stimulus

Gallup: The Unemployment Rate is 10%

Gallup:  The Unemployment Rate is 10%

Jobs…jobs…jobs… I’m beginning to sound like a broken record but it’s true: This economy is going nowhere unless we start creating some jobs. As for the recent drop in the unemployment rate to 9.0%, I’m not buying it since it comes from Uncle Sam. The real figure is likely closer to what Gallup is reporting today… From by Dennis Jacobe entitled: Gallup Finds U.S. Unemployment Up to 10% in Mid-February “Unemployment, as measured by Gallup without seasonal adjustment, hit 10.0% in mid-February — up from 9.8% at the end of January. Underemployment, in which Gallup combines part-time workers wanting full-time work with the U.S. unemployment rate, surged in mid-February to 19.6% — mostly as a result of the sharp increase in those working part time but wanting full-time work. Underemployment now stands at basically the same place as it did a year ago (19.8%). The unemployment rate in mid-February is 0.8 percentage points lower than it was at this time a year ago, compared with a 1.1-point improvement at the end of January. This suggests that jobs are less available now than they were in January. More troubling, however, is the surge in underemployment. On this broader basis, current job conditions are barely improved from what they were at this time last year. Essentially, what has happened over the past year is that some people who were unemployed got part-time jobs but are still looking for full-time work. This is not much to show for a year in which many macro-economic indicators showed improvement. This is likely why Gallup’s self-reported spending

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A Self-Employed Carpenter’s Thoughts on the Future

The world is changing. Currently, as a nation, we have a large and well-trained section of our work force dedicated to residential construction. Unemployment within the construction industry now exceeds 20%. That number takes into account only workers getting unemployment compensation. There are also many self-employed individuals, ineligible for unemployment compensation, who have simply run out of customers and work. That is the bad news. Now the worse news: Not only are those jobs not coming back, but the construction industry will continue to diminish for the foreseeable future. The real estate glut is not on hold; it is over. Waiting for its return is similar to waiting for next the big surge in typewriters, 35mm cameras, and home phones. Why are the construction jobs not coming back? There are three main reasons, the first of which is inflation. Decades of credit expansion and the recent printing of money (quantitative easing) have increased the overall volume of our fiat currency: dollars. Therefore, the value of each dollar unit has been reduced, causing prices to rise. This results in increased costs in construction of new homes. Higher new construction costs make staying in and repairing older structures, or renting, more attractive. The second reason is fuel costs. Living rurally and working in urban areas is becoming very expensive. Reasons one and two will keep an increasing number of younger workers and couples living and renting closer to work. Why take the financial and mobility risks associated with homeownership? The third reason is we are broke. Who are “we”? Western civilization, comprised mainly of the U.S. and Europe. Consider this…there are gold and silver coins and bullion: actual wealth storage vehicles. There are paper dollars: temporary wealth storage vehicles. And there are also trillions of “dollars” represented as pixels on screens in accounting software programs. When I say that we are broke it is because I don’t believe those pixel dollars represent anything. All of the wealth supposedly held in those pixels does not exist. It is a classic Ponzi scheme. If you go today and convert your pixels to actual dollars, everything is just fine. But if 10% of us go today and try to convert our pixels into dollars, the banks will shut down…Why? Because the money doesn’t exist. There is no actual wealth stored in any of those pixels. Spain and Portugal may require financial bailouts in 2011. Part of the fallout from the Greek financial crisis last year was the creation of a eurozone bailout fund of $1.01 trillion. That fund could be used to assist Spain and Portugal if necessary. Where did that $1.01 trillion come from? Was it removed from another sector of Europe’s economy? Supplied in gold bullion to EU headquarters in The Hague? Removed from the savings accounts of earnest Europeans? No, none of those could supply …

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Fear the Reaper

Filed in ben bernanke, BP, earnings, economy, Gold, GOld juniors, lead, o, recession, shares, stimulus by on January 24, 2011 0 Comments
Fear the Reaper

It’s been a hell of a run. The economy is back on track. A new survey from the National Association for Business Economics suggested that jobs were coming: The number of economists who saw hiring by their firms increasing over the next six months was 42 percent, compared with 7 percent who expected to lay off workers. The NRI of 35 was the highest in the 12 years that the question has been asked. Some talking heads are suggesting the economy grew 3% in the fourth quarter of 2010. Companies slashed costs, became mean and lean, and drove profitability to record levels. Intel— one of the companies I told you to buy two weeks ago — just said it was buying back $10 billion in shares. Ben Bernanke has been pumping up liquidity to drive the stock market higher. His plan has worked to perfection… The Dow only goes up There is only one trade on right now. Group-think means the trend is your friend. “Don’t fight the Fed” is the mantra bleated by the sheeple. The blind squirrel investors have found their nut and assume there is another one just over there, ready to be eaten. This of course, raises my contrarian hackles. Take a look at this chart… Barry Ritholtz over at ritholtz.com had a great point when he wrote: At 90% gains, this market has run further and faster than any previous rally. Indeed, in just 20 months it has far outpaced every other rally’s 24 month record by some 50%; the next closest gainer was 65.7%. That does raise some cause for concern short term. The market has never gone so far, so fast as it has in the last two years. After a 90% run, which is a more likely scenario— that the Dow goes up another 90%, or that it corrects? Small caps lead Not only do small cap stocks (under $300 million market cap) lead over the long haul, but they also lead the way out of recessions. These are the smaller, quicker companies that are able to adjust to the economic landscape, and fast to roll out new products. T. Rowe Price found that in the 12 months following the previous nine recessions, small-cap stocks gained 24%, versus 17.6% for the S&P 500. Merrill Lynch reported that in the 18 bear markets since the 1930s, small caps gained an average of 41.4% in the 12 months after the end of the decline, compared with a gain of 32.4% for large caps. It has been true with this bounce back, as well. Small caps have been on fire until last week. As of Friday, small caps were down 4% for the week and 1% for the year… No more bailouts to states Another reason to think about taking some profits is that there are no more bailouts coming. The majority of 2008’s stimulus package went to the states. This equals about $400 billion that the states used to keep running…

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Raising the Debt Ceiling

Filed in BP, Debt, euro, european union, Gold, GOld juniors, Gold Market, lead, o, obama, silver, stimulus, target by on January 21, 2011 0 Comments
Raising the Debt Ceiling

The United States government seems to enjoy spending our money with the zeal of a rap star. They like it so much, in fact, that they’re going to need a little more from you… Last week, Treasury Secretary Timothy Geithner warned Congress that this year’s statutory limit on federal debt will be reached as early as spring — between March 31st and May 16th. Geithner alerted congressional leaders saying: Even a very short-term or limited default would have catastrophic economic consequences that would last for decades. For these reasons, I am requesting that Congress act to increase the limit early this year, well before the threat of default becomes imminent. I don’t buy it. We’ve already been down this road before… Bush’s TARP and Obama’s Economic Stimulus effectively did the same thing. And look what happened: more than 90% of the money went right to the banks, where it still resides. Bush and Obama did their jobs. They protected the banks at all costs. And that was, of course, the design from the start. To bring confidence back into the U.S. system, we’re simply going to have to cut out the reckless spending. This would point America in the right direction and reduce the risk of a default or devaluation that looms in our near future. Unfortunately, this does not appear to be the road our politicians want to take. ~~SIGNUP_WD~~ The trouble with this train wreck of a debt picture is that rates are going to have to go higher in the near future. That’s because the folks who have been buying our debt over the course of the last 30 years are no longer interested in our new debt offerings at current interest rates. Not only are they not interested in buying our new debt; but they’ve decided to dump the Treasury paper they already have. This puts the U.S. in a tricky situation. To make our obsessive borrowing more attractive, we’ll have to continue to raise rates. This is where things really start to go south… And the whole of society could fail because of unsustainable spending and debt scenarios at every level of government worldwide. This was typical of every other empire our world has ever known before their ultimate collapse: the Spanish, Greek, Roman, and British Empires all came to an end because they spent themselves into oblivion— just as the European Union, England, Japan, and the U.S. are doing today. Just consider how truly desperate some situations have become… Last week, the state of Illinois increased personal income tax by 66% and corporate income tax by 45%. These increases are designed to address a $15 billion state budget deficit that lawmakers said was leading the state into insolvency. How long is it before we start seeing headlines that include “State Bankruptcy”? On its current path, the United States could not possibly meet all of its future obligations. And the end game could mean collapse. That means as an investor, you need to get your ducks in a row. The

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The Fed Blows a Cupcake Bubble

The number one cupcake play in America is going public. Crumbs Bake Shop operates 34 cupcake stores from New York to California, humorously billing itself as “creator of the gourmet cupcake.” Owners stand to make up to $100m from the IPO, and the deal could price higher, with cupcake-mania hitting a fever pitch. At $100m, investors would be paying about $3 million per cupcake store. Management is betting on aggressive expansion to fuel growth, and plan to open hundreds of new stores. Naturally, growing a chain of stores from 34 to 300 is no easy task. Recall the great donut bubble of 2003… Krispy Kreme (NYSE: KKD) was the darling of Wall Street. Its shares peaked at near $50 from a split-adjusted IPO price of $3.50, giving the donut maker a sky-high valuation of $3b (pdf). Shares trade around $7 today, up from a low of around $1. KKD expanded too fast, took on too much debt, and nearly went bankrupt. They also had some accounting issues, but those likely were probably just a side effect of a business-plan gone bad. Today Krispy Kreme is still muddling along, closing stores opened just a few years back. Expansion is always risky — especially when financed with debt and equity offerings. Hopefully Crumbs can avoid a similar fate, and follow the glorious path of Chipotle instead, which is up 436% since its IPO in 2006. In any case, I wish them well; I’ve heard their cupcakes are delicious. The larger point here is about what this cupcake IPO says about the state of markets. After all, it almost certainly wouldn’t be happening without all that Fed-injected liquidity sloshing around. Back in July 2008, The Onion published a prescient piece titled, “Recession-Plagued Nation Demands New Bubble to Invest In”: What America needs right now is not more talk and long-term strategy, but a concrete way to create more imaginary wealth in the very immediate future. Congress is currently considering an emergency economic-stimulus measure, tentatively called the Bubble Act, which would order the Federal Reserve to begin encouraging massive private investment in some fantastical financial scheme in order to get the nation’s false economy back on track . Even Jonathan Swift would have to appreciate satire so pointed. Unfortunately, the bit reads a lot like a Fed policy statement. Change the title to “Encouraging Risk Investment During Recession,” and any good Fed economist would nod along in agreement. The sentiment is identical. Bernanke has often stated that he wants to create a “wealth effect.” Push stocks higher, the theory goes, and people will spend more because they feel richer. Long-term thinking, truly… It’s been two and a half years since the Onion piece was written. Not only did we get one bubble; we got a handful of them. Notably in commodities, metals, food prices, and treasury bonds. Malinvestment and moral hazard ride on in 2011 One of the nastier side effects of “easy money” policies is known as malinvestment . It almost sounds harmless… mal- investment ( mal = bad). After all, everybody has a loser every now and then, right? The problem with easy money is that it inevitably spurs not just bad, but dangerous investments. During the tech bubble, it was countless doomed tech IPOs. In…

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Big Ben’s Stimulus Party: Only the Top 20% Received an Invite

Big Ben’s Stimulus Party: Only the Top 20% Received an Invite

What if they threw a recovery party and only the top 20% showed up? It looks like we are about to find out….. From the Telegraph by Ambrose Evans-Pritchard entitled: Deepening crisis traps America’s have nots “ The US is drifting from a financial crisis to a deeper and more insidious social crisis. Self-congratulation by the US authorities that they have this time avoided a repeat of the 1930s is premature. There is a telling detail in the US retail chain store data for December. Stephen Lewis from Monument Securities points out that luxury outlets saw an 8.1pc rise from a year ago, but discount stores catering to America’s poorer half rose just 1.2pc. Tiffany’s, Nordstrom, and Saks Fifth Avenue are booming. Sales of Cadillac cars have jumped 35pc, while Porsche’s US sales are up 29pc. Cartier and Louis Vuitton have helped boost the luxury goods stock index by almost 50pc since October. Yet Best Buy, Target, and Walmart have languished. Such is the blighted fruit of Federal Reserve policy. The Fed no longer even denies that the purpose of its latest blast of bond purchases, or QE2, is to drive up Wall Street, perhaps because it has so signally failed to achieve its other purpose of driving down borrowing costs. Yet surely Ben Bernanke’s `trickle down’ strategy risks corroding America’s ethic of solidarity long before it does much to help America’s poor. The retail data can be quirky but…

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Grocer Margin Squeeze

Filed in BP, commodities, earnings, economy, Gold Market, inflation, o, stimulus by on January 6, 2011 0 Comments

Bernanke must not buy groceries — or fill his car with gas, for that matter. He thinks inflation still isn’t a problem. That’s what happens when you’ve either lost touch with the common man, or you’re still reading core CPI numbers, which cut out food and energy costs. As any grocer can tell you, CPI isn’t accurate… Orange juice and coffee are up more than 50%. Cotton is at 140-year highs. And the U.S. grain market is exploding, increasing costs for food processors. That’s inflation. And we’ve only just begun to surpass record food price levels of 2008. (Just remember to blame China for this— that was the favored excuse of 2008 when food prices went ballistic.) And as long as the Fed ignores reality for an inaccurate CPI read — opting to push ahead with stimulus, as promised yesterday — consumers and businesses will suffer. Businesses that can’t pass on the higher cost will especially suffer. As the Fed pointed out in its minutes: Although the prices of some commodities and imported goods had risen appreciably, several participants noted that businesses seemed to have little ability to pass these increases on to their customers, given the significant slack in the economy. That’s a real problem. It’s getting tough out there for grocers And it’ll cut into grocer profits through margin shortfalls and demand. When food inflation first reared its ugly head again, investors cheered, thinking grocer stocks would rocket by increasing prices more than costs were rising. That didn’t exactly go as planned. Grocers pulled back hard, especially when Safeway said it was having trouble passing along cost increases in some categories. Kroger, too, saw a drip in gross margins. In what was hoped to be a turnaround year for these guys, grocers are suffering as costs rise. The big question: When to pass on the costs to consumers? Sure, charging more would help protect the bottom line… But at the cost of demand. Some say they’ll raise prices gradually; others are barely making ends meet. Pass on higher costs too quickly, and you’re screwed in a weak economy. The harsh realities of the aisles According to The Wall Street Journal , Stater Bros. has

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China Scrambles to Secure Molybdenum Resources

China Scrambles to Secure Molybdenum Resources

The race is on… World leaders are scrambling to gain control of global molybdenum assets on speculation that China will cut exports. China is the world’s largest producer of molybdenum, supplying over a third of global supplies. But growing domestic demand may prompt the Chinese government to restrict exports… This may cause the price of molybdenum to rise significantly in 2011, and lift share prices of primary producers. China moves to secure molybdenum resources China has been a net buyer of molybdenum for the year, importing over 5.5 million pounds of the strategic metal used to harden steel. China produced about 160 million pounds of molybdenum in 2009. This year, analysts expect Chinese molybdenum to increase nearly 20% to 190 million pounds. Despite being the world’s largest supplier, China may be forced to continue importing molybdenum in 2011. The country’s recent economic stimulus package— which focuses on infrastructure — will continue to require a large supply of molybdenum for high-strength steel to be used in bridges, power plants, and pipelines. This will continue to have a significant impact on global molybdenum supplies. And China has already recognized the importance of securing molybdenum resources… Last month, the Chinese Ministry of Land and Resources reported it was planning to set up strategic reserves for 10 metals — including molybdenum and rare earth metals. The Chinese government recently showed its commitment to helping the domestic market secure molybdenum supplies. Just a few months ago, the gov’t accelerated a financing approval for Hanlong Investments, a privately-owned Chinese company, to fund the development of General Moly’s (AMEX: GMO ) Mt. Hope project. General Moly (AMEX: GMO) Hanlong Investments will purchase 25% of General Moly for $80 million and procure a $665 million loan from a Chinese bank. The total funding from the Hanlong transaction is anticipated to fund all remaining capital requirements for Mt. Hope, currently the largest and highest-grade primary molybdenum project in development. Primary producers like General Moly and Thompson Creek Metals (TSX: TCM ) will receive a premium because molybdenum is usually a

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Robert Prechter Explains The Fed, Part I

November 19, 2010 The world’s foremost Elliott wave expert goes “behind the scenes” on the Federal Reserve The ongoing financial crisis has made the central bank’s decisions — interest rates, quantitative easing (QE2), monetary stimulus, etc. — a permanent fixture on six-o’clock news. Yet many of us don’t truly understand the role of the Federal

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Consumer’s Revolt, Shun the Chains of Debt

Consumer’s Revolt, Shun the Chains of Debt

As I discussed in this article, you can lead a horse to water but you can’t make him drink. That’s where the ultimate sticking point is for the Fed — especially in an economy where consumption is 70% of GDP. Because while the Fed can force money into the system in exchange for government bonds, they can’t necessarily make the money circulate to create new goods or more importantly, new jobs. In short, that leaves the Fed essentially “pushing on a string” while commodity prices rise across the board. Meanwhile, consumers are refusing to go along with the Fed’s ongoing effort to hook them on even more heroin… From Bloomberg by Caroline Salas entitled: U.S. Household Debt Shrank 0.9% in Third Quarter, Fed says. “ U.S. households cut their debt last quarter, borrowing less against homes and closing credit card accounts, according to a survey by the Federal Reserve Bank of New York. Consumer indebtedness totaled $11.6 trillion at the end of September, down $110 billion, or 0.9 percent from the end of June, according to the New York Fed’s quarterly report on household debt and credit. Households have slashed about $1 trillion from outstanding consumer debts since the peak in the third quarter of 2008, the New York Fed said. U.S. households, facing a jobless rate that’s persisted near a 26-year high, have slashed debt and increased savings following the worst financial crisis since the Great Depression. That’s pared consumer spending and slowed the economic recovery, helping to prompt the Fed’s decision last week to start another round of unconventional monetary stimulus. “ Consumer debt is declining but only part of the reduction is attributable to defaults or charge-offs,” Donghoon Lee, a senior economist at the New York Fed, said in a statement. “Americans are borrowing less and paying off more debt than in the recent past. This change, which we continue to study carefully, can be a result of both tightening credit standards and voluntary changes in saving behavior.” Individuals paying off their debt crimped their cash flow by about $150 billion in 2009, the New York Fed said. Between 2000 and 2007 borrowing increased consumers’ cash flow by $300 billion a year, according to the district bank.” Needless to say, the borrow and consume model is has seen better days. Phony is as phony does. Related Articles: Hoenig: QE2 May Lead to “future instability” Agflation is Here: Hate to Say I told you So… Hoenig: QE2 Won’t Work Jim Grant on the Fed’s “Mission Creep” Jim Grant: “The Fed is out of its lane” To learn more about Wealth Daily click here Advertisement Masamune’s Secret Metal Six centuries ago, a Japanese sword master accidentally dropped some into the steel he was making… creating the first ever true Samurai Katana blade. Today, it’s the cornerstone of a $987 billion-a-year industry. Find out how you can bank up to 2682% as one tiny mining company taps into one of the world’s last remaining untouched deposits. Consumer’s Revolt, Shun the Chains of Debt originally appeared in Wealth Daily . Wealth Daily is a free daily newsletter featuring contrarian investment insights and commentary.

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Bullion Prices Explode, Gold Tops $1380 and Silver Tops $26 | Coin …

U.S. bullion prices, commodities and stocks soared Thursday, a day after the Federal Reserve announced a monetary stimulus plan to boost the economy. The U.S. dollar was driven lower in the wake of the news, throwing gold prices 3.4 …

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Doug Casey on the Tea Party Movement

Louis: So, Doug, about the Tea Party? Doug: Consider what seems to be brewing in the Tea Party movement. It’s just a straw in the wind, of no real significance itself, but a foreshadowing of something ominous. All the false hope this Tea Party movement is creating impresses me as similar to what was going on in France in the late 1780s… L: I think I can guess, but why do you say that? As much as you dislike the government, isn’t it a good thing that so many people are finally fed up with it and at long last are showing signs of willingness to throw the bums out? Doug: Well, you know I don’t like making predictions, so I’m not prepared to say that it’s a terrible thing, but it’s at least a double-edged sword. Of course it’s nice to see that there are people out there who are unhappy with the status quo, with the so-called two-party system, and with the Republican party in particular. But the process of “throwing the bums out” has gone on since Day One, and it’s accomplished absolutely nothing. The system itself has degraded hugely. And more than ever before, government draws the absolute worst type of people and totally corrupts those who might be decent. That’s because government is so overwhelmingly powerful today. L: Power corrupts, absolute power corrupts absolutely. But why the Republicans in…

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