Sunday, August 4, 2013

Government Says 2+2=5...L&C

If freedom of speech is taken away, then dumb and silent, we may be led to the slaughter.

- George Washington

We received many stats this past week and words from "Helicopter" Ben of the Fed. The stats were the cement and Bernanke layed the bricks as the S&P crossed another milestone at 1700. If one didn't know better, it is all good. Dear reader, I know better and although it appears that deep pockets are winning, the game ain't over until its over. Thank you, Professor Yogi.
Hosing prices are rising. This creates jobs and it has many trickle down affects to the national economy like your new home may need appliances, carpet, nick-knacks, whatever. Commissions for real estate agents. Home insurance sales. Tax revenues for cities and states. Everyone gets a piece of the action. The BLS says GDP grew at a surprising 1.7%. Gotta love the way that they release the stats. I would be smiling except it is another lie that our government presents to the nation.
GDP Is Manipulated!
Going back to the fourth quarter of 2012, the BLS first said GDP was negative. The market paused. It waited for the revised number, which came in at 1%. Go figure?  The doubts get extended when the first quarter is released. GDP came in at 1.8%. We're growing! Lies! How do I know? Well, when they released their numbers last week, they added a revised number to the previous stat which translates to this: GDP only grew at 1.1% in the first quarter because .7% growth was misplaced into the first quarter, when it should've been in the second quarter. See. They manipulate positive news which pushes up the market. They get a positive market response with the big jump from a negative to a positive and now, they double dip the positive news by using the same growth twice. What about the other positive stats on the economy like housing and car sales? Glad you asked.
US Car Sales
were selling at a 2.7m clip a year in 2012 and that was up from 1.7m in 2011. Now, they are up to 3.27m in 2013. Great! I'm happy for Detroit. It needs some good news, however one needs to look at all angles to understand the picture. Inventory. How many cars on lots and for how long gives the true aspect into the health of the auto industry. Keep in mind there are 100m cars in the US that are in the 7 to 12 year old range. People need to replace their vehicles and low interest rates are helping sales. This is the confluence point. Interest rates are climbing and higher rates means less expendable money after the purchase. This will hurt other industries within the economy. Not good. Rising gas prices don't help either. Further, inventory is climbing too. It has gone from under two months on the lot to now 71 days, but the problem is this: the 2014s are coming and that means lower margins or unsold inventory for 2013s. An inflection point is coming in September that could hurt the recovery in auto sales.
prices are up over 12% this year and over 24% in the past three years. This is great except rising interest rates effect housing more than any other industry. Consider the trend and correlate this into it. In June housing starts dropped 9.9% and yet, home builders were saying that they lost sales because they lacked inventory. Liars! How do I know? Because new permits are down 7.5%. Construction spending is down .6% and pending sales are down .4%. Mortgage applications are down three weeks in a row. They know before you do. Add this little tidbit to the game. Blackstone and Fortress, the two biggest home buyers declared that they are now selling!
this info is the most manipulated of all the stats. Consider dear reader, what you read above about GDP. When the jobs number is released, the market responds. The numbers were all good which has kept the rally in the market. Lies! Two months ago it was reported that there were 195K jobs when in fact, there was only 176k jobs. Last month it was reported that another 195k jobs were created when it was only 188k. 26,000 jobs that didn't exist and yet, unemployment is down Go figure?! Consider what the Hamilton Project estimated about jobs and unemployment in our economy. They figure when you add population growth and people passing, and using a growth number of 208k per month, it will take us into the year 2026 to reach the level of employment that we had in 2007. By the way, we are not averaging 208k per month. I would add at this time that an iconic brand will seek bankruptcy at the end of this month. I would name it except that I am afraid that they will sue me. If you think that you would like a second opinion, I have it for you from two great past professors whose voice is gone, but not forgotten. Bud Abbot and Lou Costello on unemployment. (I will use today's numbers.)
Bud: Unemployment is 7.4%
Lou: That's a lot of people out of work.
Bud: No! 14.7% are out of work.
Lou: You just said, 7.4%
Bud: 7.4% unemployed.
Lou: Right, 7.4% out of work.
Bud: No! that's 14.7%.
Lou: Wait a minute! Is it 7.4% or 14.7%?
Bud: 7.4% are unemployed and 14.7% are out of work.
Lou: If you are out of work, you are unemployed.
Bud: No! Congress said you can't count the "out of work" unemployed because you have to look for work.
Lou: But you are out of work!
Bud: No! You miss the point.
Lou: What point?
Bud: Someone who doesn't look for work can't be counted with those who look for work. It wouldn't be fair.
Lou: For whom?
Bud: the unemployed.
Lou: but they're all out of work!
Bud: No. The unemployed are actively looking while the others gave up looking.
Lou: So, if you're off the unemployment rolls that would count as less unemployment.
Bud: Absolutely!
Lou: The unemployment goes down because you don't look for work.
Bud: Absolutely. Otherwise, it would be 14.7%. Our government does not want you to read about 14.7%.
Lou: That would be tough running for reelection.
Bud: Absolutely.
Lou: That means there are two ways to bring down unemployment.
Bud: Two ways - correct.
Lou: Unemployment can go down if someone finds a job.
Bud: Correct.
Lou:  Unemployment can also go down if you stop looking.
Bud: Bingo!
Lou: Of the two ways, the easier choice is to stop looking.
Bud: You are becoming an Economist.
Lou: I don't even know what the hell I said.
Bud: Now, you're thinking like Congress.
Liars and Crooks: Goes to Congress who are out of touch with the people, especially with incomes. Our lawmakers take advantage of their position to get inside information about products and corporations before the public. They use this info to get rich. There are no middle class or poor lawmakers. Congress members can see stock info on their "docket." If rules are passed that can help a company, they buy before anyone else knows. They also steer their committees to favor projects that can effect stock prices. Nothing like knowing the final score before the game is even played.