Financial Crisis - 2013 - ????

[MinutemanCO]

Add an EMP to the list and we've got the perfect storm.

It's called "probing defenses".

Here's what I predict. One day when things are going along just fine, when there has been any "attacks" for a few weeks and things are just hunky dorey... we will suddenly be attacked in the malls, crowded places etc.

Wall street will go offline.
Google will go offline.
Amazon will go offline.
News sites (Remember NYT was down the other day) will go offline.
The Power grid will go offline - or large portions of it will disconnect.

This is a plan they have. It will turn out later, when the smoke and dust clears that the Russians were involved, the Chinese and North Korea had a huge hand in it, Al Qadea had a major hand in it - and they will get the blame.

Seriously, there is a plan afoot to hit us hard and take us down.

We've been kicked in the nuts, they are just trying to find the right timing to do the fatal chop across the neck.

[American Patriot]

Oh, yeah, I forgot that one... Look what the Chinese are doing. Remember the sudden, weird change in course on the satellites? Easy enough to get a nuke over us I guess.

[American Patriot]

(and I said grid offline, because I was thinking they'd hack it or EMP it)

[Ryan Ruck]

Hindenburg Omen: Very Ominous, Highly Technical Warning Sign Returns

August 21, 2013

One of the most ominous market indicators has reared its ugly head this summer, flashing warning signs about the health of the U.S. stock market. The Hindenburg Omen is a highly technical indicator used to predict a major market crash.

It’s named after the infamous German aircraft that went up in flames in Lakehurst, New Jersey on May 6, 1937. The Hindenburg flight originated in Frankfurt, Germany and was generally considered a smooth ride, until unforeseen elements sparked a fire that quickly engulfed the craft while landing. Thirty-five of 97 passengers were killed. The tragedy, displayed on news reels across the world, destroyed public confidence about air travel. The exact cause remains a mystery to this day; much like its use as a stock market indicator.

There are varying definitions for what triggers the Hindenburg Omen. In this installment of Investing 101, we’re laying out the basic premise.

By all definitions, the NYSE Composite (^NYA) is used as the benchmark. It’s an index consisting of all common stocks listed on the New York Stock Exchange. Among the 2,000-plus listings, market analysts monitor four criteria that trigger a signal. Here they are in no specific order:

1) The daily number of stocks that hit 52-week highs AND the number of stocks that hit 52-week lows are both 2.2% or more than the sum of NYSE issues that rise or fall that day.

2) New 52-week highs cannot total more than twice the number of new 52-week lows.

3) The McClellan Oscillator, which measures the difference between the number of rising stocks versus the number of falling stocks, is negative.

4) The NYSE Index rises above its 10-week moving average –meaning it’s greater in value than it was 50 trading days ago.

If ALL of these measures are hit on the same day, we start to get nervous. If this occurs a second time, within a 30-day period, the Hindenburg Omen is triggered, and a serious stock market decline is expected to follow within the next 40 days. (Also of note, that 30-day time period varies among analysts. Some use a 36-day period, some use 30 calendar days, and others use 30 trading sessions.)

It’s extremely rare to see this omen flare up. Non-believers point out that it doesn’t always work. But true believers point to prior instances which include the 2007 meltdown and the tech bubble burst in 2000.

Whether you buy it or not, the signs are emerging and trading floors are buzzing. But only time will tell.

[Ryan Ruck]

California Wants Small-Business Owners To Pay Back $120 Million In Tax Breaks

August 19, 2013



Small-business investors in California were promised big breaks five years ago, but now they’re being told to pay up, instead after a court ruling.

After following the law, many of them are getting hit with tax bills as high as $250,000.

“When we make a promise, we have to uphold it,” said Sen. Ted Lieu, D-Redondo Beach.

But that is not what the state government appears to be doing. Small-business owners are getting hefty tax breaks for tax credits they already got five years ago.

“They relied on California law as it was written, that they would get a tax break if they invested in certain kinds of businesses,” Lieu said.

But a court ruled in December that practice by the state was unconstitutional. Now, the Franchise Tax Board wants its money.

And it’s killing small businesses, says Ken DeVore, with the National Federation of Independent Businesses.

“It sends a message that you can’t trust government. If you comply in good faith with the rules, they can go back and penalize you.”

It’s estimated that 2,000 small-business investors will have to pay these retroactive taxes. If the senator’s bill doesn’t pass, they’ll be out up to $120 million.

“A lot of them don’t have that money anymore. Its been reinvested,” DeVore said.

Lieu says it’s not as if the state is counting on the case. The $120 million would be a surprise windfall for the state.

“They obviously can’t go backwards 5 years in time and change their investment or change what they did.” he said. “They are stuck with what they did and its unfair to penalize them.”

Investors who could be hit by the retroactive taxes did not want to go on camera, fearing they would become an easy target for the Franchise Tax Board.

The board doesn’t comment on pending legislation, but a department review of the bill reveals they haven’t yet taken a position on it.

[Ryan Ruck]

Cattle Theft on The Rise in Texas, Despite Tougher Penalties

August 20, 2013

The Giddings Livestock Commission holds its auction every Monday. Hundreds of cows pass through, brought in by their rightful owners to be sold to the highest bidder. But, every now and then, auction manager Larry Larry Schatte says, a contraband cow finds its way into the mix.

“Probably about a year ago. This one guy, he’d usually bring in some cattle for his mom,” Schatte told StateImpact Texas on a recent auction day that the man would always bring in the same kind of cow, a specific type of cross breed.

“And this one particular time he came in with a couple of long horns, and I thought it was kind of an odd deal,” he said.

Turns out, it was. The cattle had been stolen from a ranch where the man worked. Stories like this are becoming more and more common.

Ranchers saw a sharp jump in cattle rustling last year in Texas and Oklahoma. Over 10,000 cows and horses were reported missing or stolen. That’s an almost 40 percent increase from the year before. It’s a trend that’s surprised some in law enforcement.

Doug Hutchison is a special ranger commissioned by the Texas Department of Public Safety to investigate cattle theft. He points out that -since the drought ravaged herds in 2011- there’s simply less and less Texas cattle to steal.

“I was really starting to think that maybe we’d start to see a downturn, because these ranchers are watching so close to what they have with the downsizing of the herd, it’s a little easier to track,” said Hutchison.

He might have had another reason to expect a decline in thefts: Penalties against rustlers were toughened by Texas lawmakers in 2009. Now, the crime could put you in prison for up to 10 years. But ironically more and more cattle have gone missing or stolen since that law was passed.

Richard Hartley Chairs the Criminal Justice Department at UT San Antonio. He says it goes to show that tougher sentencing doesn’t generally serve as a deterrent. After all, cattle rustlers plied their trade even when the penalty was death.

“If you read a lot of the research or even just the historical writings on that era. When there was hangings in the town square crime would actually go up,” Hartly said. “Because when you had a lot of people congregated in an area where pickpockets would know that we steal stuff from them.”

Hartly said the reasons people do or don’t resort to crime has to do with other things. And that brings us back to the drought Hutchison mentioned. There’s less cattle because of it, but the cattle that’s left is more valuable, making it an appealing target for thieves. Special Ranger Hutchison says those theives are often desperate to feed drug addictions.

“Not always, but I would say the majority of these cases are driven by the meth community. Cause they know it’s some quick cash,” he told StateImpact Texas.

Ranchers I spoke with mentioned the rise in hobby ranches as another possible reason. These are ranches owned by urban professionals who may only visit infrequently. That leaves their cattle less supervised and easier to steal.

Something else that makes cattle theft easier? Hungry cows. And that brings us back to the drought yet again.

“During a drought those cattle will actually come to a pen because their hungry. So it actually makes it easier for someone to steal something,” said Larry Schatte.

One final reason for the uptick in theft: the economy.

The slow economic recovery hasn’t yet come to many parts of rural Texas. Leaving some willing to take the risk of cattle rustling, regardless of the penalties.

[American Patriot]

Cattle Rustlers? We used to hang them.

Stu Varny was on a few minutes ago. He said this whole Syria thing is screwing the American economy. I watched gas shoot up over 30 cents this week.

Maybe this is meant to be the hammer strike to kill the economy that's hanging on by a thread?

[Ryan Ruck]

I would say the whole "Obama/Democrat/Leftist thing" is what's screwing up the economy.

[Ryan Ruck]

Labor Participation Rate Hits 34-Year Low

August 29, 2013

The percentage of Americans who have a job or are looking for one, known as the labor force participation rate (LFPR), has plunged to a 34-year low, according to a new report from staffing company Express Employment Professionals.





"Following the Great Recession, we've entered into the Great Shift," says Express Employment Professionals CEO Bob Funk, who previously served as chairman of the Kansas City Federal Reserve Bank. "This is a period defined by the Boomer retirement, Millennial frustration, and growing reliance on government programs. All indicators suggest this shift is not sustainable."

The New York Times reported on the study and suggested that "another cause [of the Great Shift] may be the rise in the number of workers on disability."

A record 8,733,461 people now receive disability benefits, a figure greater than the population of New York City.

Today, nearly 90 million Americans are no longer in the labor force.

[Ryan Ruck]

Labor Outlook: 'It's Just A Very Tough Job Market'

September 2, 2013

Millions of Americans are off from work this Labor Day. But millions of others are off nearly every day because they have no job—or have given up looking for one.

"It's just a very tough job market now. There's no other way of putting it," said Daniel Opler, professor of history and a labor expert at the College of Mount St.Vincent.

"And the least skilled are in the toughest spot. It's a daunting task to find a job these days," he said.

According to a survey released last month by recruiting firm Express Employment Professionals—using Bureau of Labor Statistics data and its own findings—the number of Americans in the labor force, or those working or seeking a job, is at a 35-year low of 63.4 percent.

That translates into some 89.9 million Americans who are not working or seeking work.

This number might seem like a contradiction to the falling overall unemployment rate—from a high of 10 percent in October 2009 to a recent 7.4 percent in July.

But a big part of the decline is likely due to the millions who have taken themselves out of the job market, said Bob Funk, CEO of Express Employment.

"It's a tragedy so many people have given up looking for work, " he said. "It's older people and younger people that have in essence just thrown in the towel."

That's not to say there aren't jobs, said Funk, whose company's survey cited hard-to-fill positions like welders, machinists, engineers, IT professionals and even accountants and office managers.

"There's a skills gap for many people," he said. "We have hundreds of job openings but we can't find the people to fill them. They just don't have the training."

"We're finding even at entry levels, there's a mismatch of skills out there," said Sandy Mazur, a division president of staffing firm Spherion.

"I think we have to do more with training issues," she said. "It's becoming more difficult to find people with the right skills employers want."

'People are hungry to work'

Trained or not, those still looking for a job often find the competition fierce.

"People are beating down our doors to get jobs," said Bryan Scott, owner of Barn Light Electric, a porcelain light manufacturing firm in Titusville, Fla.

"With the cutbacks in the nearby Kennedy Space Center, we get 10 to 15 people a day walking in to fill out job applications," said Scott, who employs 100 workers and started his business in 2008, after working 25 years in law enforcement.

"People are hungry for work. We've hired those right out of high school and college grads and former space workers. A man who was a coal miner for 30 years is now head of our manufacturing," he said.

"Our turnover is low, especially for workers with families," Scott added. "They know they have to pay their bills, and we do our best to give them good working wages. Fortunately, our business has been growing so we can do that."

'Wages not going up'

But having a job has failed to guarantee a living wage for those who feel trapped in conditions that offer little in pay and benefits.

"I can't get any other job right now," said 53-year-old Melissa Roseboro, who was part of a day-long walkout for higher pay in May at the McDonald's she works at in Washington.

"And I can't support myself and my three kids on $8.33 an hour, which is what I'm making," said Roseboro.

"I don't have enough money to cover my food and rent. I have to bring home food that they give us from work," she added. "And I can only work 35 hours a week. They won't let me work more than that."


Jobs like Roseboro's are the backbone of whatever job recovery there is, according to the National Employment Law Project.

A report from the organization says that 58 percent of the jobs recovered from the recession are for low-wage positions that offer few if any benefits and have annual earnings below the poverty line for a family of four.


Higher-wage jobs make up only 20 percent of the job recovery.

According to a report from Economic Policy Institute, weak wage growth between 2000 and 2007, combined with wage losses for most workers since then, has left 60 percent of working Americans earning less now than 13 years ago.

"We're used to wages going up over time, but that isn't happening now," said Peter McHenry, a professor of labor economics at the College of William and Mary.

"Keeping wages low may make it cheaper for firms to hire, but it doesn't help households survive financially," he said.

"It was strong unions in the past that helped workers get better pay," said Opler. "But unions are much weaker now, and any kind of movement for better pay has to come from the workers themselves, as we're seeing with the fast food walkouts."

No easy fix

Remedies given to improve the job picture follow a somewhat complicated path.

"We've got to change our educational system," said Express Employment's Funk. "They have to wake up and realize the skills are not there. They need to be more flexible and realize other countries are ahead of us when it comes to educating their workforce."

"Businesses are nervous and, there's some validity to their lack of confidence in the economy and why they're not hiring, " said McHenry.

"They're worried about political economic fights in Washington and constant threats to shut down the government and all the regulations they face," he added.

It might even take improvements overseas to make things better at home, McHenry said.

"Europe's got economic troubles and China's growth has slowed, so markets for our products and services are at risk," he said. "That puts our job growth at risk, too."

Spherion's Mazur said the current workforce could determine what lies ahead for those seeking jobs.

"Consumer spending is key going forward," she said. "What happens in retail will be telling as to what happens in the job market."

Opler said the spotlight should shift from just creating jobs to focusing on the quality of jobs workers can get.

"We have to seriously think about what we mean by having an acceptable job," the history professor said.

"Fast food jobs can't support a family. We need to get people trained for good jobs with good wages, and that may take an economic plan like we had after World War II for Europe. We could use one here," Opler said.

Riding out the storm

Getting the government to provide more stimulus for a jobs plan is highly unlikely, some analysts say.

So for now and the immediate future, they say, it's more or less a matter of riding out the storm.

"I don't see a magic bullet to fix this, but I'm optimistic it will get better," said McHenry. "It's common to have a long recovery time after a recession."

"People are trying to pay down their debt, which is a good thing. When that eases up, there will be more spending and probably more job creation," he said.

"Things will get better, but I don't think we'll ever see 4-5 percent unemployment again," said Opler. "The way the economy and Washington politics are these days, it's just not going to happen."

[Ryan Ruck]

Marc Faber: Three Reasons A Plunge Is Coming

September 4, 2013

If you want to hear a rosy view on the market, you'd better not listen to Marc Faber.

The editor and publisher of the Gloom, Boom & Doom Report has long held that a correction was coming—and even though that thesis has not exactly played out this year, he's standing by it.

"In my view, we'll go back to the lows in November 2012—around 1,343" in the S&P 500, Faber said. Overall, he considers U.S. equities a "better sell than a buy."

On Tuesday's "Futures Now," he provided three three main reasons for his bearish view.

Reason one: The U.S. will follow emerging markets down

It hasn't been an easy summer for emerging markets. In the period of a month and a half, the iShares MSCI Emerging Markets ETF (which tracks emerging markets' large- and mid-cap stocks) lost nearly 20 percent of its value and has hardly bounced back from the lows.

That has made the U.S. market an outperformer, but Faber believes it cannot last. In fact, he said, U.S. equities could be hurt by their relative costliness.

"When emerging markets go down and the S&P goes up, the asset allocators say, 'Do I want to buy the S&P near a high, or do I venture back into emerging economies that are down 50 percent from their highs, like India or Brazil and so forth?' So you understand that the pool of money can flow back into emerging markets," Faber said.



Reason two: The Middle East will become a "disaster"

The stock market has lately been hurt by the concerns about U.S. military action against Syria. In fact, the market lost half of its gains on Tuesday when House Speaker John Boehner (R.-Ohio) said that he would support President Barack Obama's plan to strike Syria. But Faber believes we haven't seen anything yet.

"The Middle East is a powder keg, and it will go up in flames because the Western imperialistic powers, they still meddle into the local affairs," Faber said. "It's going to be a disaster. And it's going to strike from Syria and Egypt into Saudi Arabia, into the Emirates eventually, and so forth and so on, and you're going to have a huge mess."

Reason three: Interest rates have become a headwind

Before Syria became a concern for the market, the focus was clearly on interest rates. Though Fed easing has kept rates low by historical metrics, "the interest rate has doubled on the 10-year Treasury note" since the July 2012 low, "despite Mr. Bernanke's maddening asset purchases since September 2012," Faber said.

So what does that mean for the market?

"Interest rates are no longer a tailwind" but are now "a headwind," Faber declared, adding that yields will drop even further. In fact, he advocates buying bonds as a safety trade, because he thinks that after the market drops, deflation concerns will come to the fore.

ll in all, Faber contends that the market is well overdue for a correction.

"We're up almost 70 percent in two years, and the economic expansion is 4-years-old already," he said. And with emerging markets a mess, the Middle East highly volatile and rising Treasury yields, "where are the earnings going to come from?" Faber asks.

Of course, the question is rhetorical. And Faber thinks that by the time the market fully comes around to his line of thinking, it will have corrected by some 20 percent.

[Ryan Ruck]

Stephen Moore: Obama's Economy Hits His Voters Hardest

September 3, 2013

For better or worse, a truism of American politics is that voters vote their pocketbooks. Yet according to a new report on median household incomes by Sentier Research, in 2012 millions of American voters apparently cast ballots contrary to their economic self-interest.

Each month the consultants at Sentier analyze the numbers from the Census Bureau's Current Population Survey and estimate the trend in median annual household income adjusted for inflation. On Aug. 21, Sentier released "Household Income on the Fourth Anniversary of the Economic Recovery: June 2009 to June 2013." The finding that grabbed headlines was that real median household income "has fallen by 4.4 percent since the 'economic recovery' began in June 2009." In dollar terms, median household income fell to $52,098 from $54,478, a loss of $2,380.

What was largely overlooked, however, is that those who were most likely to vote for Barack Obama in 2012 were members of demographic groups most likely to have suffered the steepest income declines. Mr. Obama was re-elected with 51% of the vote. Five demographic groups were crucial to his victory: young voters, single women, those with only a high-school diploma or less, blacks and Hispanics. He cleaned up with 60% of the youth vote, 67% of single women, 93% of blacks, 71% of Hispanics, and 64% of those without a high-school diploma, according to exit polls.

According to the Sentier research, households headed by single women, with and without children present, saw their incomes fall by roughly 7%. Those under age 25 experienced an income decline of 9.6%. Black heads of households saw their income tumble by 10.9%, while Hispanic heads-of-households' income fell 4.5%, slightly more than the national average. The incomes of workers with a high-school diploma or less fell by about 8% (-6.9% for those with less than a high-school diploma and -9.3% for those with only a high-school diploma).

To put that into dollar terms, in the four years between the time the Obama recovery began in June 2009 and June of this year, median black household income fell by just over $4,000, Hispanic households lost $2,000 and female-headed households lost $2,300.

The unemployment numbers show pretty much the same pattern. July's Bureau of Labor Statistics data (the most recent available) show a national unemployment rate of 7.4%. The highest jobless rates by far are for key components of the Obama voter bloc: blacks (12.6%), Hispanics (9.4%), those with less than a high-school diploma (11%) and teens (23.7%).

This is a stunning reversal of the progress for these groups during the expansions of the 1980s and 1990s, and even through the start of the 2008 recession. Census data reveal that from 1981-2008 the biggest income gains were for black women, 81%; followed by white women, 67%; followed by black men, 31%; and white males at 8%.

In other words, the gender and racial income gaps shrank by more than in any period in American history during the Reagan boom of the 1980s and the Clinton boom of the 1990s. Women and blacks continued to make economic progress during the mini-Bush expansion from 2002-07. "Income inequality" has been exacerbated during the Obama era.

Mr. Obama has often contemptuously, and wrongly, branded the quarter-century period of prosperity beginning with the presidency of Ronald Reagan as a "trickle down" era. For many in the groups that Mr. Obama set out to help, a return to the prosperity of that era would be a vast improvement.

The Census Bureau data on incomes include cash government benefits, such as unemployment insurance, disability payments and the earned-income tax credit (but excludes Medicaid and food stamps). Most of the cash programs have surged in cost during the Obama presidency, yet incomes have still declined for the lowest-income eligible groups. This suggests that wages and salaries from employment have shrunk at an even faster pace than the Census data show. The shrinking paychecks of the past four years are consistent with two unwelcome anomalies of the recovery: a swift decline in labor-force participation to 63.4% from 65.5% during that period and a rise in part-time employment.

What all of this means is that the stimulus-led economic revival that began officially in June 2009—Vice President Joe Biden's famous "summer of recovery"—has only resulted in lower incomes for at least half of Americans, the very ones who were instrumental in electing Mr. Obama twice.

The president's announced economic policy goal, as well as that of progressives generally, is to spread the wealth. The left seems to have forgotten that when fewer American businesses and workers are creating wealth in the first place, something else is spread instead: misery.

[Ryan Ruck]

90,473,000: Record Number Not in Labor Force--Up Almost 10M Under Obama

September 6, 2013

The number of Americans who are 16 years or older and who have decided not to participate in the nation's labor force has pushed past 90,000,000 for the first time, according to data released today by the Bureau of Labor Statistics.

The BLS counts a person as participating in the labor force if they are 16 years or older and either have a job or have actively sought a job in the last four weeks. A person is not participating in the labor force if they are 16 or older and have not sought a job in the last four weeks.

In July, according to BLS, 89,957,000 Americans did not participate in the labor force. In August, that climbed to 90,473,000--a one month increase of 516,000.

In January 2009, when President Barack Obama took office, there were 80,507,000 Americans not in the labor force. Thus, the number of Americans not in the labor force has increased by 9,966,000 during Obama's presidency.

Part of the increase in the number Americans not participating in the labor force can be explained by Baby Boomers reaching retirement age and deciding to stop working--and not be replaced by an equal number of younger people reaching age 16 and thus becoming part of the BLS labor force population.

However, it is also true that the overall percentage of the non-institutionalized population over the age of 16 that is working or seeking to work in the United States--which BLS calls the employment-population ratio--has declined significantly in recent years.

From July to August, it dropped from 58.7 percent to 58.6 percent. In January 2009, when President Barack Obama took office, it was 60.6 percent. It reached an historical peak in April 2000, when it was 64.7 percent.

[American Patriot]

Planned obsolescence of the American workforce...

[Avvakum]

Planned obsolescence of the American workforce...

The Commies will create a 'Lumpenproletariat' of the cronically unemployed and unemployable with which they'll pull down and bankrupt the system, then they'll kill the whole lot of these useless drones in their new order.

[Ryan Ruck]

Small Business Is Going Nowhere

September 10, 2013

Submitted by Lance Roberts of Street Talk Live blog,

Each month I continue to update our analysis of the small business survey when it is published by the National Federation of Independent Business (NFIB). While this survey doesn't get a tremendous amount of press, as a small business owner myself, I find its results more aligned with what I am seeing in the "Main Street" economy versus what the government reported data suggests.

For example, last month's report entitled "Making Lemonade" showed relatively little improvement in the economic outlook by small businesses. Since that time the Institute of Supply Management's and Federal Reserve's surveys have showed sharp upticks while, at the same time, the Bureau of Economic Analysis revised GDP up from 1.7% to 2.5%. Therefore, it should be expected that such improvement in the government related reporting should translate into a much more robust report from small businesses. However, that was not the case as the NFIB reported:

"Small business optimism remained flat in August, dropping 0.1 points from July for a final reading of 94.0"

"While the total reading showed essentially no change over the month prior, a look at the individual indicators reveals incongruent details."

One of those incongruences in particular was in job creation plans the jumped to a level not seen since before the last recession. However, that increase is not supported by the dramatic deterioration in real sales. The chart below shows the very abnormal divergence between actual sales versus sales expectations. The problem is that real sales tends to lead expectations which would mean that we may have seen the peak of expectations currently.



The favorable employment plans also contrasted sharply with the increasingly negative expectations of future business conditions. While there had been some recent improvement in recent months from historically low levels at the end of 2012 - outlooks remain at very recessionary levels.



The statement from the NFIB summed this up well stating:

"Overall, the Index of Optimism says the small business sector is going nowhere and that's what it feels like. Consumer sentiment is falling so there is no wind in the sails of the consumption barge. It floats, but no speed...Owners reported lousy performance in the past few months with employment cuts, falling sales and profits, no ability to raise prices, and weak sales the top business problem for 1 in 5 employers. In particular, spending on services (70 percent of consumption) is very sluggish, up 0.5% year over year and declining at a 1.5% annual rate in July. This is where jobs are generated. Disposable income is up only 0.8% year over year, so no support for spending there. The savings rate is very low again therefore not much room to support more spending with less saving. Durable goods spending has posted strong growth, but this are doesn't produce many new jobs."

Bright Spots

However, despite that there were some bright spots in the report. First of all, as shown in the chart below, there was a massive jump in job creation plans for the next few months. The spike is somewhat anomalus but not entirely unlike what was seen in 2003. The issue, however, is that this may be more representative of two things: 1) labor hoarding has most likely run its course as employers have run out the ability to increase worker productivity much further leading to a need for hiring, and; 2) this may likely represent the peak of employment for the current cycle as it did in 2003.



It will be interesting to see if actual employment actually follows the current spike in intentions.

Capital expenditure plans also increased on the back of rising employment plans and the need to expand inventory holdings. The sluggish demand from the beginning of the year has led to short term pent up demand and low levels of inventory which now need to be restocked. The issue will be sustainability going forward if actual demand, in terms of sales which has been very poor, does not markedly improve.

"While more owners expect the economy to sink further over the next six months than improve, there was a surge in expectations for gains in real sales volumes at their own companies. This is paradoxical at the macro level, although with differing regional economies, possible."

While the world is currently glued to the events surrounding Syria; the reality is that such an event has very little to do with the real economy. The surges in expectations by business is very interesting given the actual demand that drives the real economy. Real employment remains weak and corporate earnings are struggling given the diminishing returns of cost cutting.

The recent increases in interest rates also have a very important "tightening" effect on the "Main Street" economy which will also likely suppress consumption in coming months somewhat. Also not likely factored in to current survey's is the upcoming debt ceiling debate and the onset of the Affordable Care Act (ACA). The ACA is a de facto increase in taxes and there is a potential for further tax hikes coming from the budget debate.

One of the more interesting points from the NFIB was their view on the upcoming Federal Reserve "taper."

"Federal Reserve 'tapering' [will not have] a noticeable impact on the real side. Financial markets (where trading, not investing, dominates) will see more volatility. If tapering occurs, it will fall on Treasury purchases, not MBS. The market is a bit short of Treasuries for doing business anyway, so any reduction in the $85 billion in purchases will fall on Treasury bonds.

The reality has been, and which is now being realized by the Federal Reserve, is that these ongoing interventions have done little to help the real economy but rather just inflated asset prices. Therefore, the "taper" has more of an effect on Wall Street rather than Main Street.

The current survey suggests that the economy is still stuck in "struggle mode" and an acceleration above 2% real economic growth is currently unlikely. The divergence between expectations and real demand will likely converge in the next couple of months so we will see businesses follow through with their optimisitic outlooks.

NFIB chief economist Bill Dunkelberg makes an excellent conclusion:

"But we saw some interesting things happening with the Index this month. The August reading provided us with a rather perplexing set of statistics; internally consistent on some dimensions, such as lower sales bringing lower profits, but contradictory in other ways, such as lower job openings but huge gains in hiring plans. We know that the upcoming implementation deadlines for the healthcare law are weighing on the minds of employers, and the current dim prospects for real tax reform must be, as well. The September survey will hopefully straighten things but with Syria on the horizon, the budget situation still up in the air, and Obamacare being rolled out, clarity over our economic direction is not likely to be the outcome."

[Ryan Ruck]

Fed Downgrades Its Outlook For US Economy

Federal Reserve sketches a gloomier outlook for US economic growth for this year and next

September 18, 2013

The Federal Reserve on Wednesday downgraded its outlook for the U.S. economy for 2013 and 2014. In doing so, it underscored concerns that led it to maintain the pace of its stimulus.

The Fed predicted Wednesday that the economy will grow just 2 percent to 2.3 percent this year, down from its previous forecast in June of 2.3 percent to 2.6 percent growth.

Next year's economic growth will be a barely healthy 3 percent, the Fed predicts.

Fed officials decided to continue their $85-billion-a-month bond purchase program, surprising most economists, who had expected a slight reduction. The bond purchases have been designed to keep long-term loan rates low to encourage spending.

The Fed's policymakers expect the unemployment rate to fall to 7.1 percent to 7.3 percent by the end of 2013, slightly below its June forecast of 7.2 percent to 7.3 percent. It predicts that unemployment will fall as low as 6.4 percent next year, down from 6.5 percent in its June forecast.

The unemployment rate is now 7.3 percent.

The projections showed that 12 of the 17 officials on the Fed's policymaking committee think the Fed shouldn't begin raising rates until 2015. And two think the Fed shouldn't do so until 2016, one more than in June. Three chose 2014, the same as in June.

The Fed doesn't say which policymakers made which forecast.

[Ryan Ruck]

The QE charade continues...

Fed Delays Bond Tapering, Wants To See More Data

September 18, 2013

The Federal Reserve has decided against reducing its stimulus for the U.S. economy, saying it will continue to buy $85 billion a month in bonds because it thinks the economy still needs the support.

The Fed said in a statement Wednesday that it held off on tapering because it wants to see more conclusive evidence that the recovery will be sustained.

Stocks spiked after the Fed released the statement at the end of its two-day policy meeting.

In the statement, the Fed says that the economy is growing moderately and that some indicators of labor market conditions have shown improvement. But it noted that rising mortgage rates and government spending cuts are restraining growth.

The bond purchases are intended to keep long-term loan rates low to spur borrowing and spending.

The Fed also repeated that it plans to keep its key short-term interest rate near zero at least until unemployment falls to 6.5 percent, down from 7.3 percent last month. In the Fed's most recent forecast, unemployment could reach that level as soon as late 2014.

Many thought the Fed would scale back its purchases. But interest rates have jumped since May, when Fed Chairman Ben Bernanke first said the Fed might slow its bond buys later this year. But Bernanke cautioned that the reduction would hinge on the economy showing continued improvement.

In its statement, the Fed says that the rise in interest rates "could slow the pace of improvement in the economy and labor market" if they are sustained.

The Fed also lowered its economic growth forecasts for this year and next year slightly, likely reflecting its concerns about interest rates.

The statement was approved on a 9-1 vote. Esther George, president of the Federal Reserve Bank of Kansas City, dissented for the sixth time this year. She repeated her concerns that the bond purchases could fuel the risk of inflation and financial instability.

The decision to maintain its stimulus follows reports of sluggish economic growth. Employers slowed hiring this summer, and consumers spent more cautiously.

Super-low rates are credited with helping fuel a housing comeback, support economic growth, drive stocks to record highs and restore the wealth of many Americans. But the average rate on the 30-year mortgage has jumped more than a full percentage point since May and was 4.57 percent last week — just below the two-year high.

The unemployment rate is now 7.3 percent, the lowest since 2008. Yet the rate has dropped in large part because many people have stopped looking for work and are no longer counted as unemployed — not because hiring has accelerated. Inflation is running below the Fed's 2 percent target.

The Fed meeting took place at a time of uncertainty about who will succeed Bernanke when his term ends in January. On Sunday, Lawrence Summers, who was considered the leading candidate, withdrew from consideration.

Summers' withdrawal followed growing resistance from critics. His exit has opened the door for his chief rival, Janet Yellen, the Fed's vice chair. If chosen by President Barack Obama and confirmed by the Senate, Yellen would become the first woman to lead the Fed.

[Ryan Ruck]

Middle Class Can't Eat Out, Either

September 20, 2013

Demonstrating an overall decline in casual dining, Darden Restaurants on Friday reported first-quarter earnings that were much lower than expected. It also announced major cuts, including job eliminations, Reuters reported.

Darden's holdings include the Olive Garden and Red Lobster chains.

"Darden in the most recent month was a little bit ahead of the industry, so it is a broader industry problem," Jeffrey Bernstein, senior restaurant analyst with Barclays, told CNBC.

In a conference call today, CEO Clarence Otis said Darden would cut costs by $25 million in the current fiscal year and $50 million in 2015, including laying off 85 support staff members, according to Reuters. Otis had stated in a release earlier that the sluggish recovery would continue to affect restaurant sales.

Matthew DiFrisco, director and senior restaurant analyst at Lazard Capital Markets, told CNBC that the decline of middle-class casual dining could be connected to an unstable housing market.

"I think with the volatility of the mortgage rates and also the frugalness of the consumer that [the] sector's very discretionary, and you saw some contraction there," DiFrisco said.

First-quarter earnings of 53 cents per share fell short of expectations by 17 cents, Reuters said. Net income from continuing operations fell to $70.2 million from $110.8 million, or 85 cents a share, in the year-earlier period.

Midday trade reports showed that Darden shares were down 5.5 percent, to $46.61.

Outside Darden's niche in casual dining, limited-service eateries that don't require tipping are gaining ground.

"I think you're seeing good strength, though, in brands like Chipotle. They're recovering and seeing some sales momentum," DiFrisco said. Starbucks, Dunkin' Donuts—they're all seeing some above historical same-store sales trends."

Olive Garden, which accounts for half of Darden's sales, saw a 4 percent decline in sales from stores operating for more than 16 months, Reuters said. Red Lobster reported a sales drop of 5.2 percent and the closing of one restaurant. Longhorn Steakhouse had a 3.2 percent sales rise, but increased operating costs reduced overall profit.

In its earnings release, Darden said its smaller brands, including high-end corporate chain Capital Grille, had growth of 3.2 percent in the first fiscal quarter, which ended Aug. 25.

However, Bernstein said, Darden should focus neither on smaller brands that did well nor on the drop at Red Lobster, whose business is traditionally uneven.

"Olive Garden has been the perennial leader in casual dining for a decade," he said. "So getting Olive Garden right would be a big step in the right direction."

Darden also announced today the retirement of its president and chief operating officer, Drew Madsen, at the end of the second fiscal quarter. Gene Lee, president of the company's specialty restaurant group, will succeed Madsen.

[Ryan Ruck]

The Fed is in the End Game

September 19, 2013

The Fed failed to announce a Taper yesterday of any kind.

It is positively outrageous, but it does inform us of many things.

First and foremost, the Fed has made it clear that it cannot be hawkish is any way. We had just two months of hinting at tapering QE from the Fed (Bernanke was back talking up how accommodating he’d be by July).

So for all the talk of taper and shifting to a more hawkish tone, the Fed’s actions speak louder than words: the Fed is totally and completely incapable of being hawkish at this time.

Secondly, the Fed knows that the US economy is a total disaster. If tapering even $10-15 billion per month from $85 billion month QE programs would damage the economy, then we’re all up you know what creek without a paddle.

Put it this way… here we are, five years after 2008, and the Fed is stating point blank that the economy would absolutely collapse if it spent any less than $85 billion per month. This admission has proven just how long ago we crossed the Rubicon. We’re already in the End Game. Period.

Finally, the Fed has proven that it has absolutely no exit strategy. The Fed is going to print money and buy bonds until the entire financial system collapses. Any time stocks fall it will try to rescue the markets. And it is going to do this ad infinitum because it has no clue what else to do.

In plain terms, the Fed has proven beyond even a hint of a doubt that it is simply flying by the seat of its pants, with no clear game plan or eventual outcome in mind. The Fed is simply going to keep doing what it’s done for five years until something breaks.

That something will be the entire financial system. We will have a crisis that is substantially worse than 2008. It is coming. In fact it is now coming much sooner than it would have had the Fed announced a taper yesterday.

In the meantime, inflation is soaring. The Fed continues to lie about CPI and inflation but the reality is that the cost of everything is going up.