As things economic go, this hasn’t been much of a week – a sort of ‘week treading water’ since the market is trying to figure out if the ‘green shoots’ are going to come up, or whether we will see the ‘green’ all withered up as the heat of summer builds.
Take the Dow Jones Industrials, for example (please!). Last week the Dow closed at 8,280.74 and as folks headed for The Hamptons this weekend it was down to 8,146.52, a drop of almost 135-points, but in the bigger scheme of things that’s only a 1.6% move for the week, and nowhere near the ‘two standard deviations’ range where things even begin to get interesting.
It’s on trading weeks like this that I’m thankful I invested in my stylish hammock and some umbrellas for the new deck, but the truth is I haven’t been able to use them much since we’ve got a heat advisory out for this part of East Texas that will run through Sunday. Laying in a hammock is no fund when the comfort-temperature is north of 100º.
Not so hot this week was the Consumer Debt report from the Fed. It showed that people are still reluctant to pile on debt – and with good reason, since unemployment is high and may head higher. What’s overlooked in the Fed data is that there’s no mention of constant dollars in the Fed’s numbers. So (here goes too much coffee George with his whiteboard markers) if you have inflation going along at let’s say a nominal 4%…and you have the Consumer Debt (mislabeled credit) as declining 1.5%, then the real drop in effective spending is something much worse than most folks think about.
The Fed numbers for Q3 ‘08 show, for example that back then, consumer debt was 2582.8 billion and the most recent month (May) it was 2,519.6 billion. But to take inflation into account (our 4%) we can multiply the most recent number by .96 (meaning only 96% of last year’s purchasing power remains) such that on a constant dollar basis, Consumer Debt is somewhere around 2,418.8. Now, let’s do this: Take that and divide 2,582.8 into it (last year’s Q3 level) and you’ll see consumer debt is running 93.65% of last year. Subtract that from 100% and it means Consumer Debt is down about 6.349 percent – on a constant dollar basis.
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Of course this also applies to other things – like the recently refigured Dow Jones Industrials. If one looks to this historical data, you see that last year’s Dow closed the second Friday of July (July 11th last year) at 11,100.54 and so if we discount this week’s Dow by 4% to account for annual inflation of 4% that means our 8,146.52 close this week had purchasing power equivalent to what 7,820.66 would have purchased last year, so dividing that by 11,100.54 means the Dow has retained only 70.45% of its value….having dropped 29.55% on a purchasing power basis over the past year.
I realize that this could be easily labeled a “pessimistic perspective” but here in George Land, there’s no pessimism or optimism: There’s just ‘getting aheader” or “getting behinder.”
To those who would label such a view as ‘Negative” and “Doomster” or “Gloomster” I’d just offer that great Jack Nicholson line delivered in the movie “A Few Good Men” “You can’t handle the truth.“
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Reports following the G-8 meetings this week show us pretty clearly how the Obama administration is about to get backed into something I call ’stimulus lag.’ Just like certain cars have noticeable ‘turbo lag’ when you get your foot into them when coming out of a corner while the turbo spools up, the same kind of thing can happen to the economy. Now that we’re reading headlines where “Obama rejects 2nd stimulus: Give recovery time to work” the economic equivalent ought to be the ‘turbo lag’ equivalent of something like this…
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Time to step on gas (second stimulus) with more emphasis on home saving and lower/middle income job creation is now.
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The economy continues through the corner and falters seriously starting late August and into November.
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At which time the need for the ’second stimulus’ will become overwhelming obvious (along with a bunch of withered ’shoots’.
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The rest of the world will pass us by from November onward until the next argued-to-death stimulus gains traction my March of next year…
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However, in the Spring of ‘10 the economy will be over-stimulated thanks to Stimulus #1 and Stimulus #2 kicking in at the same time….
Which means, to anyone who has read Going Faster! Mastering the Art of Race Driving
It’s always easier to apply a little extra fuel early in the turn, keep the turbo spooled up, even if you get a little high of the line you can always dial it back a bit, rather than overpower and stay on ‘the line’. Unless you go way ‘inside’ so that when the power comes on, you’d be able to harness all that energy.
Unfortunately, however, that would require sounder money and a national focus on something that coupled with an achievable national purpose would cause people to all ’sign on’ to a vision…thus ‘getting traction’ for America again.
Sorry, but ‘rolling up your sleeve’ for not one, but two flu shots which will apparently contain autism-risking mercury-based preservatives is not going to do it, but those headlines will be along later on in the year, so stay patient.
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.Although I believe that the economy will experience this ‘turbo’ (stimulus) lag that risks spinning out the whole country by this time next year (necessitating another LIHOP/MIHOP, perhaps in spring ‘10) I seriously hope to be wrong. Consequently the Peoplenomics report this weekend will be dealing with design of a personal risk-allocation model using readily available data that we’ll update in the ChartPack every so often as the year moves along.
There’s always a chance that runaway deflation could occur, but doesn’t seem likely…still the intellectually honest thing is to measure, measure, and then measure again, before cutting and fleeing any asset class.
Payback
This time it’s for real as Representative Elijah Cummings of Maryland says the taxpayers oughta get all that dough we’ve piled into AIG back before execs get bonus money.
Story Catching On
More headlines about the adventures of Goldman Sachs adventures in court this week such as “Can Goldman Sach’s Stolen Code Be Used to Manipulate the Markets?“
Great Story Idea
Speaking of which: If I were a financial fiction writer, I’d be looking at a novel where the plot line involved the Plunge Protection Team, a/k/a the government’s “Working Group on Financial Markets” needing a big player whom they could trust (or so they’d think) in order to keep the markets from cratering in the event of Black Swan things like terrorist attacks or investor panic that would make a Second Depression instantly recognizable. So, they approached a Big Wall Street firm, help them install a financial version of WOPR, but that gave huge leverage to those at the top of the firm who because knew what the deal was, were recruited as a succession of insiders to hold key government positions (at the secretary level, for instance) in order to keep the market manipulation efforts of the government under-wraps.
All fictional of course. But it would make a fine plot in fiction and there are surely a few factual matters to support the plot. Especially if a screenwriter could get hold of the underlying code from the WAREZ crowd and show it had
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For further plot ideas in this proposed fictional account – turn to the headline “DKos Diary Reverberates Throughout Wall St.” or the headline “Proprietary Program used to Manipulate Markets Stolen from Goldman Sachs“.
It all sounds o next to impossible except that about 2/3′rd’s of the way through the plot line, guess what happens?
“NYSE Cuts Order-Execution Time to 5 Milliseconds from 105 ” is issued as a press release…which in my proposed novel results not from technical improvements in the “Super Display Book system (SDBK) for processing orders” being implemented, but from a front-running system coming offline.
And then, because there’s risk to the market as things unwind here and the government-backed market-saving system comes offline, the “NYSE Extends Temporary Suspension of Price Standard Through July 31 ” and (in this proposed novel) without a press release announces the end of daily program trading reports in a memo to members. Kinda like M3 disappeared, don’tcha think? Oh what fun fiction is!
Think I’ll send a copy to author Michael Panzner (When Giants Fall: An Economic Roadmap for the End of the American Era
Gassed
If you thought the situation in Gaza has calmed anyone down, think again. Fox News has video of one of their reporters being gassed near a fence. Started as a peaceful demonstration. And about those relief ships that have been turned back? MSM seems to have gone deaf dumb and blind on that issue.
Around the Ranch: Interior Designing
Got about 2/3′rd of the knotty pine-look ceiling up in what will be the ‘San Francisco’ room done this week. heading for Lowes this morning for more lumber and then a ham radio breakfast. From there, it’s spreadsheet festival time working on how to build a personal econometric model to drive fund allocation for this weekend’s report.
Have a great weekend…see you Monday morning….
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Send comments to george@ure.net
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The UrbanSurvival Mall:
Toward a Personal Constitution
Two great warnings about ‘rights’ in America have stuck with me over the years. The first was that “Rights are usually taken away from those least able to defend them first…” Something I expect First People on this continent would have no reservations about endorsing. The second thing to strike me is the ‘extensibility’ of the phrase “When guns are outlawed, only outlaws will have guns.” It extends to thoughts like “When only special interests have access, only special interests have laws.” I’m worried that with the recent blatant ignoring of the Will of the People expressed on bailouts and such to congress, that our beloved Constitution is in great peril. I hear the social contract tearing. Is it time to flag Old Glory upside down – as we’re certainly in ‘distress’. Enough so that I’ve started working on my own “Personal Constitution” as a portable back-up should the one that keeps the States ‘united” fail in the midst of economic turmoil in the next year or two. Should that arrive, whether by terrorism, economic collapse, or an electric grid-killing solar flare, the relevance of the Constitution may disappear as the central government can only exists so long as it can exact tribute from We the People. I love the Constitution, but since it’s being hacked up by fits and starts, it may be time to think the once unthinkable….write our own.
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MyGroPonics
My commodity broker JB Slear has nailed a great solution for people who living in apartments and condos who want to become at least partially self-reliant when it comes to raising food: An ultra-high efficiency micro-hydroponics system using readily available local parts. 25-pages and plenty of pictures to turn you into a farmer no matter where you live (Great if you have back problems, too…)…or if you just want to fill up the back yard with MyGroPonics trees and feed the neighborhood… $10 bucks here…
Maxa-Cookie Manager
Maxa-Tools has provided us with a free demo – which you’re welcome to try – of their dandy cookie manager tool that I use here on all my computers. It shows both the browser-specific and the newer browser-independent cookies. Quite happy with it.
Here’s the download link for the free demo:
www.urbansurvival.com/setupMCMstdGU.exe
Once you try it out, click the upgrade button (!) on the upper right hand side for the $35 unlock to get it to remove even those pesky ‘non-browser specific’ cookies. Bonus: You computer may run faster. I took over 1,000 cookies off my son’s machine that he swore was clean. It ran much faster.
Attn: Mac Drivers: MCM does support the Safari Browser, but that does not mean it is compatible with Mac OS. Maxa-Tools only support the Windows world.
Help US Go Viral
UrbanSurvival has a dandy growth rate, but sadly, it’s nothing like swine (hybrid) flu’s growth rate. However, if you’d like to sicken the PowersThatBe, just click here for a tool that may help. (It’ll pop up an email window if you use Outlook (or a few other email programs) then simply send a link to everyone on your distro list…
“Live on $10,000″ Updated
What? You haven’t ordered the ebook “How to Live on $10,000 a year — or less”? Suit yourself. We’re all going to live it shortly, anyway. I just thought you might like a heads up by reading about how to do it before you get pink-slipped. But, suit yourself OR visit www.liveontenthousand.com or, click one of the following button:
Yep – still possible. I also took a bit of additional material that was pertinent from recent issues of Peoplenomics and included them. The whole thing runs about 65 pages, but it gives you a vision of how to not only live on the aforementioned dollar amount, but also how to migrate up the economic foodchain if you make a little more than that and do some active savings… Click here for the page with more details on it.
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Last week’s report is here. For back issues of this site, click here. (Goes back to 1997!)