of  

The COVID 19 pandemic is, predictably, worsening again in much of the US. Only the Northeast, and to a lesser extent some Midwestern states, have been consistently improving. And that trend could also reverse as those states fully reopen.

The problem in the US seems to be widespread public resistance to recommended practices of social distancing and mask wearing. In countries where these practices have been practi...



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Members' Corner

Coronavirus, 'Plandemic' and the seven traits of conspiratorial thinking

 

Coronavirus, 'Plandemic' and the seven traits of conspiratorial thinking

No matter the details of the plot, conspiracy theories follow common patterns of thought. Ranta Images/iStock/Getty Images Plus

Courtesy of John Cook, George Mason University; Sander van der Linden, University of Cambridge; Stephan Lewandowsky...



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Insider Scoop

Economic Data Scheduled For Friday

Courtesy of Benzinga

  • Data on nonfarm payrolls and unemployment rate for March will be released at 8:30 a.m. ET.
  • US Services Purchasing Managers' Index for March is scheduled for release at 9:45 a.m. ET.
  • The ISM's non-manufacturing index for March will be released at 10:00 a.m. ET.
  • The Baker Hughes North American rig count report for the latest week is scheduled for release at 1:00 p.m. ET.
...

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Promotions

Free, Live Webinar on Stocks, Options and Trading Strategies

TODAY's LIVE webinar on stocks, options and trading strategy is open to all!

Feb. 26, 1pm EST

Click HERE to join the PSW weekly webinar at 1 pm EST.

Phil will discuss positions, COVID-19, market volatility -- the selloff -- and more! 

This week, we also have a special presentation from Mike Anton of TradeExchange.com. It's a new service that we're excited to be a part of! 

Mike will show off the TradeExchange's new platform which you can try for free.  

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Mapping The Market

How IPOs Are Priced

Via Jean Luc 

Funny but probably true:

...

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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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