Saturday, October 31, 2009

Fundamentals Via the Updated Fed Charts…

We discussed the technicals in the prior post, now it’s time to examine the fundamentals. A significant week, our government declared an end to the “recession” (depression that is not anywhere near over) based upon a trumped up GDP report and stocks rolled over, once again proving that rallies often roll over on “good news.”

But I’m not the only one who believes this depression is not over:
Oct. 31 (Bloomberg) -- Nobel Prize-winning economist Joseph E. Stiglitz said the U.S. recession is “nowhere near” an end and the economy’s third-quarter growth rate of 3.5 percent, the first expansion in more than a year, won’t carry into 2010.

While this week’s figures on gross domestic product are “very good,” the numbers would be “miserable” without stimulus measures enacted by the Obama administration, Stiglitz said today at a forum in Shanghai.

No, he can’t use the word depression, that would make him too far outside of the mainstream.

And what does Goldman, the manipulators, think of the latest GDP report?
"How much of the rebound in real GDP was due to the fiscal stimulus, and where do we stand in terms of the effects of stimulus thus far? Although precise answers are impossible at this juncture, several aspects of the report are consistent with our estimates that the fiscal package enacted in mid-February as the American Recovery and Reinvestment Act (ARRA) would have accounted for virtually all of the growth reported for the third quarter."


Well, funny that they mention that, let’s take a look at the first updated St. Louis Fed chart from this week that caught my attention…

GDP was much touted, but it was, in fact, simply a one quarter .875% rise but year over year GDP is still very negative (even the way the BEA reports it) and, as you can see, created a barely perceptible rise in the chart:



Doesn’t that little hook look just like this one in Corporate Dividends? What a CRASH, one of historic proportions:



Light weight vehicle sales jumped on Cash for Clunkers and then instantly disappeared. The entire economy is on a similar sugar high track:



Is it any wonder, with debt levels sky high, banks raising interest rates and minimum payments on consumers, tighter credit, and higher credit standards? How about the fact that incomes are falling at the same time?



The Employment cost index is at a chart low and descending steeply:



The Employment cost index for Benefits is similarly in a steep downward trend:



Personal consumption is following incomes:



Final Sales to Domestic Purchasers has a greenshoot hook on the bottom of it, just like GDP itself.



Some economists believe that building inventories back up will save the economy… they will be wrong again, but you can see the greenshoot right here that leads them to make comments like that:



Remember our discussion about the GDP’s “deflator?” Well, here’s a chart of the deflator! Note that it peaked with interest rates in about 1980 and is now at the lowest point since the early 1960’s:



And while the government is cranking “liquidity” into the system like crazy, M1, M2, and MZM are coming down in year over year percentage change basis:







And the really damaging part of flooding money into the system is its effect on the money multiplier. Note that this multiplier is now making new lows:



As for the money flowing into the markets, retail money funds are down sharply in dollar terms:



Institutional money funds are also declining:



Expressed in yoy percentage terms, the amount of money entering retail money funds is down more than a whopping 20%!



As I thumb through the charts, I do see little turns or hooks at the end of historic collapses. Those absolutely are based on stimulus, and just like light vehicle sales will disappear as soon as the sugar is removed.

Boy, how ‘bout all those “expert” economist and banker calls so far? Conquistadors they’re not…

Procol Harum – Conquistador: