Financial Crisis - 2013 - ????

[Ryan Ruck]

What a surprise... Economy revised downward again!

Economy Shrank 2.9% In 1Q, Worst Drop Since '09

June 25, 2014

The U.S. economy turned in its worst quarter in five years during the first three months of 2014, shrinking more sharply than previously estimated.

The nation's gross domestic product in the first quarter fell at a 2.9% annual rate vs. the 1% contraction previously believed, the Commerce Department said Wednesday. Economists surveyed by Bloomberg expected a 1.8% drop in output from the fourth quarter.

The decline was the sharpest since growth tumbled 5.4% in the first quarter of 2009 during the Great Recession. The last time the economy shrank was in the first quarter of 2011, slipping 1.3%.

The more dramatic drop was partly the result of smaller growth in household consumption than previously estimated. Consumer spending increased just 1%, vs. the 3.1% gain previously estimated as health care spending dipped slightly. The government previously said that medical expenditures contributed substantially to growth as the Affordable Care Act began to cover more Americans.

Also, exports declined 8.9%, vs. the 6% drop previously estimated. And businesses replenished their stocks even more slowly than believed after aggressively adding to inventories late last year.

The larger than expected drop in output is not a harbinger of an economy headed back to recession or even softening. Many economists say much of the first-quarter weakness was the result of temporary factors, such as an unusually harsh winter weather. They expect growth to exceed 3% in the current quarter and the rest of the year.

In a research note before Wednesday's report, Goldman Sachs called a decline in output of at least 2% "unprecedented"outside of recessions. But it added that "2014 will mark the start of a period of clearly above-trend growth for the US economy."

Paul Dales of Capital Economics said the contraction "was still largely due to the extreme weather" and "not a sign that the U.S. is suffering from a fundamental slowdown."

Reports this week show that the housing market picked up last month after the dismal first-quarter, with new homes selling at the fastest pace since 2008 and existing home sales posting their largest increase in three years.

Job growth, consumer confidence and measures of manufacturing and service sector activity also have gained steam recently.

[Ryan Ruck]

The fact that the stock market is up after this news has come out should perfectly indicate just how disconnected the market has become from economic conditions and should not be used as a gauge of how well the market is doing.

[American Patriot]

Hell, the market is going up even though prices on Gas are increasing because of Iraq.

[Ryan Ruck]

Hooray for QE!

[Malsua]

The market is not disconnected at all. It thrives on the the misfortunes of others. Once you understand its nature, it makes all sorts of sense. The money in the market is not made by buying a stock, holding it and reaping dividends. The money is to be made by aggressively gambling that every sector is due to fail and to short the shit out of all of it. Hell, they rarely even bother buying the stock to short it. Naked short selling is rampant. Add in the machine trading and it's just a gambling wheel spinning round and round.

That we have a market where someone can front run you and it's legal should tell you exactly the state of it.

Joe Sucker places a buy order for a stock. Goldman sacks, the vampire squid sees this buy order, then front runs to the stock, buys it at the current price, drives up the price and then sells to the original buyer at a high price and pockets the difference.

Imagine if you could go to Ebay and place a bid on an item and see if it meets the reserve.

If Yes, you cancel your bid and place a lower bid. You keep doing this until you hit the lowest price, then you leave that bid and buy the item.

If while you're doing that, someone else asks to buy that stock, you then drive the price up to the maximum they will pay. All this occurs in 25 milliseconds or less.

There's a very easy way to fix all this shit from the bots. Simply require 5 minutes between a buy and a sell on the same stock.

right now your transaction log might look like this.

Buy,
cancel
buy,
cancel
buy,
cancel
Buy,
cancel
buy,
cancel
buy.
Sell,
Cancel
Sell,
Cancel

Etc. All day long.

[Ryan Ruck]

Yeah, from that perspective, you're absolutely right Mal.

[MinutemanCO]

That we have a market where someone can front run you and it's legal should tell you exactly the state of it.

Joe Sucker places a buy order for a stock. Goldman sacks, the vampire squid sees this buy order, then front runs to the stock, buys it at the current price, drives up the price and then sells to the original buyer at a high price and pockets the difference.

Why is this legal... those of you who understand such systems? Were the rules devised by those in positions of power, who knew from the start that they could build in a system of profit only accessible by the few who do the controlling? Any way you cut it, it's thievery and they will answer for it as judgment unfolds.

[Malsua]

Why is this legal... those of you who understand such systems? Were the rules devised by those in positions of power, who knew from the start that they could build in a system of profit only accessible by the few who do the controlling? Any way you cut it, it's thievery and they will answer for it as judgment unfolds.

It's legal because they provide "liquidity" to the market. It's utter bullshit that they are allowed to get away with it as it is nothing more than a man-in-the-middle attack.

You place a buy order for $42/share, it comes back at 42.025 and you think nothing of it. Goldman just made 2.5 cents/share on you. Do it a hundred million times a day and it turns into real money.

[MinutemanCO]

Got it. Still doesn't seem right. But in the land of relativism, what indeed is the definition of right? Without a firm, immovable standard, judgment may not be enacted.

[Malsua]

Also, for what it's worth, HFT(High Frequency Trading) doesn't really provide liquidity. When the market is in a meltdown, the HFT algos go offline to protect themselves. The moment the markets really need liquidity, they bail out. Furthermore, they aren't buyers of last resort or anything like that. They rarely hold onto anything for more than a second. They simply are man in the middle opportunists that cost everyone, everywhere and provide millions in bonuses to banksters.

[MinutemanCO]

Just so I can learn... they make major earnings through volume trading a penny or two per share at a time? And bots control their purchases and sales?

[Malsua]

It is not the primary income stream of most of the banks. There are a few firms that are exclusively HFT, but for most, like Goldman, it's a side business. The thing is, most HFTs NEVER lose. That should tell you something. It's a highly profitable revenue stream that makes money on volatility...which means they're just skimming.

[American Patriot]

Bullard Predicts Fed Rate Increase in First Quarter of 2015

By Steve Matthews and Jeff Kearns Jun 26, 2014 9:45 AM MT 38 Comments Email Print

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Photographer: Scott Eells/Bloomberg

James Bullard, president of the St. Louis Federal Reserve Bank.

Federal Reserve Bank of St. Louis President James Bullard predicted the central bank will raise interest rates starting in the first quarter of 2015, sooner than most of his colleagues think, as unemployment falls and inflation quickens.
Asked about his forecast for the timing of the first interest-rate increase since 2006, he said: “I’ve left mine at the end of the first quarter of next year.”
“The Fed (FDTR) is closer to its goal than many people appreciate,” Bullard said today in an interview with Fox Business Network. “We’re really pretty close to normal.”
The Federal Open Market Committee is debating how long to keep the benchmark interest rate near zero after completing a bond-purchase program that’s set to end late this year. The committee repeated on June 18 that it expects the rate to remain near zero for a “considerable time” after the purchases end.
U.S. stocks fell after a report showed consumer spending grew less than forecast and extended declines following Bullard’s comments. The Standard & Poor’s 500 Index slid 0.4 percent to 1,951.10 at 11:41 a.m. in New York. The 10-year Treasury yield fell four basis points, or 0.04 percentage point, to 2.52 percent.
Bullard predicted the jobless rate may fall below 6 percent and inflation rise near 2 percent by the end of this year.
‘At Target’

If his forecasts bear out, “you’re basically going to be right at target on both dimensions possibly later this year,” Bullard said. “That’s shocking, and I don’t think markets, and I’m not sure policy makers, have really digested that that’s where we are.”
In quarterly forecasts released June 18, Fed officials said they expected the benchmark rate will be 1.13 percent at the end of 2015 and 2.5 percent a year later, higher than they previously forecast. The forecasts, represented as dots on a chart, don’t give the quarter in which the first increase is expected to occur.
Economists surveyed by Bloomberg from June 6 to June 11 predicted a rate increase in the third quarter of next year, to 0.5 percent from the current range of zero to 0.25 percent.
At a press conference following last week’s meeting, Fed Chair Janet Yellen played down the significance of Fed officials’ interest-rate forecasts.
“Around each of those dots, I think every participant who’s filling out that questionnaire has a considerable band of uncertainty around their own individual forecast,” she said.
To contact the reporters on this story: Steve Matthews in Atlanta at smatthews@bloomberg.net; Jeff Kearns in Washington at jkearns3@bloomberg.net
To contact the editors responsible for this story: Chris Wellisz at cwellisz@bloomberg.net James L Tyson

[American Patriot]

The U.S. Economy Has Collapsed: “This Is A Monstrous Negative Revision”

Image | Posted on June 26, 2014 by tomfernandez28

We’re not talking about a recession. We’re talking about a collapse
by Mac Slavo | SHTFplan.com | June 26, 2014
For months the administration, financial pundits and Wall Street analysts made it a point to inform Americans about the healthy state of our economy. One of the key metrics they’ve used as proof of recovery was the Gross Domestic Product (GDP) which measures the productive output of the U.S. economy as a whole.
Earlier this year the U.S. Bureau of Economic Analysis noted that this measure was showing positive growth. But now, after a second official revision, all of that purported growth used to goad consumers into spending more money on homes, cars and other goods has been revealed to be nothing but conjecture. According to the BEA, not only did economic growth stall during the first quarter of 2014, it completely collapsed, signalling a significant shift in consumption habits amid increasing food and energy prices:
Real gross domestic product — the output of goods and services produced by labor and property located in the United States — decreased at an annual rate of 2.9 percent in the first quarter of 2014 according to the “third” estimate released by the Bureau of Economic Analysis.
The government first made consumers believe that the economy grew. Then they revised this down to slight negative growth. The latest revision of -2.9% growth is significant, because even with official inflation at over 2% America’s economic output has declined. It seems that no matter how much money they pump into the system, it isn’t enough to offset the lack of income or job growth.
This is a monstrous negative revision.
A big part of it was non-residential fixed investment. Rather than invest, companies have issued debt and bought back stock. But this does nothing for the economy — it simply blows a bubble in the market. How long before that comes home to roost? Not long now, I suspect.
If you think companies don’t expect a recession inbound, you’re nuts. Inventory draw-downs subtracted 1.7% from the GDP number. Companies don’t build inventories if they don’t think they can sell them — as such this is a forward indicator.
Oh, and current production profits? They’re down while current taxes were up. Obamacare anyone? Worse is that undistributed profits decreased too and this is the second quarter sequentially in which they did. What does a company pay dividends with? Undistributed profits.
So for two quarter the markets has risen like a rocket while the fuel for that rise has been exhausted for the last six months.
This will turn out well, I’m sure.
Source: Karl Denninger’s Market Ticker
Officially, we have not yet entered a recession. That requires two quarters of negative growth. However, the current trend indicates that’s exactly what’s going to happen. In the next 30 days the BEA should be releasing the GDP rate for the second quarter of 2014. According to economist John Williams that will more than likely show a negative print and will lead to an official confirmation that the U.S. has entered another recession.
What’s worse, unlike the previous recession that followed the collapse of 2008, there is no way out of this one.
The reason for this is that the consumer is strapped… doesn’t have the liquidity to fuel the growth in consumption.
Income… the median household income, net of inflation, is as low as it was in 1967. The average guy is not staying ahead of inflation.
…
As a result – personal consumption is more than two thirds of the economy – there’s no way you can have positive sustainable growth in the U.S. economy without the consumer being healthy.
…
As the renewed downturn gains wider acceptance or wider recognition, that will intensify the selling pressure. When someone starts selling, it’s going to be a race for the door, and I am looking for a dollar selling panic to be the trigger for the onset of hyperinflation.
…
I don’t see what will save it at this point.
To cries of fear mongering and ‘doom porn’ contrarian economists and analysts warned that these numbers were being fabricated, despite the fact the the underlying fundamentals showed a clear draw-down in consumer confidence, company inventory, home sales and overall spending.
Now all of those warnings are coming to pass.
We have entered the next leg down and given that the governments of the world have pretty much used up all of the arrows in their quivers, there is nothing to stop what’s coming.
And what’s coming is nothing short of a complete collapse of our way of life. Hard to believe? Yes. Implausible? No.
It is so plausible, in fact, that well known radio commentator Mark Levin recently noted that the U.S. government has been actively preparing for and simulating the collapse of our financial system, as well as the widespread violence that will follow.
I’ll tell you what I think they’re simulating.
The collapse of our financial system, the collapse of our society and the potential for widespread violence, looting, killing in the streets, because that’s what happens when an economy collapses.
I’m not talking about a recession. I’m talking about a collapse, when people are desperate, when they can’t get food or clothing, when they have no way of going from place to place, when they can’t protect themselves.
There aren’t enough police officers on the face of the earth to adequately handle a situation like that.
This is happening right here and now. The streets may not devolve into madness tomorrow or next month, but piece by piece the foundations of America’s economic health and social structure are crumbling. The time to finalize preparations for what’s coming is now.
It’s going to go from bad to worse.

[Ryan Ruck]

With this most recent news of the 3% contraction of the economy, I saw this mentioned about how the government is now calculating GDP.

Something to keep in mind with their numbers...

U.S. Government's New Way Of Calculating GDP

April 24, 2013

In March 2013, the U.S. government invented a new way of calculating GDP. The Financial Times reported that starting from July 2013, U.S. GDP would become 3% bigger due to a change in statistics. As this adjustment in GDP calculation is pretty significant, I will discuss the new items in the U.S. GDP, what the consequences are and how investors should act on this revision in statistics.

GDP = private consumption + gross investment + government spending + (exports − imports), or



The government made a significant change in the gross investment number (I), which now includes R&D spending, art, music, film royalties, books, theatre. This change in GDP statistics has not been implemented elsewhere in the world. So the U.S. is the first to accomplish this rewriting of the GDP number.

Research and development (R&D) spending, which shouldn't even be accounted for as investment, adds a significant amount to the U.S. GDP number. It accounts for around 2% of U.S. GDP. Art, music, film royalties, books and theatre add another 0.5% to U.S. GDP. Another adjustment has been made to pension accounting. Previously, pension spending was included in GDP. After this adjustment however, we also look at the "promise" to pay out pensions. So we are talking about imaginary numbers that are now included in GDP. A last example is found in real estate. Commissions, legal bills and expenditures on real estate transactions are included in GDP as "investment." Obviously these expenditures aren't associated with real production.

One of the consequences is that comparing the GDP number between other countries and the U.S. is not transparent anymore. It is like comparing apples and oranges. GDP should measure real production (like building a factory) and what the U.S. government added here is not real production. It is a measure of spending in the economy and there are items in the GDP number that don't add real value to the economy (like writing books).

Second, while the GDP number gets inflated upwards, all macroeconomic indicators that are based on the GDP number will be adjusted with it. For example, the debt to GDP, which is at 105% now (Chart 1), will drop 3% just because of this adjustment to the GDP number. This fictitious drop in debt to GDP will highlight that the U.S. improved its debt load, while it did not. Another example is government spending as a percentage of GDP. By increasing the GDP number, we will get a lower government spending number, which allows the government to increase spending.



The fact is that the U.S. is headed to Zero Hour Debt (Chart 2). I talked about this in a previous article. Each dollar of increase in debt doesn't contribute anymore to an equal amount in GDP growth. With this revision in GDP, the government has temporarily "improved" this chart.



Third, people need to know that the GDP numbers were already "massaged" if we look at real GDP. Real GDP is nominal GDP, but inflation adjusted with the Consumer Price Index (CPI). As we all know, the CPI has a hedonic adjustment applied to it, which adds a multiplier to different asset classes in the CPI. The total sum of this hedonic adjustment creates a lower CPI, which makes the real GDP look bigger. With other words, the government is masking the inflation numbers. If we now take into account the recent adjustment in the GDP number, we have a double incremental effect on real GDP.

Fourth, we will have distortions in the correlations that are based on GDP. For example, the total stock market index valuation depends on the GDP number. The "Warren Buffett Rule" states that stock markets become overvalued if the Total Stock Market Index (DWCF) goes into the range of 90%-115% of GDP. With the recent adjustment in the GDP number, this range will shift to 87%-112% and will likely decline further.



The conclusion is that investors need to take the third quarter 2013 GDP number with a grain of salt. They also need to keep this GDP adjustment in their mind when they value stocks based on GDP numbers (Chart 3). The 3% increase in GDP will be imaginary, but I predict that the mainstream media will probably tout that the economy is improving and stocks (DIA) will react positively on this coming news. The decay in the underlying U.S. economy however, has not subsided.

[Ryan Ruck]

GDP: Another 'No Biggie'?

June 25, 2014

Economists are writing off the sharp 2.9% drop in first-quarter GDP as a temporary contraction. Maybe. What isn't temporary is President Obama's massively subpar growth record over the past five years.

When the Commerce Department said two months ago the economy had eked out a 0.1% gain in the first quarter, the White House and various economists said growth would have been higher if not for the bitter winter. When Commerce revised that number down to -1% in May, the same crowd again blamed Jack Frost.

Now that it turns out the economy contracted 2.9% in the first three months of the year — the largest drop since 2009 and the sharpest downward revision in the government's history of making such estimates — everyone says "no biggie." These are, you see, backward-looking numbers; all signs point to growth ahead.

We've heard this "prosperity is just around the corner" promise countless times since President Obama took office, only to see it vanish once the corner is turned. The bigger problem is that Obama has set the country on what appears to be a permanently lower growth track.

Here's the grim reality:

In the nearly five years since the Obama recovery started — just months into Obama's first term — real gross domestic product has increased only 10.2%. That's less than half the average growth rate for every other economic recovery since World War II, and almost a third less than the pace set during the Reagan recovery.

Looked at in dollar terms, if the Obama recovery had merely been average, GDP today would be $1.6 trillion bigger than it is. If growth had kept pace with the Reagan recovery, GDP would be $2.2 trillion bigger.

The picture is equally dismal on jobs. Obama says more than 8 million have been created since early 2010 — when employment hit rock bottom — but he fails to note that the working-age population climbed almost exactly that amount since then, which is why the worker-to-population ratio remains stuck at three-decade lows.

If the job market under Obama had kept pace with the average postwar recovery, 7.8 million more people would have jobs today. Had it kept pace with the Reagan recovery, 13.7 million more Americans would be gainfully employed.

Even George W. Bush has a better record on jobs than Obama, when you compare apples to apples. By this point in the Bush recovery, unemployment was down to 5%; today, it's 6.3%.

That's still being unfair to Bush, given that millions dropped out of the labor force under Obama, and so aren't counted as unemployed. If you control for this, the jobless rate under Obama today would be 10.9%.

Prosperity may indeed be around the corner. But that corner isn't likely to arrive until after we get a new economic leadership team in place.

[Ryan Ruck]

DOW 17,000 here we come! Everything must be just great!

[American Patriot]

Wonder if I ought to sell my $40 worth of silver. I'll make 4 bucks.

[American Patriot]

Actually... I just readded that. No I won't.

LOL

[Ryan Ruck]

Just taking a break from house cleaning where I made an interesting discovery.

I found a couple coupons for a local pizza place called Snappy Tomato that had fallen down into a gap near where my coupons get kept.

Snappy has a pizza called The Beast which is a 24 piece pizza. Each piece is roughly 4"x4".

The flyer the coupons were in was dated 1/25/2005. The advertised price for The Beast was $15.99

I just bought one of these Beast pizzas a couple weeks ago and the current price is $21.99

Anyone seen their pay increase that much?