Posted on 04/29/2012 4:59:06 PM PDT by Signalman
This may not come as a surprise, but we're still not seeing it. We're not seeing a US recovery.
Here we are, well into 2012, and the fact remains that the US housing situation is still a bust. There is simply no housing recovery happening in the United States. US New Home Sales fell for the fourth time in a row month-overmonth in March, representing a seasonally-adjusted annual rate of 328,000, down from 353,000 in February.1 Do you know what the annual rate of New Home Sales was back in 2006? About 1.21 million.2 No recovery there.
Same goes for US Existing Home Sales, which fell unexpectedly by 2.6% in March to an annual rate of 4.48 million units.3 Again would you care to know where they were in the same month back in 2006, before the financial system fell apart? Approximately 6.92 million units.4 No recovery there either.
Then there's unemployment. Judging by all the recent earnings-release cheerleading, March's jobs numbers seem to have been forgotten, but they were plainly weak. The US Labor Department showed US hiring slowing to a mere 120,000 new jobs in March, below expectations of 200,000+.5 That's not a recovery. That's simply weak data.
Same goes for the most recent jobless claims numbers, which have been running above 380,000 for the last two weeks, above the 375,000 threshold that supposedly signals future unemployment increases.6 Again this is not positive data, this is weak data. How high will it have to go before the economists admit that it's weak? 400,000? 425,000? We're asking we'd like to know.
Then there are US tax receipts, which continue to point in the same direction. If the US is recovering so strongly, then why are employment tax receipts only up 2%? ($484 billion fiscal year-to-date as of March 2012 vs. $475 billion over the same period to March 2011).7 A 2% increase is explainable by inflation alone, which was last reported running at 2.7% according to the Bureau of Labour Stastics.8 Shouldn't the tax receipts be much higher than that? Wasn't unemployment down so far this year? As the Associated Press plainly states, "The unemployment rate has fallen to 8.2% in March [2012] from 9.1% in August [2011]. Part of the drop was because people gave up looking for work. People who are out of work but not looking for jobs aren't counted among the unemployed."9 Oh! Sorry, now the numbers make more sense. There hasn't been any net new employment at all. Question: if everyone "gives up" looking for work next week, will the US unemployment rate go to zero? We're asking we'd like to know.
Other economic indicators exhibit the same downward momentum that the pundits are loath to acknowledge. For example, the Economic Cycle Research Institute's (ECRI) Weekly Leading Indicator index, which had been rising from its 2011 lows earlier this year, has resumed its downtrend in April.10 More recently, US Durable Goods Orders were revealed to have dropped 4.2% in March, representing the largest decline since January 2009.11 To top it all off, China's most recent Purchasing Managers Index (PMI) indicated that China's manufacturing activity has now been in contraction for six months in a row.12
Meanwhile, the situation in Europe continues to worsen. There's no point in mincing words: Spain is a complete disaster. This past week, the Spanish government managed to pull off two separate bond auctions, only to have the yield on their 10-year government bond shoot right back up the moment the second auction closed. Everyone's nervous because the Spanish banking system is up to its eyeballs in approximately 143.8 billion worth of delinquent loans, and the private sector is unwilling to lend Spanish banks the money to weather the potential write-downs.13 As we've seen before, the real culprit plaguing the Spanish banks is customer deposit withdrawals. It is estimated that 65 billion of deposits left Spanish banks this past March alone.14 People are taking their money out of the Spanish banking system, and without the help of the generous European Central Bank (ECB), the Spanish banks would likely be in a full collapse today (see Figure 1).15 As it stands, the Spanish banks have now borrowed a massive 316.3 billion from the ECB in order to meet the withdrawals and maintain the illusion of solvency.
Perhaps it's Euro-crisis fatigue, or maybe just plain denial, but the equity markets appear unwilling to acknowledge how close we are now to yet another round of Eurozone upheaval. Spain's economy is almost five times that of Greece. Spain also has over four times the amount of externally-held nominal debt outstanding.16 If the bond vigilantes choose to punish the Spanish 10-year bond (currently trading precariously close to a 6% yield), we could soon be back where we were this past September, only with a problem four times as large.
The rest of Europe isn't looking so hot either. Italy's bond market is in a similar situation to that of Spain, with the Italian 10-year bond trading perilously close to the 6%-yield threshold. Recent data showed the European Purchasing Managers Index (PMI) falling to 47.4 in March, well below the 50 mark which signals growth in industrial activity.17 German PMI recently confirmed this move with its April release of 46.3, down from 48.4 in March, representing the fastest rate of contraction since July 2009.18 These declines in economic activity, combined with the austerity measures most Euro countries are currently attempting to impose, almost guarantee more printed money will be pumped into the European bond markets before the year is over. It's simply a matter of time.
As expected, the powers that be are busy parading around in preparation for the next round of Eurozone panic, with the IMF using the renewed concerns as an opportunity to re-establish its relevance as a firewall provider. The IMF most recently secured $430 billion worth of new "pledges" from various G20 member countries to increase its potential lending capacity to $700 billion in the event of further problems in the Eurozone.19 Not unsurprisingly, the BRICS countries have expressed irritation at the disproportionate voting power held by Western powers within the IMF at the expense of themselves and the other developing nations. In prepared remarks at an IMF press conference, Brazil's finance minister criticized the skewed quotas that dictate voting power, stating that, "The calculated quota share of Luxembourg is larger than the one of Argentina or South Africa The quota share of Belgium is larger than that of Indonesia and roughly three times that of Nigeria. And the quota of Spain, amazing as it may seem, is larger than the sum total of the quotas of all 44 sub-Saharan African countries."20 This unbalance used to make sense when the IMF was designed to help fund ailing third world and developing countries through economic crisis. But that is clearly no longer the IMF's main purpose.
It must be difficult for the BRICS countries today. On one hand, they continue to jockey for respect among the Western powers, insisting on participating in quasi-European bailout funds like the IMF. On the other hand, they are also clearly aware of the Western nations' continuing efforts to surreptitiously devalue their domestic currencies, and the pernicious effect that has had on them as exporters and as lenders of capital. In that vein, it was interesting to note that during the latest BRICS Summit held this past March in New Delhi, the main topic of discussion centered on the creation of the group's first official institution, a so-called "BRICS Bank" that would fund development projects and infrastructure in developing nations. Although not openly discussed, reports suggest what they were really talking about was creating a type of BRICS central bank an institution that could facilitate their ability to "do more business with each other in their local currencies, to help insulate from U.S. dollar fluctuations "21 Given the incredible scale of western central bank intervention over the past six months, the BRICS' increasing frustration with their printing efforts should be a given by now. The real question is what they're doing about it, and what assets they're accumulating to protect themselves from the inevitable, which brings us to gold.
Although the paper gold price has been range-bound over the past month, the physical gold market has been undergoing staggering change. Earlier this month it was revealed that Hong Kong gold imports into China totaled nearly 40 tonnes in the month of February, representing a 13-fold increase over the same month last year (see Figure 2).22 40 tonnes annualized equates to 480 tonnes per year a massive number in a market that only produced 2,810 tonnes of mine supply in 2011.23
You know it is going to be bad when tax cheat Tim takes the position that the depression in Europe won’t impact on US companies. When companies like p&g are hurting, you know things aren’t going so well.
I just tonight put all my stock holding on the market to sell tomorrow....
I think it going to get real ugly real quick....
I lost a bunch in the 2008 crash.... I am not losing a bunch in the coming crash....when Europe starts to unravel ....
Tomorrow I move my 401 K holdings into the bond market ...
I have a webpage of unfudged economic numbers, most directly from the Federal Reserve. When you cut out the Gov doublespeak, things don’t look good.
http://www.futurnamics.com/slfed.php
Probably a good time to sell. Prices are artificially pumped up at the end of the month to raise valuations for managed funds and thusly, the management fees for the operators.
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