Economy

Economy Like a 'Drunk That Keeps Drinking': Langone from http://www.cnbc.com/id/38837177

Langone also dismissed growing worries that the United States will slide into a second recession—chiefly because the banker doesn't believe the U.S. economy ever really recovered.

"It's not a double-dip—we never came out of it," Langone said. "We were artificially propped up."

This is part of the "New Normal" that is talked about in business circles. We are still in recession mode and it will continue for quite some time. In addition, our lack of constructive fixes will postpone the recession even farther. Welcome to the "New Normal" and it isn't pretty!

(c) 2010 - Jim Lindell

Understand the Economy for yourself. Don’t be over-reliant on the good opinion of other people. Many individuals are unaware of the free resources that are available to track economic trends. One of the best tools comes from the Federal Reserve at http://www.federalreserve.gov/releases/g17/ipdisk/alltables.txt

The page shows the industrial production by industry for both seasonal and non-adjusted data. In essence, if you want to track a particular industry, there is no need to wait to read the information in a newspaper or a blog. Get the information for yourself and make your own interpretation. For example, the ship and boat building industry data (not seasonally adjusted) is presented as of July 2010 from the link previously referred to. Each of the columns represents monthly data. The data is also listed as IPS – Industrial Production Seasonally Adjusted or IPN - Industrial Production Not Seasonally Adjusted. The following information then is not seasonally adjusted. (Note: The series in the data is: Series ID, Year, Jan - Dec)

G3366: Ship and boat building boat building NAICS= 3366
IPN.G3366 1998 77.7154 76.4769 77.4417 73.0003 78.4545 77.2793 79.2277 79.9203 77.7161 83.1318 83.3754 85.0114
IPN.G3366 1999 81.2649 83.0248 84.2262 79.4988 80.0477 80.2212 79.1561 87.1829 86.567 86.5657 87.876 91.0407
IPN.G3366 2000 87.5872 90.1602 90.6017 89.0554 86.1863 87.6935 86.631 84.7939 79.8662 82.7261 86.2213 85.5277
IPN.G3366 2001 84.4292 80.6533 85.8832 81.4089 83.0756 82.7078 81.6635 78.0686 80.8324 82.0314 85.0271 86.2545
IPN.G3366 2002 86.5545 84.4315 91.5064 90.9403 93.6875 95.4739 83.8494 89.2274 95.6293 94.3411 91.5129 94.8692
IPN.G3366 2003 91.3116 90.6367 96.6679 92.4623 93.9838 95.8826 84.7913 91.7654 96.7991 95.0387 94.4247 92.2472
IPN.G3366 2004 92.0228 94.1356 104.9366 99.0401 98.7157 96.7238 86.1078 91.8224 96.2436 94.6853 90.7968 91.0349
IPN.G3366 2005 91.8575 96.3021 106.8692 103.1725 100.7357 99.1634 84.572 90.6338 84.0774 91.4369 90.2713 95.5123
IPN.G3366 2006 95.6029 93.4566 104.0523 95.1993 96.4354 100.6408 85.1382 87.9755 94.6969 92.6844 89.7758 95.5011
IPN.G3366 2007 97.0109 92.9683 96.9511 97.1001 101.4735 107.5809 92.3686 96.3188 105.7243 103.0968 102.5471 106.8595
IPN.G3366 2008 108.5889 107.712 112.3035 110.8724 105.2275 112.7792 97.1203 100.4989 97.2664 98.9122 92.4011 91.1939
IPN.G3366 2009 84.9463 78.9674 82.4338 77.0116 83.7825 90.1609 87.2618 90.0689 85.3314 77.3386 77.2099 78.595
IPN.G3366 2010 83.0853 83.7035 90.8107 90.9836 93.3699 92.5587 82.0928

If we were to graph out the data, our chart would look like the following:

It is easy to spot trends in the ship and boat building industry. Unfortunately, there does not appear to be a significantly favorable trend and this industry will continue to experience difficult times. This observation also seems to parallel the other general economic evidence that the economy is not turning around.

This same analysis can be prepared for any industry and should be a regular component of an organization’s competitive intelligence gathering.

© 2010 – Jim Lindell

You think someone might remember that we are in tough economic times!

GM, Ford and Chrysler Sales All Lag Estimates
By Tim Higgins and David Welch - Aug 3, 2010
GM July Sales Rise 5.4%, Trailing Analysts’ Estimates

Aug. 3 (Bloomberg) -- ... Ford reported U.S. sales in July that trailed analysts’ estimates as consumers concerned about the economy limited large purchases. Ford's adjusted sales fell 0.7 percent, trailing analysts’ estimates for a 10 percent gain. Its total sales climbed 3.1 percent. (Source: Bloomberg)

Why do I believe that we are sitting on top of a house of cards? Consider the following lunacy:

Excerpt from: http://www.nytimes.com/2010/06/12/nyregion/12pension.html
ALBANY — Gov. David A. Paterson and legislative leaders have tentatively agreed to allow the state and municipalities to borrow nearly $6 billion to help them make their required annual payments to the state pension fund.

And, in classic budgetary sleight-of-hand, they will borrow the money to make the payments to the pension fund — from the same pension fund.

New York Plan Makes Fund Both Borrower and Lender
By DANNY HAKIM
Published: June 11, 2010

We do not have the courage to deal with current problems. We continually pass them off to a later date. Since we do not have the funds to pay for our expenses now, we believe that the problem will magically fix itself at a later date - unmitigated BS.

(c) 2010 Jim Lindell

From the Rasmussen Reports

Most Americans have “come to believe that the political system is broken, that most politicians are corrupt, and that neither major political party has the answers,” observes Scott Rasmussen. Just 27% believe Congress knows what it’s doing when it comes to the economy and 41% say that a group of people randomly selected from the phone book would do a better job than the current Congress. In his new book, Scott adds, “Some of us are ready to give up and some of us are ready to scream a little louder. But all of us believe we can do better.”

http://www.rasmussenreports.com/public_content/politics/obama_administration/daily_presidential_tracking_poll

Wayne Allen Root Perspective 5/23/2010
http://www.lvrj.com/opinion/america-faces-a-big--fat-greek-style-bankruptcy-94686509.html

The solution to save America from economic Armageddon? Simple. Use the same "austerity measures" imposed upon Greece, in return for this $145 billion loan, to dramatically cut spending on government employees:

-- Freeze government hiring for the next three years.

-- Eliminate bonuses and raises for the foreseeable future.

-- Institute layoffs and across the board wage cuts. Why should government employees enjoy "privileged status" that no employee in the private sector enjoys?

-- Change pensions from "defined benefit" to "defined contribution" pension plans, meaning retirees receive only what has been built up in their 401K type retirement accounts.

-- Raise the retirement age. In Greece it is going from age 53 to 67. Gold-plated pension plans are the single biggest factor that bankrupted Greece. The same problem bankrupted U.S. automakers GM and Chrysler.

-- Require government employees to pay more of their health care (through co-pays and deductibles).

-- Change the way pensions are calculated by eliminating overtime and raises in the last years of employment to "game the system."

Hat tip to http://thecynicaleconomist.com/ "The Cynical Economist.com"

Unbelievable. This clip is only 36 seconds but it is a must listen. Pelosi encourages musicians and writers to pursue their passion and to not worry about holding a job just to obtain health care coverage. The taxpayers will pay for them. This is an example of why our country is rudderless. Every citizen has a passion, be it sewing, cooking, softball, etc. Good, hardworking people should not have to cover the health care cost of able bodied people.

On the other hand, let's elect musicians and artists to congress. They will be more creative, they will be concerned for the entire country and they will give better performances than the lot that reside there now.

California wake up and elect someone worthy of being in congress.

Questions
If someone is an alcoholic – do you give them another bottle?
If someone is a drug addict – do you give them their favorite drug?
If someone is overweight – do you give them candy?
If someone can’t live within their budget – do you give them more money?
If someone is in debt over their head – do you give them more debt?

Comments

We have given money to companies that were too big to fail.

We have increased the size of government when private corporations have been forced to cutback on employees and expenditures.

We have increased national debt to a point that recovery may be impossible.

We have forgotten that value is created in the private sector not the government sector. The government sector exists to do one thing only and that is to serve the taxpayer – not the other way around.

We have unemployment (U-6) approaching 20% and some would suggest in excess of 20%. We have hired people in non-value adding jobs (many of them in the public sector) which are only temporary support to the overall economy.

Solutions
We need new solutions to old problems:
1. No tax increases – period.
2. Current level of government at all levels must be reduced by 10%.
3. Government expenditures must be limited as a % of GDP (% never to be increased or GDP never to be gamed).
4. Congress must be subject to any legislation that they pass for the taxpayers (pensions, social security, healthcare, etc.)
5. Lean processes must be implemented across all levels of government.

© 2010 – Jim Lindell

NBER Says ‘Premature’ to Declare End of Recession in U.S.

By Tim Homan

April 12 (Bloomberg) -- The committee responsible for determining when U.S. recessions begin and end said it’s “premature” to declare an end to the current slump, which it reaffirmed begain in December 2007.

“Although most indicators have turned up, the committee decided that the determination of the trough date on the basis of current data would be premature,” the Business Cycle Dating Committee of the National Bureau of Economic Research said in a statement.

To contact the reporter on this story: Timothy Homan in Washington at thoman1@bloomberg.net
Last Updated: April 12, 2010 07:50 EDT
(Source: http://www.bloomberg.com/apps/news?pid=20601087&sid=aQgDSuxGlHgU&pos=6)

The good news is that rail traffic is beginning to rebound. The bad news is that everyone is comparing to 2009 which was an abysmal year. In the attached image (based on the reports from the AAR.ORG), note the underlined columns in red. When you compare 2010 to 2009, the increase is obvious. However, compare 2010 to 2008 and there is still a significant decrease from the 2008 levels. With unemployment expected to get worse, it will be difficult for us to have a sustained recovery. There is also a strong probability that credit tightening will further dampen recovery efforts (let alone the inevitable tax increases).

(c) 2010 Jim Lindell

I post the following chart of the historical daily volume of the the ETF QQQQ's. The "pink" line represents the 3/30/2010 daily volume extended across the entire time-frame. My concern is that the current economic environment is playing havoc with normally functioning markets.

What is the ramification? I do not claim any type of investment expertise, but it appears that the run up may have run out. The wild economy continues - hang on!

© 2010 - Jim Lindell

I love cats. They are fun creatures to watch and play with. I am amazed at how they can hang on the edge of a table and seem oblivious to falling off. Even when they roll around and find themselves slipping off the edge, they have an innate ability to "right themselves" and land on their paws.

In many respects it's similar to our economy. Our country is rolling around on the edge of a recession. The government seems oblivious to the danger, and from many critic's perspectives, continues to do the wrong things. The fear is that our country is going to roll off the edge. I wonder if our government is as nimble as a cat and has the ability to land on its feet?

The cat also has one other gift - nine lives. With all of the missteps and overspending, I wonder how many of its' original 9 lives our country has left?

Copyright 2010 - Jim Lindell

Have you read "The Incredible Journey" or seen the movie? The plot from wikipedia follows:

(Source: http://en.wikipedia.org/wiki/The_Incredible_Journey)
The animals' owners, the Hunters, leave for England for university lectures and so entrust the animals to John Longridge, a family friend and godfather of the young daughter, Elizabeth. One fateful day, after John Longridge leaves for a 2 week trip of duck hunting, the animals, feeling the lack of their human companions, set out without a trace to try to find their way home to the Hunters. Mrs. Oakes, who is taking care of Longridge's home, doesn't find the animals and concludes that John must have taken them with him.

Incredible Journey

The animals follow their instincts and move westward towards home, dodging danger nearly every step of the way. But when Bodger, the old Bull Terrier, is attacked, they have to slow down. Tao, the cat, is separated from the others because of a rushing river and faces several dangers before he succeeds in finding the lost dogs. Along the way, the animals are offered help several times. When the Hunters and John Longridge come back from their trips they are devastated when they learn that the animals have gone. They try to find the animals, but after giving up almost all hope, the animals one by one appear out of the woods in a happy homecoming.

In many ways our country and economy is on its' own "Incredible Journey". We are like the pets in the story - on our own and in the wilderness. Our leadership is just as absent as the Hunters were. We have experienced excitement, danger and sadness (just as Bodger did) along the way: failed banks, lost pensions, foreclosed homes, lost companies, lost jobs, etc.

I would like to believe that we are coming out of the woods and that our "owners" are there for us. Unfortunately, the Woods may be deeper and darker and our owners are not as deserving as the Hunters. Anyway, I believe that we are only at the first intermission. Go pop some popcorn, grab a soda and relax - intermission is almost over and Part II is ready to begin. Enjoy the show!

Copyright 2010 - Jim Lindell

Finance Professionals Don't See U.S. Companies Hiring Until 2011 - Dec 17, 2009 by E. Johns

The 2010 Business Outlook Survey released today by the Association for Financial Professionals (AFP) and underwritten by Wells Fargo & Company (NYSE: WFC) shows that while more than a quarter of respondents indicate that their organizations will shrink their payrolls in 2010, 46 percent expect that their organizations' workforces will be stable in the new year.

When hiring begins, most finance professionals expect payroll growth to be modest at first. Of organizations surveyed, 25 percent anticipate returning to pre-recession staffing levels in 2011; 32 percent expect a rebound in 2012; and three out of ten do not expect their organizations ever to return their payrolls to pre-recessionary levels.

Lindell commentary: Consider the above comments and our consumer driven economy. If their survey predictions are accurate, consumers will continue to have lower wage levels. The consumer will also have trouble keeping up with their debt service. In addition, the overall wage base for income taxes will decline. This will continue to put financial pressure on all levels of government. Given their prediction that 30% of the companies do not anticipate returning at all to pre-recessionary levels of employment, the future becomes bleaker. Stay tuned - this gets better day by day ...

Copyright 2009 - Jim Lindell

In previous posts, I have commented on the ship and boat building industry. In this entry we will update that information. Based on the industrial production numbers released by the Federal Reserve in the beginning of December, the boat and shipbuilding industry remains in a funk. Consider the attached chart which is based on the unadjusted data. For most of 2009 the data has fluctuated within a very narrow range. There appeared to be a brightspot with a slight increase a couple months ago but the last two months have experienced a downtrend. When you compare the current level with the prior five years, the desperate state of the industry is obvious. Continuing pressure on consumers spending habits will also curtail demand in the future.

Copyright 2009 - Jim Lindell