Wednesday, August 31, 2016

The police will not protect you - more proof

San Jose Police Chief Eddie Garcia says there are “absolutely” too many guns in America, and that more gun control is needed.

Garcia also said Black Lives Matter is “a valid movement” and that his police department needs to to “acknowledge … [our] badge didn’t always stand for what it stands for today.”
In another story:
In Fremont, CA there is a very upscale neighborhood of Indians.  The low life in the East Bay figured correctly that they must have gold in their houses because Indians love gold.  An Indian resident of the neighborhood acknowledged that.
But they have security cameras inside and one resident while dining out had a break in by five blacks.  The live recording and live alert showed them crouching with guns waiting for the homeowners to come home and show them the gold.
The armed burglars got impatient and ransacked the place then fled.  They got away.  The police were only a few minutes too late.  The police department spokesman said seconds too late. 
This was the fourth such burglary recently all done by a group of 3 to 5.

Tuesday, August 30, 2016

Deficit 37.8% of individual income tax

The budget for 2016 calls for $1,627,837,000 of personal income tax.  If you don’t want to raise payroll taxes (you might think it might hurt employment) then the $615,805,000 deficit is 37.8% of individual income tax.

And that increase is on half the population.  So does that make the economic impact like 75.6%.  I know, that isn’t logical.

I know, let’s soak the rich.

I am so cheery.

You want to trigger a recession? Balance the budget.

The projected FY 2016 deficit is $615 billion dollars.  Where do you want to take it out of?  HSS, the top expenditure?  Medicare is in there you know.  How about from the second expense line, Social Security?  I know people who would take it all out of the military but that would only be a $576 billion dollar savings, not the whole thing.

How about increasing taxes?  How about putting it all on corporations?  Raise their taxes from $300 billion to $600 billion.  It won’t work because it will kill off many companies which will kill off so many jobs personal income tax would plummet.

Corporations don’t really pay income tax anyway as they pass it on.  Usually in higher prices and lower payroll.  So we might as well just put it on the individual which is where most of the federal government revenue comes from directly.

The deficit is 23% of personal income tax and payroll tax.  Only half of the people pay income tax so the whole thing goes on half the population.  Is that going to impact the economy like it was a 46% tax increase?

I know.  Let’s create an economic school of thought, call it Keynesianism, and believe that deficit spending is good because it creates aggregate demand.  That would make me sleep well.

Budget Receipts
   Individual Inc Tax and Payroll Tax 2,674,940
   Corporation Income Taxes    292,561
   Unemployment Insurance      49,874
   Other Retirement        3,816
   Excise Taxes      96,821
   Estate and Gift Taxes       21,094
   Customs Duties      36,721
   Miscellaneous Receipts    159,675
   Total Receipts 3,335,502
Budget Outlays
   Department of Health and Human Services 1,110,428
   Social Security Administration    991,558
   Department of Defense--Military Programs    576,328
   Interest on Treasury Debt Securities (Gross)    447,293
   Department of Veterans Affairs    177,612
   Department of Agriculture    153,773
   Office of Personnel Management      93,883
   Department of Treasury operations           93,083
   Department of Education      79,098
   Department of Transportation      77,832
   Other Defense Civil Programs      63,679
   Department of Homeland Security      51,769
   Department of Labor      43,546
   Department of Justice      39,115
   Department of State      30,911
   Department of Housing and Urban Development      28,691
   Department of Energy      27,416
   Independent Agencies      22,624
   National Aeronautics and Space Administration      19,153
   International Assistance Programs      16,042
   Department of the Interior      14,022
   Department of Commerce      10,527
   Environmental Protection Agency              8,340
   Judicial Branch        7,729
   National Science Foundation        6,895
   Corps of Engineers        6,705
   Legislative Branch        4,728
   Allowances        1,875
   Executive Office of the President           400
   Small Business Administration          -378
   General Services Administration          -719
  Surface Transportation Board
   Undistributed Offsetting Receipts:
     Interest    -151,495
     Other    -101,156
   Total Outlays 3,951,307
   Surplus (+) or Deficit (-) -615,805

Taxation destroys capital

Taxation destroys capital.  The government wants cash, not stocks, bonds, factories, or land.  Owners of assets have to come up with cash to pay their taxes.  If they are cash poor they have to sell assets.  If they have the cash they cannot invest it productively.

Government spending is inefficient.  The more taxes and capital destruction or prevention that the government turns into consumption the worse the economic growth.

The increase in tax collections creates its own destruction as inefficiency and the destruction of capital for consumption ends the business cycle.

Deficit spending destroys capital

Deficit spending is tightening.  It is like monetary tightening where liquidity in the system is reduced.  But with deficit spending it is capital that is reduced.

The money going into bonds could be going into productive investment.  Instead, it is creating debt for consumption.  Yes, the government spends the money into the economy creating demand.  Aggregate demand - that false idol.  And the money gets recycled back to the ownership class but different owners.  It is a redistribution of wealth to different owners with interest expense in between.  And it is inefficient.  The inefficiency of government is way understated.

Tax receipts as percent of GDP - *early warning

For clarification.  This chart is quarterly total federal tax receipts annualized, divided by quarterly GDP.  This doesn't measure the total annual, or four quarters receipts as a percent of GDP.

This is more boom bust evidence.  I am adding this to early warning signs.

Sunday, August 28, 2016

My Jackson Hole conclusion

It is my belief that the speakers at Jackson Hole were setting the stage for pretty big inflation.  That is, they want some serious inflation.  It needs to happen not from central banks but from deficit spending.

Quote not from Jackson Hole:

Princeton University economist Christopher Sims, "policymakers were told that it may take a massive program, large enough even to shock taxpayers into a different, inflationary view of the future."

In my opinion congress will legislate authority for the Fed to directly monetize deficit spending.  I think that they will partially monetize new deficit spending at the start.

It is also my opinion that it will be recognized that general price increases on top of the ongoing massive inflation in insurance/health care, rent, and education, will be too much for the majority of the population.

With or without Hillary Clinton I think subsidies to the middle class are pre-ordained.  They will start out small.  But it will be increased rapidly.  After all, what are they going to spend the trillion dollar deficits on if it isn’t welfare?  Well, climate change and the military will get a good cut of it too.

All this will happen when the next economic slowdown gives them the excuse to do it.

I think the only restraint is fear of too much inflation.  That fear will be overridden.

Friday, August 26, 2016

S&P Earnings Optimism Q2 2016

With 96.3% reporting the earnings are not looking great.  Better than the quarter a year ago but worse than 06/30/14 and 06/30/13.

                      quarter               earned            last 4 Qs

96.30% 06/30/16 23.35 86.99
03/31/16 21.72 86.44
12/31/15 18.70 86.53
09/30/15 23.22 90.66
06/30/15 22.80 94.91
03/31/15 21.81 99.25
12/31/14 22.83 102.31
09/30/14 27.47 105.96
06/30/14 27.14 103.12
03/31/14 24.87 100.85
12/31/13 26.48 100.20
09/30/13 24.63 94.37
06/30/13 24.87 90.95
03/31/13 24.22 87.70
12/31/12 20.65 86.51
09/30/12 21.21 86.50
06/30/12 21.62 87.92
03/31/12 23.03 88.54
12/31/11 20.64 86.95
09/30/11 22.63 86.98
06/30/11 22.24 83.87
03/31/11 21.44 81.31
12/31/10 20.67 77.35
09/30/10 19.52 71.86
06/30/10 19.68 67.10
03/31/10 17.48 60.93

But worry not.  Q3 is forecast at $27.06 and Q4 is forecast at $29.27.  This must be why the S&P PE ratio is 24.85 as of 8/19/16. The Atlanta Fed is forecasting GDP in the present quarter, Q3, to growth at 3.4%.  The NY Fed being a downer bunch of folks at 2.8% growth.

All must be good ahead.

Corporate profits headlines -2.2% but misleading - Q2 2016

Corporate profits are down 2.2% from a year ago.  This chart shows that.  But last quarter they were down 5.3% and the quarter before that down 19.7% so there has been a big improvement.

Here is a chart of corporate profits in dollars.  It definitely shows that profits have stalled.  BUT.  Corporations are giving positive forward guidance.  That is a really bullish sign for the economy.  Right?

Your police are probably not left wing fascists

But your chief of police probably is as most assuredly is your mayor.

The rank and file of you police are probably mostly democrats.  That is where their bread gets buttered with pension promises.  But they would defend you if ordered to.


I have been saying Bleach Bit

When Clinton comes up I have been saying, more like muttering, “bleach bit”.  Outrage follows thinking I said bleach bitch.  Then I take the opportunity to explain.

Thursday, August 25, 2016

Lesson – Four monetary macro conditions

This is prepare you for Yellen's Jackson Hole speech tomorrow.

1 Dovish Fed during Improving Macro economic conditions
2 Hawkish Fed during Improving Macro economic conditions
3 Dovish Fed during Declining Macro economic conditions
4 Hawkish Fed during Declining Macro economic conditions

The Fed should never get us into conditions 1 and 4.  Boom and Bust.  But they do all the time.

What everyone wants us to be in and the Fed at least pretends we are in is condition 2,  renewed economic “animal spirits” where they Fed can raise rates.

In reality we are in condition 3.  The Fed talks hawkish but acts dovish.  We are in a weak economy.

Bank of America’s performers per condition:

1   The fed overheats the economy; everything is good.  Performers are equities, credit, commodities and EM equities until market corrects as investors think the Fed is ‘behind the curve’.”

2   This is where everyone wants us to be right now.  Performers are USD, value, banks/cyclicals & EAFE equities.”

3   This is the condition we are in currently.  Performers are “bonds, gold, growth & U.S. Equities.”  Bank of America calls this condition "secular stagnation".

4   This disastrous condition comes after the Fed is Dovish when macro is improving – the first condition listed.  Performers are “cash, volatility, defensives.”

Wednesday, August 24, 2016

Are you ok with this? Shortage of U.S. Treasuries.

The world is short of dollars.  This is because there is a shortage of safe collateral.  In other words U.S. Treasuries.  The world is bidding up the price of U.S. Treasuries of all maturities to acquire them to use as repo collateral.  That is, they borrow dollars and use their Treasuries as collateral.

It is being argued that the U.S. needs to increase its deficit spending in order for the U.S. Treasury to issue more Treasuries for the world to buy to fill their collateral needs.

There is some so wrong with this.  But what do I know.

Very low interest rates are destructive.  Interest rates are so low it is argued because there isn’t enough Treasuries to satisfy the needs of people who want safe storage of their money.  You know, savers and investors, insurance companies and pension plans.  Not just the banks of the world to use for collateral.

This demand for Treasuries has outstripped the supply of Treasuries so prices of Treasuries are bid up and the yield down.

I think the problem is there is too much money.  But if you reduce money it is tightening and tightening creates recessions and depressions.

The solution will eventually be to forgive debt which will destroy a lot of money and not create a recession or depression as it isn’t tightening.

Good luck with that you all.

Allahu Akbar knifers part 4 – argument against guns

I have been told that not banning guns means the Allahu Akbar knifers can become Allahu Akbar gunners.

We have seen in fact massacres by Muslims with guns against non-believers both here and in Europe.

My answer to that is that there was no minimizing affect in these attacks because there were no guns to shoot the Muslims who were expecting to die in the end.  The Muslims in Europe got guns even though it is nearly impossible for non-Muslim citizens from owning guns.  We can’t stop drugs from flowing into the U.S.  In fact, that drugs are illegal create the flourishing drug trade.  You want a flourishing gun trade?  Ban them.  Only the wrong people have drugs.  Only the wrong people will have guns.

San Bernardino is in California.  You can’t get a concealed carry permit.  If someone in that room stopped the attack with a gun he or she was carrying illegally, the hero would have been hung on a lamp post for everyone to see.

It is acceptable by liberals to have these kind of losses in their quest to fundamentally transform America.

Criminals with records can’t buy guns legally.  It is true that without the near elimination of guns it is more easy for people with criminal intent to acquire them.  But if you eliminate guns they no longer serve as a deterrent.  Criminals do not want to get shot unlike Muslim killers.  You will be defending with sticks against thugs with baseball bats and they will smash your brains out.  And when they do invade your home they will do it in gangs.  You will be outnumbered, out youth-ed, out sized, to say the least.

And again, smashing your brains out is ok with liberals because we live in such a bad society.  It is society’s fault.


Guns are needed to minimize the carnage of Muslims.
Guns are needed to deter criminals.

You cannot defend against knives, clubs, and guns without guns.

Allahu Akbar knifers Part 3

Do you think that the prospect of getting caught and going to jail is a deterrent to violent crime?

To some degree is has to be.  I just don’t think that jail time is thought of as such a bad thing and it isn’t.  The chances of being executed are slim and everyone knows it.

Certainly punishment doesn’t deter Allahu Akbar knifers.

The gun is the single greatest deterrent to criminals.  Criminals really don’t want to get shot.

Actually shooting Allahu Akbar knifers is the only way to minimize their carnage.

Allahu Akbar knifers part 2

In every Allahu Akbar knifing there were dozens of people witnessing it. 

None helped.  Usually.  When people have helped they were knifed to death as happened in England during the Brexit vote.

How could one help?  Do you carry a knife?  Are you in good shape and physically agile?  Are you athletic?  Are you a knife fighter?

When they ban guns in the U.S. there will be massive attacks on people.

“Police in Akron, Ohio, have charged a group of men with a variety of violent offenses after accusing them of viciously beating several white people while chanting, “Black lives matter.”

Home invasion will be common.

But again, as in part 1, liberals will be ok with it.  In fact, it will be the fault of the victims because America is bad.

Allahu Akbar knifers part 1

British woman, 21, killed in Australian backpackers' hostel attack by knifeman 'shouting Allahu Akbar'

I have read every article I could find on the knifing in Australia.  Thousands of words have been written.  Dozens of photos have been published.

The only way the attacker is identified is that he is a Frenchman.  They don’t describe his looks.  They don’t give his name.

The Australian authorities and Australian media are engaging in a cover up.  This encourages the “lone wolfs”.  The liberals in Australia are responsible for the death of this girl.  This has happened many times before.

The very same liberals will not give a shit if your daughter is knifed to death as long as it is done by a person whose motive is unknown while yelling Allahu Akbar.

Tuesday, August 23, 2016

Vehicle sales for July 2016

This is really good.  Yes, it isn't growing, thank heavens.  You want it to spike above 20 million?  Well then you want it to crash later.

New home sales, new commercial and industrial loans, and new vehicle sales are all coincidental indicators of the health of the economy and they are saying it is good.

Note: the chart of total vehicle sales looks the same as this one.

C & I loans - look healthy - is a coincidental indicator of the health of the economy

This looks like a really really healthy indicator for the economy,.

The rate of growth is steady which is a good thing.  I advocate steady.  And even if it is slow and stead which this is not, it is better than spikes and crashes.

The one bad thing is the delinquency rate has jumped up some.

Huma-dinger - she was only on the mast head for 12 years

Everything and everyone connected to Clinton is corrupt and evil.  But the Left always wins.  Eventually they break their society but the reign of the Left in the U.S. will be long and hard.  This is because Leftism is now global with massive funding by multibillionares who view those who paid money to them as inferior and needing world centralized control.

Russia, China, and a lot of Asia fear our oligarchs.  But the growing multibillionares they have are joining in with the Western World's oligarchs.

Huma-dinger - she was only on the mast head for 12 years

Everything and everyone connected to Clinton is corrupt and evil.  But the Left always wins.  Eventually they break their society but the reign of the Left in the U.S. will be long and hard.  This is because Leftism is now global with massive funding by multibillionares who view those who paid money to them as inferior and needing world centralized control.

Russia, China, and a lot of Asia fear out oligarchs.  But the growing multibillionares they have are joining in with the Western World's oligarchs.

Another beheading of open ocean sailors

Scroll down to the story.

'Lectronic Latitude

Lattitude 38 is a sailing magazine.  This is the online edition.

But really, it is Trump supporters you need to worry about.

More wasted time on Soros

"The peoples of the West need to recognize the common foundations of all Soros’s actions. They need to realize as well that the only response to these premeditated campaigns of subversion is for the people of the West to stand up for their national rights and their individual right to security. They must stand with the national institutions that guarantee that security, in accordance with the rule of the law, and uphold and defend their national values and traditions."

Ain’t going to happen.  And you know it.

Why Soros exits

People don’t believe that anyone could be so evil.  It is pointless to tell people about him.  And Alinsky.  And others.  It is pointless to waste your time talking about it.

If you want to know about Soros, here is a good summary.

I have wasted enough time on this.  I need to get back to planning how I and mine protect from all this.  You are on your own with these Satan.

New home sales July 2016

New home sales is one of the most important economic indicator.  It is flashing bullishness on the economy.

Monday, August 22, 2016

Is it true? Huma worked for her mother's radical Islamic "journal"?

US Secretary of State Hillary Clinton (2nd L) is pictured with Saleha Mahmood Abedin (3rd L) at a women's college in Jeddah on February 16, 2010 

What is it with the Left that they embrace Islam?  Oh, that's right.  They want to fundamentally change America.

Saturday, August 20, 2016

Democrats and liberals want to undermine all that is good, decent and honest about America

Obama and Clinton should be tried at the Hague for war crimes

David Rosenberg is advocating buying stocks in certain dividend sectors

He says there are two certainties.


“So we know full well that the central banks want inflation — it is the easiest way to default on the record global debt-to-GDP ratio without having to write anything down and generate real losses — and while inflation does remain at bay, that will not be the case indefinitely.
But it is key to know that the central banks will not desist until inflation does come our way. So the shortage of yield is going to remain as acute tomorrow as it is today.”
The second certainty he writes is the aging baby boomers who the oldest turn 70 in 2016.  They want yield and cannot get it in bonds thanks to the first certainty.  They look to dividends to get it.
Telecom was down [earnings] 21 per cent and Utilities down 34 per cent — and these are the two leading sectors year-to-date in stock price performance just because of their dividend yield characteristics.
“So which sectors managed to see earnings hang in reasonably well during this profit recession piece? Try Healthcare, Consumer Staples, Industrials, Technology and the Financials.”

“The beauty of this group is that it is a nice barbell between inflation hedging and maintaining a portfolio that delivers an income stream that cannot be beat in the bond market with a median dividend yield of 2.3 per cent and year-over-year dividend growth of 7 per cent.”

Thursday, August 18, 2016

Will they let an Afghan man off for murder?

So you’re the boss and you off offhandedly as a greeting ask an Afghan male employee, “How’s the wife and kids?”

Then he kills you. He has a female daughter.

Then do the Bill Clinton and Barack Obama judges and Democrat Party prosecutors let the Afghan off with probation and remedial training?

From the handbook:

Afghanistan:  A key difference between Afghan and mainstream American cultures is that the latter stresses the independence of the individual while the former emphasizes the individual’s de‐ pendence on the family. Afghanis are generally reluctant to share personal and family issues with nonfamily members, though women may discuss their problems with friends, including non‐Afghans. An Afghan's family is a matter of great privacy. It is considered a breach of manners among liberal Afghans, and an act requiring revenge among conservatives, for a man to express interest of any sort in another man's female relatives.  

Here is the proof of our coming demise is a plan - Second, you will get sued by the government

Look at the detail of this work.  Think of the detail.  The time and effort put into it.

It is a guide on how to convert our country to a third world country.  This is an eye into how the Left thinks and what they are planning for the Western World.

This is really fascinating reading:

They may not make constant direct eye contact, as this is deemed impolite and sometimes intimidating. 

Direct eye contact is seen as a positive thing

An employer better know what is right or wrong or suffer the consequences: First – not getting the job done and hostility in the work place.  Second – getting sued by the government for incorrectly applying the wrong cultural signals.

Seriously, this is great reading.

(it is over folks)

Germany is a danger to the Western World - The Left doesn't even hide it.

They are assisting Turkey in its goal of establishing the Caliphate in Turkey by setting up a sub-Islamic government in Germany.  Germany will become the center of subversion on the rest of Europe.

Here is Angela Merkel saying so.  She is using the same diversionary techniques as does Obama and the other Leftists.  These are the same people who supported communism and Russia in the past.  Their goal is always the same.  White Christian people need to come down to the third world level as they make the third world look bad with their successful civilization.

Chancellor Angela Merkel said on Wednesday refugees had not brought terrorism to Germany, adding that Islam belonged in the country as long as it was practiced in a way that respected the constitution. 

She doesn’t mean a word of it any more than Obama means it.  But she does admit it obliquely.

Merkel said many people had traveled from Germany to Syria for training with Islamist militants. In June Interior Minister Thomas de Maiziere said a total of more than 800 were believed to have gone to Syria and Iraq.

"We have said clearly that an Islam that works and lives on the basis of the constitution ... belongs to Germany," Merkel said.

She added that a type of Islam that did not stick to the constitution or accept equal rights for women had no place in the country.

She is lying.  Just like Obama.  She is no less a hard core Leftist than Obama, Hillary Clinton, George Soros, and the leaders of the Democrat Party.  They all want to dilute the Western World of White Christian dominance.

Just read time and again the NY media mocking whites for being upset that they are losing their dominance.  Meaning they support White Christians losing their dominance. And all the while promoting more anti-Western immigration. THEY DON'T EVEN HIDE IT ANY MORE.

Wednesday, August 17, 2016

Yield curve flattening 8/15/16

They give good reasons why this is ok.  I don't buy it.  

Employment to Population ratio ages 25-54

Prepare to abandon the Republican Party

It is now completely out in the open that the Leftist Progressionist of the Democrat Party, the New York and California media, Soros, Obama, and Clinton is and has been undermining America and the Western World with unrelenting subterfuge.

I am waiting for the leaders of the Republican Party to announce a TV ad program exposing this on the very same anti-American TV stations that work to undermine the United States.

They are all subversive.  Muslims are subversive.  They are told to how to make trouble by the Leftist operatives.  For now in the U.S. it is to scream Islamophobia, discrimination, and sue via various administrative venues like the EEOC and the labor department.

In Europe the subversives are being funded by these Western traitors to create mayhem and terrorism.

I suspect the Republican Party is too busy trying to find out how to get Trump to drop out to bother themselves with the existential threat from the Left.

GDPNow & Now Forecast 3.6% and 2.4% growth for Q3 2016

All Seems Well

Big 4 and Big 6 August 2016

All Seems Well

Breath 8/17/16

LEI index still above 1 for June 2016

All Seems Well

Tuesday, August 16, 2016

What Obama, the Pope, and Soros think

The white Western world is the source of all the problems of the non-white non-Western world.

Bringing up the third world to Western standards of civilization has been abandon by the Left as impossible to do.  So the objective is to bring down the Western world toward third world status.


I knew the sheriff of a large well to do county.  He said there are two things that keep the animals from going to the suburbs and attacking whites.

One was it was out of their element.  They were uncomfortable with the layout of the streets including hills.

The other is there is an awareness that whites have guns.

One of his deputies I knew well at the time gave me response times when the police or sheriff was called.  They had some of the best times in the country but it often took 5 minutes to get there.

We saw the Los Angeles police let the black Watts rioters leave their area.  We saw that they actually protected the roving bands.

You want to ban guns?  You will regret it.  Home invasion will become the norm.  Gang attacks will become the norm.

And this is all part of the plan.  And the U.S. elected a president who believes in this plan.  He is a really happy person in my opinion as I observe him.  He never ever thought he could have accomplished so much.

Obama, the Pope, and George Soros

We know Barack Obama and the Pope are on the same page as George Soros.

Is Paul Ryan a flunky for them?

Michael Savage, talk radio host, on George Soros

Michael Savage is considered by many to be a nut job.  Only rarely do I get a chance to listen to him but had him on the car radio while driving a month ago.  That is a month before the leaked George Soros documents.

Savage said on that day ‘if he could pick just one person for the immigration crisis in Europe it would be George Soros’.

Myself, I have been aware of George Soros’ radical left wing ideology.  He doesn’t believe that Western nations have the right to any of their traditions.  And, he spends money on it.

My guess is that he had people paying agitators in Ferguson and elsewhere where blacks rioted.  And continues to do so.

My guess is that Savage is tooting his own horn right now.

Monday, August 15, 2016

Operating in the black

How quaint.

Kinda like Ben Franklin saying, "A penny saved is a penny earned".


Ok.  I have now recovered from guffaw laughter.

SF Fed - more stimulus

The point of this long article by the president of the SF Federal Reserve Bank about natural interest rates is two things.

One.  He wants more stimulus to create more inflation; above the 2% target.

Two. He wants massive deficit spending.

Seriously, you don’t have to read it now.

S&P 500 Earnings Optimism

The second quarter 2016 is coming in a bit on the disappointing side.  Seems like this happens all the time.  Right?

The 2nd quarter estimate was for $25.72 per share.  With 91.5% reporting they are at $23.02.  They might not make it to the estimate.

But worry not.  Third quarter is estimated at $27.09 and the 4th quarter at $29.29.

Temporary jobs July 2016 has flatlined

Is this a long lead time or what?

Labor Market Conditions Index - recovery after first dip

Unit Labor Cost Q2 2016 and Productivity Q2 2016

Labor cost still not a problem that would lead to the Fed tightening.

Productivity is probably down due to lack of company cap ex.  With low interest rates it is probably better to buy back stock and pay dividends.  It may give a better rate of return on investment.

Saturday, August 6, 2016

Divergence: stocks and reserves

Jobs report July 2016 - wages uptick

It is good to see wages for the mass of workers going up.  It is a benefit to everyone.  It means the economy is doing well.  It appears wages are poised to start trending upwards.  Until wage growth gets to 4%, things will be improving.  It seems the economy has a ways to go before a recession.

Remember however that economist believe that inflation is a bad thing, which it is, and they believe wages are the problem that pushes up prices. "Cost push inflation".

Here is a chart showing the Federal Funds rate in red along with the annual increase in wages.  If wages start to trend upwards, the Fed is going to want to increase interest rates along with it.

Friday, August 5, 2016

Breadth stats August 5, 2016

The stock market broke upwards to new highs on top of new highs.

I look at 12 breadth stats plus VIX.

Of the 12:
4 participated today – bullish
7 did not participate today – bearish
1 was neutral

VIX was 11.39.  Really really low.  Since December 2014 when it got this low, the market went down soon after a follow through of several days  or went up for a while but did go down before getting all that high.

I am not so sure the follow through from today will go all that far.  If the breadth stats improve, that certainly would indicate a new bull run.

Buying the dips or just holding tight has been best.  Foreign flows of money come to the U.S. safe haven.  Interest rates remain low.  TINA - there is no alternative.

Retail Sales

Definitely a down slope.

Output per person Q1 2016

A lot of economists say this low rate of output per person is bad.

Unit labor cost Q1 2016

Unit labor cost is cyclical.  Labels for this are both Productivity and Business Cycle Theory.

Unit labor costs before the great recession reached 4.1% growth.  The prior two recessions growth reached about 5%.

We do see an uptick here to 3%.

July 2016 Jobs Report - mine

The annual cycle of hiring and firing peaks in November December, troughs in January, then climes to a peak in June, then drops for one month of July, finally climbing back to a peak in November December.

July's employed people is important as it is the mid-way point in the cycle and is a trough. Only having 63,000 more people employed since the peak in November 2015 is very disappointing.  The previous two years had so much better growth in jobs by July.

'16 / '15        63,000
'15 / '14      443,000
'14 / '13      202,000
'13 / '12        14,000
'12 / '11       -99,000
'11 / '10     -332,000
'10 / '09  -1,124,000
'09 / '10  -6,409,000

Here is a chart showing the percentage gain in employment, year over year.  It is obvious that the rate of job growth has stalled and even now actually has slowed down. Click to enlarge.

Here is the actually number of jobs lost from June to July.  And, the seasonally adjusted number you read and hear all over the media.
              Jobs lost June to July         Seasonally adjusted           
2016   -1,030,000                   +255,000
2015   -   943,000                   +277,000
2014   -1,079,000                   +232,000
2013   -1,174,000                   +140,000
2012   -1,211,000                   +134,000

For the last three years they have applied a very healthy seasonal adjustment.

Below is a close up of the cycle. Click to enlarge.

Is the BLS lying?  Actually, it is the census bureau that does the survey.  Are they lying?  Or is it legitimate considering the Atlanta Federal Reserve Bank is forecasting a third quarter GDP of 3.8%.  I seems like good times are ahead.