GDP Is A Joke January 31, 2012

Not just this month, but pretty much all of the time. But then, we can say that about most, if not all, gov’t stats, can’t we?

John Crudele in the NY Post:

In order to get to that 2.8 percent growth the Commerce Department used a very unrealistic level of inflation in its calculations.

Let me explain: The government comes up with a figure on how much it thinks the economy grew, or shrunk. Friday’s figure was a first estimate for the fourth quarter, so most of the numbers used in the calculation are only guesstimates anyway. (But that’s for a different story.)

The government then takes that growth figure, subtracts the rate of inflation and comes up with the real growth it reports in its press release.

So, in other words, if inflation is rising it reduces the rate of actual, after inflation, growth — which is the figure that Washington reports.

In Friday’s number the government used 0.4 percent as the rate of inflation. Zero. Point. Four. Percent.

In which country is inflation that low? Certainly not in America. Absolutely not in the last four months of 2011.

The consumer price index, which is put out by the US Census Bureau, had prices up 3 percent for the year.

And the rate of inflation used in calculating the third-quarter 2011 GDP was 2.6 percent; in the first and second quarters, combined, the rate was 2.5 percent; it was 1.9 percent in the fourth quarter of 2010.

So how does the Zero-Point-Four-Freakin’ percent sound now?

—

Let me put this another way in case you are missing my outrage.

If the inflation figure used in last Friday’s GDP figure had just remained the same as the 2.6 percent rate from the third quarter, Washington would have had to report fourth-quarter annualized growth of just 0.6 percent.

Yet another link from Instapundit.

Market Wrap January 31, 2012

Dow Industrials 12632.91 -20.81 -0.16% S&P 500 1312.40 -0.61 -0.05% Nasdaq Comp. 2813.84 +1.90 +0.07% Russell 2000 792.82 +0.44 +0.06%

NYSE Comp. 7838.48 +4.07 +0.05% Nasdaq 100 2467.95 +2.63 +0.11% Dow Transports 5319.14 -2.83 -0.05% Dow Utilities 448.84 +2.28 +0.51%

View Major Index charts

Internals managed to get back to the positive side, and volume picked up a bit. Advances/declines were 3 to 2 on the NYSE and 10 to 9 on the Nasdaq, with up/down volume flat on the NYSE and 10 to 9 on the Nasdaq. New highs/lows were 204/12 on the NYSE and 83/12 on the Nasdaq.

Leaders — HMOs (+1.15%), Disk Drives (+0.70%), Transport (+0.66%), Defense (+0.61%), Utilities (+0.50%), REITs (+0.49%), Insurance (+0.48%), Airlines (+0.40%)
Laggards — Homebuilders (-1.37%), Metals (-1.24%), Retailers (-0.97%), Hospitals (-0.69%), Network (-0.62%), Natural Gas (-0.59%), Internet (-0.15%), Chemicals (-0.12%)

An extensive visual representation of the day’s winners and losers can be found at Finviz.com.

Treasury Yields — 6-Month : 0.08 %,  2-Year : 0.21 %,  5-Year : 0.70 %,  10-Year : 1.79 %,  30-Year : 2.94 %

Energy Prices — Crude oil: $98.41/barrel,  Gasoline: $2.88/gallon,  Natural Gas: $2.47/mmBTU

US Dollar Index — 79.281

Precious Metals — Gold: $1739.10/ounce,  Silver: $33.17/ounce,  Platinum: $1585.00/ounce

BMB Note:  
The bulls saved another one – what is that, three in a row? Bears had a chance to pull the market down today, but it just didn’t happen.

January’s over. On to February.

Repression January 31, 2012

I’m feeling pretty repressed — are you?

“The Fed’s Rain Dance at the Bottom of the Stairs”

At first, the expectation was that the “exceptionally low” rates would last 6 months, but now it’s been three years, and three more years have already been added to the schedule, so six years in total, and soon, it’ll be 20 years, à la Japanese, which isn’t exactly the paragon of a healthy economy. While there are cosmetic differences between the two, they do share ZIRP, out-of-control budget deficits, a ballooning national debt, and a political refusal to deal with reality—aided and abetted by a central bank.

It’s an ugly situation. Short-term treasury yields are at practically zero, 5-year yields hit a new all-time low of 0.71%, and even 30-year yields dipped below 3%. Savings accounts, money market funds, and short-term CDs yield just about nothing. Yet inflation was 3% in 2011. The many trillions of dollars that individuals, institutions, and countries hold in these assets are slowly being ground down by inflation, but without compensation in form of yield. Financial repression. And the largest slo-mo ripoff in the history of mankind.

Arlo Sings Bailouts January 30, 2012

“Arlo Sings Bailouts”:

“When they hand a million grand out, I’ll be standing with my hand out….If you’re a corporate titanic and your failure is gigantic, Down in Congress there’s a safety net for you.”

Link from Instapundit.

Market Wrap January 30, 2012

Dow Industrials 12653.72 -6.74 -0.05% S&P 500 1313.02 -3.31 -0.25% Nasdaq Comp. 2811.94 -4.61 -0.16% Russell 2000 792.38 -6.47 -0.81%

NYSE Comp. 7834.40 -42.21 -0.54% Nasdaq 100 2465.32 +3.55 +0.14% Dow Transports 5321.97 -22.81 -0.43% Dow Utilities 446.56 -1.41 -0.31%

View Major Index charts

Internals were negative, and volume was even lighter than Friday’s pathetic effort. Advances/declines were 7 to 12 on the NYSE and 1 to 2 on the Nasdaq, with up/down volume 3 to 7 on the NYSE and 4 to 5 on the Nasdaq. New highs/lows were 157/10 on the NYSE and 62/18 on the Nasdaq.

Leaders — Airlines (+0.82%), Biotechs (+0.77%), Health Care Products (+0.64%), Comp. Tech (+0.49%), Comp. Hardware (+0.09%), Drugs (+0.08%), Natural Gas (-0.01%), Chemicals (-0.03%)
Laggards — Hospitals (-2.21%), Metals (-1.58%), Homebuilders (-1.43%), Network (-1.19%), Semis (-1.11%), Banks (-1.10%), Oil Services (-0.96%), REITs (-0.89%)

An extensive visual representation of the day’s winners and losers can be found at Finviz.com.

Treasury Yields — 6-Month : 0.08 %,  2-Year : 0.21 %,  5-Year : 0.73 %,  10-Year : 1.85 %,  30-Year : 3.00 %

Energy Prices — Crude oil: $98.99/barrel,  Gasoline: $2.87/gallon,  Natural Gas: $2.66/mmBTU

US Dollar Index — 79.145

Precious Metals — Gold: $1729.10/ounce,  Silver: $33.47/ounce,  Platinum: $1611.00/ounce

BMB Note:  
I’ll hand the commentary over to Deron Wagner today, since I pretty much agree with his assessment at this point (and most other times too, for that matter…). And you can check out his/their new blog too:

Although the market and many sectors are pinned to overbought levels, there’s been little sign that buyers are leaving the market. Distribution days have been at a minimum, high relative strength stocks continue to hold their breakouts and every dip in the market has thus far been met with buying activity. We remain bullish on the market but a period of modest selling and/or consolidation is needed for new setups to appear. At the current levels, the reward to risk ratio just isn’t in line to consider taking on new positions. A little patience is likely needed until new setups appear.

Oh, and I’ll add that volume has been abysmal.

Unsustainable January 30, 2012

Mike Burk:

Over the past 6 weeks the Russell 2000 (R2K) has been rising at an annualized rate of 221% while the Dow Jones Industrial Average (DJIA), the laggard, has been rising at an annualized rate of 103%. These rates are unsustainable.

Ya think?

Hard Decisions January 29, 2012

“John Mauldin: It’s Time to Make the Hard Decisions”

Or maybe past that time.

Tellin’ It January 29, 2012

…like it is.

Some inconvenient truths from Victor Davis Hanson – “What We Do Not Want to Hear Anymore”:

Wall Street crooks were only one third of the equation. Another third were equally dishonest and greedy insiders at Freddie and Fannie, such as Clinton hacks like Franklin Raines, Jamie Gorelick, or James A. Johnson, who made millions for themselves without much banking expertise, and were egged on by congressionals like Barney Frank and Chris Dodd. who hid their own conflicts of interest with high talk about helping the poor. That the three chiefs of staffs in the Obama White House were all Wall Streeters who made millions, in part from the housing bubble, is proof enough of the revolving-door, get-rich schemes. (I don’t remember any particular banking skills that Rahm Emanuel ever displayed that would result in $16 million in profits from two years on Wall Street. Apparently he was a fat cat, a millionaire, and one who did not know that at some point that he already had made enough money.)

The other third party, of course, was “we.” We were not forced to buy homes by “them.” Some of us were greedy and wanted to keep flipping real estate and got caught when the music stopped. Some were stupid and leveraged their homes to pay down credit card debt and write off the interest — or take on even more consumer debt. Some were always better off in an apartment or rental. True, some just bought at the wrong time; but that’s called “bad luck” and not quite the result of a mustached black hat forcing an innocent widow at gunpoint to sign on the dotted line. What are we to think when the president thunders, “We learned that mortgages had been sold to people who couldn’t afford or understand them”? What does “we learned” mean? Did we ever not know? And what does his passive-voice “had been sold” mean? Are we to learn now that it does not mean “bought”? Americans did not “buy” houses, but were pried out of their beds to have too costly homes “sold” to them?

—

Human nature and the laws of physics, not technocratic liberalism, are still the best guides to the madness around us. Money borrowed has to be paid back or the debt eaten by someone, period. Poverty is defined by a want of material necessities, not by lacking the appurtenances that someone else better off enjoys. Gas and oil are miracle fuels and it is very hard to find alternate energies at comparable costs and reliability. And as a rule, the green class of environmental elites usually uses more fossil fuels per capita than do the muscular classes who mine and drill them out of the ground — and who do not jet, drive, or live in the comparable fashion of their critics. The content of our character alone matters; those who are not so confident in their own, usually demand that their tribal affiliations be essential and not incidental to their personas. Most accept that culture, not race matters, but it matters still more not to say that. Most of the political class has no interest in history; dogma is their creed. They assume that everyone (far less noble than themselves) in the past would have agreed with them, or now can be postfacto made to agree with them.

Link from Instapundit.

What’s Hot, What’s Not January 29, 2012

• Take a cruise through a subset of group charts here: set #1 — set #2 — set #3 — set #4.
• For a more detailed breakdown of group movement over various time periods, try the Industry Group Tracker at WSJ Online, the industry group tools at Finviz.com, or the list of Morningstar industry groups at FreeStockCharts.com.

 

Best Performing Industries
Last Week	Last 4 Weeks	Last 8 Weeks
Gold & Silver ($XAU) +8.4%	Biotech ($BTK) +20.0%	Biotech +22.5%
Airlines ($XAL) +7.8%	Airlines +18.2%	Housing ($HGX) +21.6%
Hospitals ($RXH) +7.1%	Housing +14.5%	Airlines +16.7%
Biotech +5.4%	Metals & Mining (XME) +14.0%	Chemicals ($DJUSCH) +12.5%
Metals & Mining +5.3%	Networking ($NWX) +13.6%	REITs ($DJR) +12.1%

 

 

Worst Performing Industries
Last Week	Last 4 Weeks	Last 8 Weeks
Paper ($DJUSPP) -3.7%	Utilities ($UTY) -3.9%	Natural Gas ($XNG) -4.3%
Brokers ($XBD) -3.0%	Drugs ($DRG) -0.7%	Gold & Silver +0.2%
Telecom ($XTC) -1.6%	Telecom +0.2%	Utilities +0.6%
Defense ($DFX) -1.6%	Natural Gas +0.2%	Telecom +0.7%
Banks ($BKX) -1.4%	Insurance ($INSR) +2.2%	Oil ($XOI) +2.8%

Major Error January 28, 2012

Doug Noland, “Policy Deserving of a Rant”:

There are reasons why Jean-Claude Trichet over the years repeatedly stated “the ECB would never pre-commit” on interest-rate policy. The Federal Reserve this week moved further to the opposite polar extreme, essentially pre-committing to near-zero rates through late-2014. The ECB has historically believed that market speculation based upon future policy expectations works to foment market excesses, imbalances and attendant fragilities. In contrast, the activist Federal Reserve believes that it has a fundamental obligation to intervene and manipulate to achieve market outcomes the committee believes will spur growth.

Unprecedented operations back in late-2008 took the Fed’s balance sheet from about $900bn to $2.2 TN. We were assured that the Fed had an “exit strategy.” I’ve always presumed “no exit,” and here we are today with Fed holdings at $2.9 TN. The economy is expanding, financial markets are strong and consumer price inflation is rather undeflationary – yet Dr. Bernanke is again signaling he is prepared for additional monetization.

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I have seen overwhelming support for the “global government finance Bubble” thesis. Fiscal and monetary policy has been out of control for going on four years now. And with parallels to the mortgage finance Bubble, the more prolonged the Bubble period the more dismissive the crowd becomes to the notion that they might be participants to a manic Bubble. That’s ok. As an analyst of speculative Bubbles, I am well aware of the nuances. Objectively, it is possible to recognize Bubble dynamics in real time. Realistically, however, it is the nature of things that this analysis will be dismissed and disparaged. As I’ve written in the past, “Bubbles tend to go to unimaginable extremes – and then double!” I am comfortable with the analysis that we are in the late stage of a historic global financial mania.

—

The Fed committed yet another major error this week. The worsening European crisis last year created a major artificial bid to perceived “safe haven” Treasury (and related) securities. This amounted to a major loosening of financial conditions for the commanding sector of U.S. Credit expansion. The Fed should have recognized how this dynamic had created heightened Bubble risk throughout our government debt markets (Treasury, agency, MBS, muni, etc.). Instead, the Fed has administered gas to the fire – along with pronouncing that it’s content to stand gas can in hand for some years to come. The Bernanke Fed has created a backdrop further supportive of speculative leveraging – and global risk market speculation more generally. Worse yet, our central bank is determined to punish savers into submission.