Consumers are still in full-on saving mode according to the latest Fed data on consumer credit:
Reuters: Total U.S. consumer credit dropped by a bigger-than-expected $14.80 billion in September, Federal Reserve data showed on Friday, indicating households prefer to reduce debt and are still reluctant to spend.
September consumer credit outstanding fell at a 7.19 percent annual rate to $2.46 trillion. August’s figures were revised to show a $9.86 billion drop, previously reported as a $12 billion fall.
Given the massive consumer bubble we’ve come off of, maybe some old fashioned debt reduction is still in order. Yet the trend definitely looks rough. Feel free to check out the full release below.
William D. Cohan profiles Larry Summers in the December issue of Vanity Fair and confirms what we’ve long known: the star economic counselor has been his own worst enemy.
The whole thing is worth a read, but here are some highlights:
Iris Mack, a former derivatives specialist at the Harvard Management Company (responsible for investing Harvard’s endowment) claims that a betrayal by Summers lead to her termination. “I would say that there is 99.9999999999999999 percent probability that Summers had a hand in my departure,” she wrote Cohan in an e-mail. (Summers replies he had nothing to do with Mack’s firing and could not have, because she did not work for or report to him. “[Mack’s] allegations were the subject of thorough internal and external reviews and found to be without merit,” says a Harvard spokesman.)
Long-time critic Cornel West tells Cohan: “I think that both as Harvard president and now as head of the National Economic Council that with Summers you have this tension between braininess and a certain lack of long-term vision…and I really believe we need some long-term vision right now. The smartness and the brilliance, on the one hand, is fine, but I feel like you also have to treat others with a courtesy or a civility or even a decency at times.”“
Larry has not had the jobs he’s had because he’s misunderstood,” Treasury Secretary Tim Geithner tells Cohan. “He’s had them because some of the best leaders in our country understand quite well how much he has to offer.”
Robert Rubin agrees, telling Cohan that “what [Obama] saw in Larry is what so many people have seen in Larry: not just a very bright guy, but a guy who sees many different dimensions of issues, sees the competing points of view… will keep sort of relentlessly searching to see if there’s some better way of looking at something.”
As I said on Larry Kudlow’s CNBC show Wednesday night, the big issue in the US economy is the massacre of small business. That’s why the household survey shows that 558,000 Americans “became unemployed” during October, while the establishment survey of payrolls shows a decline of only 190,000 jobs. The establishment data, which are collected from larger businesses, are more reliable; the household survey is based on telephone interviews with randomly-selected households. But the numbers are so large as to make clear that small businesses are shutting down.
The melt up in stocks on no volume was fully expected after the worst possible employment news to come in over 20 years: the market-economy disconnect is now complete, and all stocks are freeriding purely on Bernanke’s printing press. At least gold vigilantes are beginning to whisper in Bernanke’s ear he can go fornicate himself and his dollar destruction deathwish: let’s see what happens when gold melts up ala the S&P to 1,200, 1,300 and maybe 1,500 in a few short weeks: can you spell panic at the Fed? Also next up: failed auctions, the only question is when and by whom…Oh wait, those never happen right… yeah, until they do.
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“Research In Motion Ltd. (RIMM) will spend up to $1.2 billion to buy back about 21 million of its shares, or 3.6% of its total shares outstanding. The buyback will start Nov. 9 and last for up to one year.”
That was the headline news today on Research in Motion symbol RIMM so I decided to look at the chart to see what was going on in the “real world”. When I got to the chart, one thing immediately jumped out at me and that was the negative action that this market has shown in the past several weeks. Looking at this market a little closer I was able to see that our “Trade Triangle” technology was 100% negative and that our monthly “Trade Triangle” indicator had turned negative on October 28th at $63.38. This is a major negative in my mind for this market. Click The Chart to view the video below
We have come a long way since early March of this year. After bottoming at 666, the SP 500 Index has rallied as high as 1101 at its recent peak pricing. I wrote about the market bottoming and my outline for a bull rally prediction back in late February. My targets at the time were 10,400 on the Dow and 1140 on the SP 500 index. Since we came within 3% of those targets, I believe the next leg for the market is a corrective movement to the downside. The bounce up that we are getting now is likely temporary, and will be followed by another bout of selling. My methodology uses a confluence of factors to determine direction and price targets. A combination of Elliott Wave Theory, sentiment indicators, technical analysis patterns, and cyclical movements. We are looking for the SP 500 to pullback into the 840-880 ranges before a significant pivot bottom, and are moving our trading positions from very bullish and aggressive to defensive. I continue to favor the gold stocks on a strong pullback to accumulate for a five year bull market that began in early August of this year.
To wit, the SP 500 has retraced a normal A B C pattern to the upside following a cataclysmic 5 wave pattern from October 2007 to March of 2009. The 8 month rally is roughly 50% of the 17 months of decline that preceded it into early March. With the sentiment readings back at very high bullish levels, many small cap stocks rolling over, and leadership spread amongst fewer and fewer equities, it is time for a corrective decline. We see this bounce ending shortly to the upside, followed by another bout of selling.
Active Trading Small Cap Stocks
Our advice is to maintain higher than normal cash positions at this time, accumulate Gold on large dips, and wade into Gold Stocks on a big drop as well. We also plan to recommend the occasional use of Bear ETF’s for defense and insurance on our portfolios.
The Big Zero promised that the unemployment would go down, but said recently that “this will be a jobless recovery…” These politicians are “rich in BS…” There is no recovery and no jobs. Anyway, that number soared to 17.5% from 17% last month. That’s a huge month-over-month jump.
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The unemployment rate rose from 9.8 to 10.2 percent in October, and nonfarm payroll employment continued to decline (-190,000), the U.S. Bureau of Labor Statistics reported today. The largest job losses over the month were in construction, manufacturing, and retail trade.
Click on graph for larger image.
This graph shows the unemployment rate and the year over year change in employment vs. recessions.
Nonfarm payrolls decreased by 190,000 in October. The economy has lost almost 5.5 million jobs over the last year, and 7.3 million jobs1 during the 22 consecutive months of job losses.
The unemployment rate increased to 10.2 percent. This is the highest unemployment rate in 26 years.
Year over year employment is strongly negative.
The second graph shows the job losses from the start of the employment recession, in percentage terms (as opposed to the number of jobs lost).
For the current recession, employment peaked in December 2007, and this recession was a slow starter (in terms of job losses and declines in GDP).
However job losses have really picked up earlier this year, and the current recession is the worst recession since WWII in percentage terms, and 2nd worst in terms of the unemployment rate (only early ’80s recession with a peak of 10.8 percent was worse).
The economy is still losing jobs at about a 2.2 million annual rate, and the unemployment rate is finally above 10%. This is a very weak employment report – just not as bad as earlier this year. Much more to come …
1Note: The total jobs lost does not include the preliminary benchmark payroll revision of minus 824,000 jobs. (This is the preliminary estimate of the annual revision that will be announced early in 2010).
In our last video on the S&P 500 (10/27), we indicated that this market may have topped out for the year. Today’s action puts in place a weekly “Trade Triangle” which indicates that a temporary or a permanent top is now in place for this market. Watch the video below
It’s no wonder that gold is soaring with the US, UK, and China all printing money like mad. Throw enough money around and gold is bound to rise regardless of anything else that might happen (all of it bad).Please consider the latest insanity in the UK: BOE May Expand Bond Plan as Officials ‘Throw Money’ at Economy.
The Bank of England may increase its bond-purchase plan by 50 billion pounds ($83 billion) today as central bankers and politicians scramble to shore up Britain’s banking system and drag the economy out of recession.
Governor Mervyn King’s nine-member Monetary Policy Committee will expand the asset-buying program to 225 billion pounds at 12 p.m. in London, the median of 48 forecasts in a Bloomberg News survey shows. That follows Prime Minister Gordon Brown’s pledge this week to spend almost 40 billion pounds in a second bailout of two the nation’s biggest banks.
Any increase in the Bank of England’s emergency program would be the third since King unveiled the plan in March. Brown’s first bank bailout, the government’s fiscal stimulus measures and an injection of 175 billion pounds in newly printed central bank money have so far failed to end Britain’s longest recession on record.
“They’ve got to throw money at it,” said Neil Mackinnon, an economist at VTB Capital Plc and a former U.K. Treasury official. “The fact of the matter is that the U.K. economy is lagging behind. As to whether quantitative easing is working, the jury is still out.”
Quantitative Easing History Lesson
Mackinnon does not know if the strategy is working yet still insists “They’ve got to throw money at it.”
Neil Mackinnon is in dire need of a history lesson. Quantitative Easing was a spectacular failure in Japan, it will prove to be a spectacular failure in the UK as well. For more on the lesson of Japan, please see Is Debt-Deflation Just Beginning?
However, this should not take a history lesson. Common sense alone says you cannot cure a debt problem by throwing still more money at problems hoping something will stick.
It is impossible to have a sustainable recovery based on loose money policies. The global housing bubble should be proof enough of that.
