Your weekly Lupus
Originally posted on Le blog A Lupus un regard hagard sur Lécocomics et ses finances:
La crise qui arrive…pour les nuls – Delamarche, Jovanovic, Herlin, Feron poloni
Despite a strong February on the markets, indices soaring to new highs, economic fundamentals are not responding to the overwhelming optimism. Nearly 6 years into the crisis, overall growth is still for the 1% involved in the stock market, while the real economy takes a hit after another, disguised in an optimist rhetoric.
Maybe optimists need to incorporate in their analysis and projections that we live in an interconnected world. If the Russian stock market takes a hit, other markets might benefit from a short-term spillover effect of scared investors. This however is offset by the damage to trade relations a wounded Russia might represent to the global economy. Some on Wall Street might see the turbulence in emerging markets as beneficial to their short-term interests, but in a time of deep, chronic recessions, no one needs major economies competing in economic warfare.
What the data says
The data wasn’t that of the famous recovering US economy the consensus is talking about and President Obama is selling as his major achievement. After 6 years, and after all the monetary injections and stimuli plans applied to the suffering US economy, 2.5% GDP trend over the year is the best the world’s economic giant can do.
Data from the Bureau of Economic Analysis out Friday shows that real GDP — which measures output produced in the United States — grew at an annual rate of 2.4% in the fourth quarter of 2013. The second estimate is down 80 basis points from the 3.2% advance estimate BEA put out in January. The figure shows fourth quarter growth relative to the third quarter, when real GDP increased 4.1%.
The BEA presented the following as explanations for the deceiving GDP figure they presented
The deceleration in real GDP growth in the fourth quarter reflected a deceleration in private inventory investment, a larger decrease in federal government spending, and downturns in residential fixed investment and in state and local government spending that were partly offset by accelerations in exports, in PCE, and in nonresidential fixed investment and a deceleration in imports.
Analysts welcomed the news as encouraging despite the sluggish fourth quarter figures. The momentum continued existing for consensus analysts, it however has suffered from the bad weather…
Jim O’Sullivan, chief U.S. economist at High Frequency Economics, pointed out that the results were close to the 2.5% consensus. “While 2.4% is fairly sluggish,” he wrote, “it was despite more adverse than usual weather at the end of the quarter and the government shutdown at the start. The shutdown directly subtracted 0.3 points from the growth rate through the government spending component, but there were likely other effects as well.”
So after finding the ideal scapegoat, the weather, now mainstream analysts are bragging that they expected the slowdown, and interpreted the technically “bad news” as an optimist overall situation. The weather argument however can be definitely dismissed, so anyone telling you that growth is not showing up because its afraid of ice cold temperatures, tell him to get his facts straight.
And there you have it: all services, in fact, in January US consumers spent a record amount of $72 billion on services. So, the Service Recovery, if not so much Goods. It appears the weather was so harsh and horrible it led to… the largest spending on services in history!Of course, nobody will mention this as it is a favorable benefit from the weather: remember the propaganda only identifies the negative data and scapegoats it with snow in the winter.
So if you break down the spending and GDP data, you will get the bizarre impression that the weather did more good than bad to the overall economy. Some even underlines the fact that housing data contradicted the bad weather argument.
On 26 February, the US census bureau (part of the US department of commerce) released the “seasonally adjusted annual rate” of sale of new homes in the US. This piece of data is also called “new home sales”. On a seasonally adjusted basis, sale of new homes rose 9.6% in January from December—a big number for a month-on-month change. The annual change from January 2013 was a rather modest 2.1%.This piece of data—sale of new homes in January—is at odds with the confidence plunge seen in the monthly data on the Housing Market Index (HMI). HMI measures confidence among homebuilders. It is published every month by the National Association of Home Builders (NAHB). It plunged from 56 in January to 46 in February.Cold weather—spate of severe snow storms, arctic freeze, etc.,—is claimed to have affected their confidence. That does not sound very persuasive. If the traffic of homebuyers is good—that is, those who wish to or enter into contracts to buy new homes—then homebuilders should not lose their confidence because of bad weather.
To resume, bad weather has had several effects, as mentioned in my previous post, but does not come close to explaining the missing growth the US economy is not accounting for.
Then why is the weather only used as an excuse to offset negative parts of the overall macro image of the US economy?
All news is good news
Keeping in mind February was a record month for the stock market, and not so much for the real economy, why is everyone cheering?
As Peter Schiff puts it, heads we win, tails we win! The equity and bonds markets are in the sort of situation here where good news means more profits, and bad news means the Fed continues monetary injections, a win-win situation!
Growth figures are not performing well, emerging markets are in turmoil, weather is not helping, Ukraine and Russia at the brink of war, and how does the market react?
It soars! See what I mean when I point out the disconnection between the real economy and the 1%’s territory, the bull market? Here is the analysis of the excellent Zero Hedge.
With the Ukraine now openly appealing to the world to halt what in its own words is a Russian invasion, it only made sense that after the bigger than expected downward revision to Q4 GDP, and the miss in Pending Home Sales, that the S&P would close at a new all time high. Oh, there was that surge in the Chicago PMI which confirmed that the February weakness across all other data was not due to the weather, and which is all that the market decided to focus on.
And so once again, the fact that it was 3:30 pm at the end of the day – easily the most “fundamental” driver of stock valuation in the past five 5 years – overruled all bad news, or is it good news? The VIX was, as usual, slammed into the close in a mirror image of the last hour ramp”
It is confusing what the catalyst for stock surges any more is – is bad good news great, or is good news greater – aside from the Fed’s relentless growing balance sheet of course.
We are at a loss what else to highlight here: maybe the fact that despite the sheer euphoric idiocy the Nasdaq did finally closer lower.
You cannot master a market that is so critically dependent on a central authority for survival, similar to the global disconnected bull market we are witnessing. At most you can observe it and hope that at a certain point the real economy will start benefiting from all the money printed around. Every year drifted away from the stimulus makes the chances of witnessing a credible recovery dim, and the chances of a crash beginning 2015 in certain bubbly markets to match the real economy’s status more and more plausible.
Illusion of a recovery
The recovery has not produced the effects that are supposed to show after a historic stimulus plan.
The U.S. recovery from the Great Recession is still one of the worst recoveries in history (see red line at right).
With so much public funds engaged yielding results so weak, the positive consensual rhetoric joins market exuberance in masking a sad reality: the economy will never recover, at least not like the world knew it. And instead of facing the public with this difficult reality, politicians everywhere are just buying time, hoping to find magical solutions to fundamental economic problems.
As Robert Blumen puts it,
Mainstream media discussion of the macro economic picture goes something like this: “When there is a recession, the Fed should stimulate. We know from history the recovery comes about 12-18 months after stimulus. We stimulated, we printed a lot of money, we waited 18 months. So the economy ipso facto has recovered. Or it’s just about to recover, any time now.”
Links and videos
What this shows is that, while you can fund a new venture with money printing, you cannot print skilled workers or office space. At some point, real factors become the bottleneck, so their price has to rise. And when that happens, some producers get squeezed out because they cannot raise prices. If they over-estimated demand for their output from the start, they would have needed lower, not higher, costs to make profits. And that is the start of the recession.
The paper by Michael Feroli, Anil Kashyap, Kermit Schoenholtz and Hyun Song Shin presented at the Monetary Policy Forum in New York on Friday argued that you don’t need complex financial instruments — like we had in the 2008 crisis — to cause a panic. Rather, panics can occur when good ol’ money managers get caught in a herd mentality.
The economists argue say that as the Fed continues to taper this year and prepares to hike rates, likely in late 2015, the end of easy money could set off another panic. “Stimulus is not a free lunch, and it comes with a potential for macroeconomic disruptions when the policy is lifted,” they write.
Great case study
Originally posted on TechCrunch:
So how did the startup, with absolutely no marketing spend and no formal PR representation, pull in so many downloads out of nowhere?
It’s all about timing.
For one, Ryan Orbuch is a hound. He’s a smart kid who built a pretty app, and as a high schooler himself he truly understands his target demographic.
But he’s also one of the last people I want to receive a text, email, or DM from. Not because he isn’t nice, or because I don’t like Finish, or because he’s done anything wrong. In fact, he’s done most things right — the kid won an Apple Design Award at 17!
But he can’t…
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Originally posted on Olivier Demeulenaere - Regards sur l'économie:
(Eric Zemmour, RTL, 25 février 2014)
Politique Friction du Lundi 24 Février 2014: Hollande l’incohérent, la France incohérente, la France étouffée, asphyxiée!!!
Your weekly Lupus post
Originally posted on Le blog A Lupus un regard hagard sur Lécocomics et ses finances:
L’article qui raille Hollande le synthétique, Hollande le caméléon ou Hollande qui retourne sa veste avant d’enlever le pantalon, n’est pas un article sur la personne. Nous utilisons le procédé qui consiste à personnaliser, à donner incarnation pour montrer d’abord et faire comprendre ensuite.
La dérision n’est pas faite pour rester au niveau de Hollande, elle est faite pour glisser, et passer au niveau du pays tout entier.
Ce qui est en filigrane dans cette charge contre Hollande qui cherche à concilier les contraires et à changer de paletot selon les circonstances et les publics, c’est l’incohérence.
C’est le mal français.
Si nous avions fait un article d’idées, montrant que ce qui est en cause, c’est la question de la cohérence, personne ne nous aurait suivi,…
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Nearly every news diffused in the financial community is analysed, broken down, analysed again, till a consensus around its significance is reached. The consensus usually tells you if the news is good or bad. You don’t need to know why, you just listen to the professionals. But if by any chance the news is bad, the good old weather is here to punish for the disastrous damage it is doing to our policy and well-being. Shame on you weather!
The U.S Commerce department is publishing its GDP revision in a report that will be scrutinized by the whole business community. Overall expectation by economists is that the report will be good-looking. Good looking only. If you crunch the numbers a lot of indicators portray a gloomy picture, bad job data, excessive stocking inventories by american companies, overall destruction of wealth in the economy, and I can continue like that till Friday.
However, when you observe the disconnection of the growth of equity, the rallies on the S&P500, the CAC40 reaching record highs, Tokyo expected to have a record year, with the overall bad shape the real economy is in, you can assert something is wrong. I mean the economics community is quasi unanimous that GDP is an imperfect indicator, disregarding a lot of what needs to be observed in a healthy economy. To resume, it’s not all about growth. The fuss around a positive GDP is weird to say the least.
The two economic data releases that U.S markets follow most closely—the monthly jobs report and quarterly GDP report—don’t actually tell us much about how the economy is doing, according to a new analysis by Goldman Sachs.
Especially when you already have an excuse if your genius explanation that the economy is recovering is contradicted by the data; It’s the weather’s fault!
Forget the data, faith is enough
I spotted these two articles on the Business Insider.
In one of them, a senior Moody’s economist is assuring you that everything is going on fine in the U.S economy today. Another where the weather, as an excuse to justify bad figures at the beginning of the year, takes a blow. Notice the call for optimism:
“The slowdown is testing everyone’s optimism about the economy, but so far it’s just a soft patch. The economy will regain strength,” said Ryan Sweet, a senior economist at Moody’s Analytics in West Chester Pennsylvania. “Outside housing, we don’t believe the recent data signal a change in fundamentals.”
You need to believe. Believe that the economy will regain strength, believe that the data don’t signal a change in fundamentals. Millions of people left the workforce, but don’t worry, fundamentals where always there and will continue throughout 2014. And if they don’ t, the historic wave of cold that struck the US at the beginning of the year might do the job as a valid excuse!
“Weather can … affect the economic data when it departs significantly from seasonal norms,” said David Mericle, an economist at Goldman Sachs in New York. “February looks likely to be the harshest month of all this winter, suggesting the worst might be yet to come.”
And notice that the excuse goes on till February! If we get good figures in February, we can say, oh, despite the bad weather, the economy was rolling. If bad figures fall down on us, then we have the weather punching ball.
The weather’s real impact
As much as the weather can affect an economy, the numbers where not good at the first place to talk of a negative effect.
First-quarter GDP growth estimates are currently pegged at or below a 2 percent annual rate, but weather is only part of the story. In addition to housing, consumer spending was also already ebbing late last year.
Not only were retail sales in November and December not as strong as had been thought, export growth has been less stellar as well. Many economists now anticipate the fourth-quarter’s 3.2 percent growth pace will be cut to about a 2.5 percent rate when the government revises the data on Friday.
Other factors restraining growth, which economists had already factored into their estimates, include unsustainable high inventories, the end of jobless benefits for more than 1 million people in December, and cuts to food stamps.
Additionally, the areas that should have most suffered from the weather didn’t actually, so?
Housing starts cratered 16% month-over-month in January. Pantheon’s Ian Shepherdson wrote clients that these were “horrible numbers but they have to be seen in the context of the severe weather… That said, December was snowier than usual but starts were strong, so the weather perhaps is note the only source of Jan weakness.”
But as we pointed out, the Northeast — an area that should have been impacted by the bad weather — actually saw a major spike in housing starts.
The point is, it’s really hard to say just how much impact the weather has had on these reports.
To add to the whole picture, the U.S economy took a hit from slow Japanese and Chinese economies.
On top of all this, China’s manufacturing conditions fell to a seven-month low and Japanese exports came in lower than expected. You would think neither of those would have much to do with American weather, but they can of course prove a drag on American markets.
Scapegoats are easy to find when we are trying to find any excuse to hide from plain reality. How much the weather affected the U.S economy is unknown. However it is a detail. A detail that hides the sad truth that the U.S economy is not doing better, and the recovery praised by media and mainstream consensus and the financial community is just nonexistent for anyone looking honestly at the numbers. Not at the weather.
Enjoy some links on the Friday report and Weather and economics!
Originally posted on Quartz:
Unlike Google, Facebook, and Twitter—all generally blocked by the country’s government—LinkedIn has a growing presence in China. It has already quietly amassed four million users in the country. The new Chinese-language site aims to broaden its reach in a market with some 140 million professionals. The company has also established a joint venture with venture capital funds Sequoia China and CBC (China Broadband Capital) to further that aim.
“Our mission is to connect the world’s professionals and create greater economic opportunity—and this is a significant step towards achieving that goal,” Derek Shen, LinkedIn’s president of China, wrote in a blog post.
While native services like Sina Weibo, WeChat, and Baidu have massive…
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