The Money Market Piggybank is Shattered
by ilene - August 2nd, 2010 11:53 pm
The Money Market Piggybank is Shattered
Courtesy of Joshua M Brown, The Reformed Broker
USA Today is out with a mystery that I will help them out with…
They ask the question "Where did the $1.1 trillion that just came out of ultra low-yielding money market funds just go?"
Then they go on to point out that the average bank account’s interest rate is .75% versus the ridiculous .04% that traditional money market funds are paying, so maybe some of the $1.1 trillion went there.
Then we are treated to the usual stats about "how much gosh darn cash has been sucked into bond mutual funds" – $700 billion in the last 18 months says TrimTabs. The growth of assets in bond funds cannot explain the money market sapping alone, because we all know that a lot of those inflows are coming from stock people that are scared and asset allocators that are hopping aboard the bond bandwagon (bondwagon?). It’s the disillusioned stock market money that’s pumping into bond funds more than anything else.
The article also posits that investors may be skipping the money market funds and going straight for money market instruments, like buying treasuries directly. I’m not seeing much of that at the retail level at all.
So where did a trillion dollars just go when it left the universe of over 1600 money market funds?
Easy. Some of it may have gone to bond funds, but my bet is that an inordinate amount went toward everyday Americans paying their everyday bills. That’s right, I believe that the investor class is finally starting to pay regular expenses and cover the bills with their money market funds, turning that New Normal maxim about the coming of higher savings rates on its ear.
I don’t have statistical confirmation of this hunch just yet (and I’m actually not sure where to get it), but this is what I’m beginning to see firsthand. Brokerage and investment accounts are becoming a piggybank for investors who are nowhere near retirement.
They will not be buying-and-holding as the commercials have programmed them to do while their businesses and household balance sheets are on their last legs. They will put the capital that’s been earmarked for "investment" to much better use than a $40 annual return on $10,000 in a money market fund.
With underemployment still raging and business…
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Anemic Retail Sales; Strength of Consumer Recovery Overstated
by ilene - June 11th, 2010 3:16 pm
Anemic Retail Sales; Strength of Consumer Recovery Overstated
Courtesy of Mish
Economists never expect bad news. Once again they were surprised by weak economic reports, this time by poor retail sales. Bloomberg reports Retail Sales in U.S. Fall as Consumers Boost Savings
Sales at U.S. retailers unexpectedly dropped in May, signaling consumers boosted savings as employment slowed and stocks fell.
Purchases decreased 1.2 percent, the biggest drop since September 2009, following a 0.6 percent April gain that was larger than previously estimated, Commerce Department figures showed today in Washington. Demand plunged at building-material stores, reflecting the end of a government appliance rebate, and sales fell at auto dealers, in contrast to industry figures which showed a gain.
Companies reined in hiring last month, making it likely households will keep a lid on spending, which accounts for about 70 percent of the economy. Discounters Target Corp. and TJX Cos. were among merchants reporting gains in May sales, indicating households are looking for bargains to stretch out their paychecks.
“The strength of the consumer recovery was overstated,” said David Sloan, a senior economist at 4Cast Inc. whose forecast of a 0.7 percent decline was the lowest among economists surveyed. “I don’t think things are going into a nosedive. The economy is in recovery. The outlook is still moderately positive.”
Retail sales were projected to increase 0.2 percent, according to the median estimate of 76 economists in a Bloomberg survey. Forecasts ranged from a decline of 0.7 percent to a gain of 1 percent.
The decrease in demand wasn’t broad-based, with five of 13 major categories showing decreases last month, led by a 9.3 percent plunge at building-material stores.
The decrease at building-material stores followed an 8.4 percent jump in April and a gain in March that may have reflected a surge in appliance sales propelled by a provision of the government’s stimulus package last year that provided rebates for purchases of more energy-efficient products.
Purchases of automobiles dropped 1.7 percent last month, counter to industry figures. General Motors Co. and Ford Motor Co. posted U.S. sales increases in May that topped analysts’ estimates as higher consumer confidence and inexpensive gasoline spurred customers to buy more sport utility vehicles.
“We’re ramping up production to meet continued strong demand for all of our launch vehicles as well as other products,” Stephen Carlisle, vice president for U.S. sales at GM, said
…
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There’s a Slow Train Coming
by ilene - June 5th, 2010 9:33 am
There’s a Slow Train Coming
Courtesy of John Mauldin, Thoughts from the Frontline Weekly Newsletter
There’s a Slow Train Coming
A Negative 2% GDP in the Third Quarter?
Small Business Still Has Issues
Italy, Paris, Vancouver, and San Francisco
And a Forbes Cruise to Mexico
Sometimes I feel so low-down and disgusted
Can’t help but wonder what’s happenin’ to my companions,
Are they lost or are they found, have they counted the cost it’ll take to bring down
All their earthly principles they’re gonna have to abandon?
There’s a slow, slow train comin’ up around the bend.- Bob Dylan
The question before the jury is a simple one, but the answer is complex. Is the US in a "V"-shaped recovery? Are we returning to the old normal? A great deal hinges on the answer, and this week we look at some of the evidence before us.
But first, a follow-up thought to last week’s letter. I wrote about why countries can reduce their private debt, reduce their public debt, or run a trade deficit, but not all three at the same time. If a country wants to see its government run a fiscal surplus (or small deficit) and at the same time its private citizens want to reduce their leverage (common desires throughout the developed world), it must run a trade surplus. That’s a simple accounting statement. If you did not read last week’s letter, you can get to it by going here.
That brings up the deepwater gusher in the Gulf. That it is an unmitigated disaster is an understatement. There is the possibility of the oil getting into the Gulf Stream and going around Florida and landing upon the Atlantic coast. We will be cleaning this up for years.
I am at the moment on a plane to Italy, but if memory serves me right, we run about a $300-billion-dollar trade deficit just in energy purchases. Our trade deficit has been coming down in most other categories but is fairly steady with respect to oil. And as noted above, if we want to get to a place where we are in control of our government deficit, we must reduce that trade deficit.
Bluntly, we cannot hope…
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May Jobs Report Is ‘Disappointing’
by ilene - June 5th, 2010 9:16 am
Courtesy of Econophile
From The Daily Capitalist
President Obama has now become a professional economist, because like most professional economists his unemployment forecast was wrong.
While the headline from the Wall Street Journal this morning was "Census Hiring Bolsters U.S. Payrolls," nothing could be farther from the truth. Private sector job growth in May was anemic, coming in at only 41,000. The total number of new jobs was 431,000, but temporary Census Bureau hiring accounted for 411,000 of those jobs. Note that the difference between the two numbers doesn’t add up because net government employment was less than that because state and local governments shed jobs. [I now see that the latest online edition of the Journal has re-entitled their story, "US Private Sector Added Few Jobs In May."]
The consensus among economists surveyed by the Journal and Bloomberg expected 515,000 and 536,000, respectively.
“Job growth is going to be anemic,” said Bill Gross, who runs the world’s biggest bond fund at Pacific Investment Management Co. in Newport Beach, California.
“Remember, it requires 150,000 to 200,000 jobs in order to reduce that unemployment rate, which is a key focus for the administration,” he said in an interview with Bloomberg Radio’s Tom Keene on “Bloomberg on the Economy.”
These numbers are disappointing considering that April showed modest private employment growth of 218,000 jobs in April and 230,000 jobs in March. Overall the unemployment rate dropped from 9.9% to 9.7%. The broader "U-6" index dropped to 16.6% from 17.1%. This is not what was expected. It is discouraging to see the Employment-population ratio decline YoY from 59.6 to 58.7 (May 2009 to May 2010).
The U-6 report is interesting in that while it fell, it is likely that the fall was a result of people dropping out of the labor force because they can’t find employment. The civilian labor force participation rate decreased by 0.2% to 65.0%. About 6.8 million people have been out of a job for more than 27 weeks, or 46% of the unemployed. This has to be considered in light of population increases: while the population grew 170,000, 322,000 dropped out of the labor force.
Some of the BLS report highlights: manufacturing +29,000, temps +31,000, mining +10,000, health care +8,000, construction -35,000. These numbers well under the levels seen for…
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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...
Ilene is editor and affiliate program
coordinator for PSW.