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Stock Market Update, Sept 10th 2013

Sept 10 2013 chart

The Dow is recovering nicely here, just as anticipated. As I have mentioned before the market was oversold and due for a bounce. I believe this bounce will take the rest of September to complete. 

What is interesting is that the market left a bunch of open holes (gap downs) on the way down around 15,500-15,400 range. After studying the market for many years, I have noticed something. The market doesn’t like these gaps. One way or another the market comes back to close the gap. Even if it takes years.

Other technical and timing works indicate that the market is likely to get into this 15,500 range by the end of September before reversing and heading down. As of right now I would still be in a waiting pattern, looking for various confirmation. There is no need to rush here. Stay patient. 

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Americas Hidden Depression

Bloomberg Writes: Recession? Depression? One in Three Thinks So

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A third of Americans think the U.S. economy is in a recession or a depression and only one in six think it’s growing, says a new survey that also finds “deep-seated pessimism about the medium term.”

Americans are highly critical of policymakers, unwilling to take risks with their savings, planning to reduce their indebtedness over the next year, suspicious of the stock market, and more worried about inflation than unemployment, according to the survey released today.

The National Bureau of Economic Research has declared that the U.S. pulled out of recession more than four years ago—in June 2009—but a lot of people apparently didn’t get the memo.

The survey found that 85 percent of the 1,000-plus adults worry to some degree about their financial situation, compared with 90 percent three years ago. People who say they’re worse off than they were a year ago outnumber those who say they’re better off, 28 percent to 22 percent.

Read The Rest Of The Article Here

This is fairly easy to explain.  The survey above shows the true state of the US Economy. Even though the numbers shows that the US Economy has recovered significantly from the March of 2009 bottom, nothing could be further from the truth.

The recovery was fueled and financed by Credit Bubble Finance. Meaning that the US Government basically wasted about a Trillion Dollars (some claim a lot more) to prevent a complete collapse in the US Economic System.  However, the original “SIN” of massive credit expansion, cheap finance and speculation hasn’t been fixed yet. On the contrary, it has been made a lot worse.

Now the US Economy has massive imbalances that cannot be dismissed or fixed in any favorable fashion. It could only be done either through massive inflation or massive defaults. Even war is no longer a tool. 

I am sorry to say, but my timing work clearly shows that both of those things are about to happen. First, deflationary credit defaults from now till 2016 final bear market bottom (and 2018 secondary bottom), followed by accelerated inflation thereafter.

Unfortunately, in such a scenario no one wins, but it does pay to be prepared.  

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Economic Lunacy

The Daily Ticker Writes: Krugman Overboard! Says Economic Policy a ‘Horrifying Failure’

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Nobel Prize-winning economist and New York Times columnist Paul Krugman argues in his new editorial that U.S. economic policy over the last five years has been “an astonishing, horrifying failure.” Krugman, a long-time critic of the Obama Administration’s stimulus efforts, writes that the U.S. government should have spent three times the amount of money it did to get the economy back on its feet:

“…if the U.S. government had actually been able and willing to do what textbook macroeconomics says it should have done — namely, make a big enough push for job creation to offset the effects of the financial crunch and the housing bust, postponing fiscal austerity and tax increases until the private sector was ready to take up the slack…we would be a richer nation, with a brighter future — not a nation where millions of discouraged Americans have probably dropped permanently out of the labor force, where millions of young Americans have probably seen their lifetime career prospects permanently damaged, where cuts in public investment have inflicted long-term damage on our infrastructure and our educational system.”

There you go. These are the idiots at the top of the US Economic Policy food chain.

“An astonishing, horrifying failure, the US Government should have spent 3 times the amount of money it did to get the economy back on track”

They are talking about an additional $3 Trillion in stimulus. WOW!!!. I am beyond speechless. I am not a big fan of either Bush or Obama administrations and what they did during the 2007-2009 meltdown.  In fact, I am a big proponent that they should have left the market alone and let a lot of those companies fail instead. That would have removed economic excesses out of the system a lot faster and we would now be in true economic recovery instead of this artificial credit induced one.

So, these Keynesian clowns believe that throwing more money at the problem would have fixed everything and brought prosperity to the US Economy?  I am starting to think that they don’t even understand basic math. Providing more stimulus here is equivalent to giving Lamar Odom a kilo of coke and saying “Go and shoot it all up at once. It will fix you right up.”   

With economic leadership like this, America has no chance of improving any time soon. A lot of economic pain is just around the corner. 

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FU64H2X4HQRH

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China Is A Mess

Reuters Writes: China locks foreign investors out of another bad-debt cleanup

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HONG KONG (Reuters) – Chinese banks have a colossal mess of bad debts to clean up for the second time in as many decades, but they are unlikely to call in the financial world’s most efficient mop and broom.

Foreign investors that specialise in buying up distressed debt are queuing outside the industry’s door, but bankers say China’s reluctance to pay the price of a privately funded clean-up means that door probably won’t open — to the cost of Chinese tax-payers and, ultimately perhaps, the wider economy.

Some economists believe the current mess will need a bigger clean-up than was required after the late-1990s Asian financial crisis. From 1999 to 2007, about $323 billion in bad loans were swept out of the banks, according to a PriceWaterhouseCoopers (PwC) review of media reports over the period, in what amounted to a taxpayer-funded bailout.

“Sometimes the door is open for foreigners to come up and make money, and sometimes it’s closed,” said one veteran debt specialist who has bought and sold Chinese debt for global investment banks. He declined to be named due to the sensitivity of discussing China’s sovereign debt.

“Our belief right now is that the door is closed.”

Read The Rest Of The Article Here:

It doesn’t look like it yet, but China is in a huge mess.  From outside it looks like an economic marvel growing at 7% per year, yet it is in huge trouble.  While a good chunk of Chinese economic growth over the last decade has been export and manufacturing related (which is great), some economist estimate that as much as 50-75% of that growth came from government debt and domestic property misallocation (aka building empty cities and roads to nowhere).

That is the primary reason Chinese banks don’t want foreign investors to look at their balance sheet or their assets. They know that as soon as someone looks at their debt they will be horrified of what they see.  At that point the news will get out and the state controlled economy that is China will not be able to control the outcome. The game will be up.  

As they say, ignorance is bliss. The Chinese economy will keep moving forward through the minefield until one of those mines goes off. I believe the time is at hand or will be shortly. At that point the jig will be up and Chinese economy will go through a severe correction.  

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Philippine Bureau of Internal Revenue(BIR) Is Now Training Their Agents To “Shoot-To-Kill” For Tax Evasion

BusinessWeek Writes: The Philippines’ Tax Sheriff Gets Tough

 Investwithalex philippine bir

When Kim Henares took over the Bureau of Internal Revenue in the Philippines three years ago, she began looking for tax dodgers by poring over the society pages of newspapers and magazines. She says that as a result, she sent federal prosecutors complaints against two television actresses, a doctor, and a Lamborghini-driving pawnshop owner. “If you’re ready to flaunt it, then you must have paid taxes on it,” Henares says.

Her take-no-prisoners approach is part of President Benigno Aquino III’s crusade to erase a Philippine legacy of graft. Not paying taxes is one of the nation’s most common forms of corruption; the government estimates that $10 billion, or 4 percent of gross domestic product, goes unpaid every year. Henares says it’s her job to claw back as much of that as she can, and “if people don’t like me, that’s fine.”

Her agency alleged in 2011 that former President Gloria Arroyo’s son Juan Miguel had evaded taxes. His mother, a friend of Henares’s in-laws, had played a prominent role at her 2001 wedding. The case is continuing. Ruy Rondain, Juan Miguel Arroyo’s lawyer, says his client believes the charges are politically motivated. “There’s no case, so they made one up,” Rondain says. Last year, Henares’s agency asked prosecutors to file charges against former world boxing champion Manny Pacquiao, who’s now a federal legislator, for allegedly failing to submit documents proving that he paid the correct amount of taxes in 2010. A city prosecutor declined the agency’s request to file charges. Pacquaio told the Associated Press the complaint against him was “plain and simple harassment.”

Henares doesn’t discount the official statistics as a sign of progress. But for proof that her crackdown is haunting the country’s moneyed elite, she points to a more informal source. Henares says her mother hears from acquaintances that it now can cost 60 percent more than in the past to bribe an official for help dodging taxes.

Read The Rest Of The Article Here

Of course the headline above is a joke.  I just wanted to bring as much attention as I could to the article for those living and/or working in the Philippines.

Overall it’s a great step forward for the country and it is always nice to see international recognition. As much as I hate paying taxes, it is one of the most important steps in fighting corruption and setting up a fair taxation environment that Philippines so desperately needs.

A fair taxation and representation system is a must key step for any future economic growth.  Without any such structure only a small percentage of the overall economy/people will benefit. I wish Kim Henares all the luck she needs.

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Can’t Find A Good Job? You Are Not Alone

Business Week Writes: Not Looking for Work: Labor-Force Participation Hits 35-Year Low

 

The unemployment rate fell in August but for the worst of reasons: Many Americans stopped looking for work so they weren’t counted among the unemployed. What’s harder to tell is why they stopped looking. The political right chalks it up to laziness and government coddling, while the political left says people are giving up looking because a dysfunctional economy isn’t producing enough jobs.

The Bureau of Labor Statistics said the August unemployment rate was 7.3 percent, down a tick from 7.4 percent in July. The worrisome part is why the rate fell. The size of the workforce declined by about 300,000 and the participation rate fell to 63.2 percent from 63.4 percent—the lowest since August 1978. The participation rate is the number of people either working or actively searching for work as a share of the working-age population. It rose steadily over the years as more women entered the workforce before falling sharply in the 2007-09 recession, and it hasn’t recovered since.

Also disappointing was the payroll report. While the 169,000 added to employers’ payrolls in August wasn’t far below the 180,000 median prediction of economists surveyed by Bloomberg, there was a downward revision of 74,000 jobs to the previous two months’ reports. The government said June payrolls grew by only 172,000, rather than 188,000; July’s grew by only 102,000, instead of 162,000. In other words, while employment did grow in August, it was from a substantially lower starting point than previously believed.

Listen, this is fairly easy. The unemployment numbers  that are reported by the FED (with all of their adjustments) are highly diluted at best or as some would argue, downright bogus. The truth of course is somewhere in the middle.

Millions of Americans have given up looking for good paying jobs. As such, they have technically left labor participation pool and are not being counted as “unemployed looking for work”.  I do not think these people sitting at home being happily unemployed.  Not by a long shot. They have simply tried (some for many years) to find good paying jobs but were unable to do so. Why?

As I have mentioned before, I believe the US Economy never technically left recession. The market was simply flooded with cheap credit in order to stabilize things and to give perception that things are getting better. However, with interest rates now moving higher and with stimulus velocity now pretty much being exhausted, I believe recession and unemployment are about to show their ugly head again.

investwithalex unemployment

So, what is the true unemployment number in the US? Hard to say, but if you count all of the people who left the labor pool due to their inability to find full time work as well as those who are considered “part time workers who would like a full time job but are unable to find one” I would put the number at around 15-20% unemployment.  

A grim picture indeed. A picture that might just get a lot worse as the US slides back into a recessionary environment in 2013-2014. If you do have a good job, treasure it. “Now”, might be a good time to start practicing your ass kissing skills. 

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A Must Read

A Must Read For Everyone, 

David Stockman writes through The Daily Beast: The End of U.S. Imperium—Finally!

After having rained napalm, white phosphorous, bunker busters, drone missiles, and the most violent machinery of conventional warfare ever assembled upon millions of innocent Vietnamese, Cambodians, Serbs, Somalis, Iraqis, Afghans, Pakistanis, Yemeni, Libyans, and countless more, Washington now presupposes to be in the moral-sanctions business? That’s downright farcical.

Read The Rest Of The Article Here. Highly Recommended.

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182 Million iPads

BusinessWeek Writes: Risk Ahoy: Maersk, Daewoo Build the World’s Biggest Boat

triple e investwithalex 

The Triple-E’s capacity is 18,000 TEU. (Most containers today are 40 feet long, so the number carried will be closer to 9,000.) Laid end to end, a single Triple-E’s shipping containers would stretch for 68 miles. “In the late 1990s we were like, ‘Oh my God, a 6,000-TEU ship,’ ” says Peter Shaerf, a managing director at AMA Capital Partners, an investment bank specializing in the maritime industry. “Then you go to 13,000 and now 18,000. I don’t know where it stops.” Practically speaking, a Triple-E, in one trip, could take more than 182 million iPads or 111 million pairs of shoes from Shanghai to Rotterdam. Such a trip would take 25 days and burn 530,000 gallons of fuel. That comes to 0.003 gallons per iPad.

Read the rest of the article here

This is truly a massive ship.  A marvel of engineering, capable of carrying massive amounts of cargo.

However, bare with me for a second as we look at it from another perspective.  I think everyone knows the Skyscraper index analogy by now. Basically, the theory says that when the biggest building in the world is built at any given time or nation it spells the end of prosperity and marks the beginning of rough times ahead.

For example,

  • Empire State Building was completed in 1931 or during the darkest hours of the great depression.
  • Chicago Sears Towers was completed in 1973 or near the bottom of a severe 1972-74 recession.
  • Burj Khalifa in Dubai was completed in 2010 close to what some believe was a cyclical high in oil  prices in 2008.  
  • Now China is scheduled to complete the world tallest building “Sky City” in 2014 as it stands close to an economic disaster previously discussed.

feat_ship37graph_315inline

So, the question becomes….. Does Triple E simply represent an engineering marvel or does it stand as a symbol of peak in global economic trade (at least for the time being). Let’s see. 

With the US being on the brink of another recession(if not already in one), with no end of economic troubles in Europe, with emerging markets imploding left and right, with China being in a massive speculative and misallocation bubble, I do not see how global trade can increase that much here over the next few years. As such, Triple E might in fact represent the peak in global trade for the time being.  

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Russian Warships Are Racing To Support Syria, S#*$ Is About To Get Real

AFP Writes: Russian warships cross Bosphorus, en route to Syria

APTOPIX Venezuela Russia

 

Three Russian warships crossed Turkey’s Bosphorus Strait Thursday en route to the eastern Mediterranean, near the Syrian coast, amid concern in the region over potential US-led strikes in response to the Damascus regime’s alleged use of chemical weapons.

Russia, a key ally of Damascus, has kept a constant presence of around four warships in the eastern Mediterranean in the Syrian crisis, rotating them every few months.

Moscow vehemently opposes the US-led plans for military action against the regime of Syrian President Bashar al-Assad in response to the chemical attack outside Damascus last month.

Russian President Vladimir Putin warned on Wednesday that any US Congress approval for a military strike against Syria without UN consensus would represent an “aggression”.

The Obama administration is hell bent on launching a strike against Syria for what they claim to be a chemical attack on their own people. Of course there is no concrete evidence to the fact, but that is not a deterrent enough for the blood hungry Industrial Military Complex.

Even though popular American opinion is overwhelmingly against attacking Syria, it looks as if this Administration will stop at nothing to settle some sort of a score or to settle some crazy perception that American should stand firm by its principals.  I have no idea what principals those are.

With Russian ships racing to support Syria and with Iran basically saying that they will go to war with the US if Syria is attacked, the situation is getting out of control.  If history teaches us anything is that in “powder keg” times such as these, even a small incident can set in motion a chain of events that has the potential to lead us into a large scale conflict.  

Why is this important from an economic perspective? If some sort of war is set off and with Russia/Iran involved,  it can engulf the whole region. That would have an immediate impact on anything and everything from interest rates to oil prices and from the stock market to the job market.

America has enough structural and fiscal problems to keep it busy for decades and as such it should concentrate on domestic issues instead of trying to go to war against Syria. Let’s just hope that nothing happens and cooler heads prevail. 

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US Economy…Which Way?

Reuters Writes: Robust auto sales keep economy on steady growth path

 Investwithalex up or down

WASHINGTON (Reuters) – The U.S. economy appears to be faring better in the third quarter than analysts had feared with automakers reporting surprisingly strong August sales on Wednesday, helping to buoy expectations of a pullback in monetary stimulus ahead.

In another report, the Federal Reserve said strong demand for autos helped keep the economy on a “modest to moderate” growth path in recent weeks, an assessment that leaves the door open for a reduction in the central bank’s bond purchases.

Auto sales rose 17 percent last month to a seasonally adjusted annual rate of 16.1 million units. That was the fastest pace since October 2007 and beat the 15.8 million-unit rate analysts surveyed by Reuters had expected.

Auto sales are a key leading indicator of consumer spending, which accounts for about 70 percent of U.S. economic activity.

“We continue to head in the right direction,” said Ryan Sweet, a senior economist at Moody’s Analytics in West Chester, Pennsylvania. “With vehicle sales above 16 million (and) a slow but steadily improving job market, the Fed is going to feel comfortable tapering in September.”

AP Writes: US factory orders drop 2.4 percent in July

WASHINGTON (AP) — Orders to U.S. factories fell in July by the sharpest amount in four months, held back by weaker demand for commercial aircraft and heavy machinery. A key category that reflects business investment plans also fell.

Factory orders dropped 2.4 percent in July compared with June, when orders rose 1.6 percent, the Commerce Department reported Thursday.

Orders for core capital goods, a category viewed as a proxy for business investment spending, fell 4 percent in July.

Orders for durable goods, items expected to last at least three years, declined 7.4 percent, a slightly bigger drop than the 7.3 percent fall estimated in a preliminary report last week. It was the biggest decline since a 12.9 percent fall in August 2012. Orders for nondurable goods, items such as chemicals, food and paper, rose 2.4 percent in July after a 0.5 percent decline in June.

Auto sales up, factory orders down. What is going on?  I believe what you are beginning to see and will continue to see over the next few quarters is divergence all over the place. While some sectors will do well, others will be in trouble.

This kind of a behavior is indicative of a major turning point in the markets and the overall economy. Eventually most sectors will turn down, but at least for now as this topping process continues, some will continue to grow. This is confirmed by my stock market work which indicates that the bull run that started in March of 2009 is now over and the market should reverse itself into the 2016 final bear market bottom. Dragging all sectors down in the process.

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