Time once again to attempt unraveling one of the most confusing reports ever created: The Gross Domestic Product numbers out this morning from the Bureau of Economic Analysis. From their press release, always a kind of NY Times crossword sort of self-referential percent-speak:
“Real gross domestic product — the output of goods and services produced by labor and property located in the United States — increased at an annual rate of 3.6 percent in the third quarter of 2013 (that is, from the second quarter to the third quarter), according to the “second” estimate released by the Bureau of Economic Analysis. In the second quarter, real GDP increased 2.5 percent.
The GDP estimate released today is based on more complete source data than were available for the “advance” estimate issued last month. In the advance estimate, the increase in real GDP was 2.8 percent (see “Revisions” on page 3). With this second estimate for the third quarter, the increase in private inventory investment was larger than previously estimated.
The increase in real GDP in the third quarter primarily reflected positive contributions from private inventory investment, personal consumption expenditures (PCE), exports, nonresidential fixed investment, residential fixed investment, and state and local government spending that were partly offset by a negative contribution from federal government spending.
Imports, which are a subtraction in the calculation of GDP, increased. The acceleration in real GDP growth in the third quarter primarily reflected an acceleration in private inventory investment, a deceleration in imports, and an acceleration in state and local government spending that were partly offset by decelerations in exports, in PCE, and in nonresidential fixed investment.
Somewhere, after many minutes of looking for the number, I can to this: $16.8908 trillion, plus or minus a cheeseburger.
Sometime in the next week, or so, I expect the St. Louis Fed data dispenser will hand us a chart that shows the (further or leveling of the) collapse of the velocity of money at M2.
For some unknown reason, rather than provide taxes which would push “dead money” back into circulation, the monetary policy people in America seem to think we can print enough paper money to make things work. It may – or it may not. But if it doesn’t work out, America ends bankrupt.
When Good News is Bad News
If you want to make a fortune as an investor, there are only two things you need to do. One is subscribe to our www.peoplenomics.com site which deserves a shameless plug because using ETFs it could have been paper-traded to 39.7% gains over the past year (and even more since Jan. 1, 2012). I don’t offer financial advice, but it’s an interesting way to sit on a nest egg.
The other thing you might want to do is pick off a degree in psychology, and that’s where we need to begin this morning. We’re in one of those periods around the holiday when a case of “depression” sets in.
Specifically we can point to the Housing data out from Census yesterday. Good news? Yes, you bet:
Sales of new single-family houses in October 2013 were at a seasonally adjusted annual rate of 444,000, according to
estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development.
This is 25.4 percent (±19.2%) above the revised September rate of 354,000 and is 21.6 percent (±15.6%) above the October 2012 estimate of 365,000.
The median sales price of new houses sold in October 2013 was $245,800; the average sales price was $321,700. The
seasonally adjusted estimate of new houses for sale at the end of October was 183,000. This represents a supply of 4.9
months at the current sales rate.
So how could this be bad? I mean, for crying out loud, this is as good as can be hoped for, is it not?
Here’s how depression works, unfortunately: A strong recovery in housing means – by extension – that the Fed may have some wiggle-room left to begin thinking about weaning America off the financial crack called Quantitative Easing.
What’s this going to do? Drive up Interest Rates.
And when rates go up, even if only to 3.5%, or so, what is the market going to do?
Answer: Tank – and in a huge way.
Right now, because of the ultra-low rates banks are playing almost nothing. I checked B of A this morning and their regular savings rate is what? 0.01% APY. Right: One one-hundredth of one percent. Which means a $5,000 deposit in regular savings for a year pays what?
50-cents a year!
At this rate, if you wanted to have enough money in the bank to have a comfortable $100,000 per year retirement income, you’d need how much of a nest egg? A BILLION dollars!
Oh, sure, they BofA and other banks offer different items to put money in, but when a regular passbook account is paying (essentially) nothing it’s no wonder stocks can put on a heady performance. (My paper 39.7% looks pretty good somewhere in here.)
But then comes the problem of “good” news. It’s taken to mean that interest rates will be going up and that will re-kill the economy. (We having fun yet?)
When markets are on the way UP, all news is good news. Once markets reach what may be a turning point in here over the next month, or two, then all news becomes bad news. It’s holiday depression-depression setting in.
It’s also what happens when the retired grays can’t cash in their chips (no one to buy them) and when rare are low, we’re all slaves to the corporate state.
And issues like immigration (which means bring in more poor people to work for cheaper) is now teaming up with the women’s movement, another group which doesn’t seem to be able to grok that getting more women into the workforce was simply a wage-lowering scam by capitalists to get more work out of the working people of America.
Is it any wonder, then, that the market is having the shakes? Not hardly. They’re struck by the slowly emerging realization that we need more consumption to make fantasy numbers work out, but we don’t have the jobs to support that.
Meantime, we’re shooting the other leg to stand on (industrial expansion) with robotics and workplace automation. Sweet!
We’ve built an incredibly complex set of self-deceptions up and – confronted with the reality of compound interest and failing lifestyles – we even now won’t let go of the faux reality that “glass ceilings” were (as much as a rights movement) just a scam to steal control of the Americana family and turn us all into Nanny State dependents.
The owner class gives, and, in case you missed it, the owner class takes away. You’re just a little slow connecting the dots, is all.
Here I would have (optimistically) thought that stories like “Dozens protest ‘slave wages’ for fast-food workers in Metro Detroit” would have been a good hint for you to follow.
Where might our future mistakes be hiding? What keeps us up at night? Well I can’t speak for the others, having spoken too much already to please PIMCO’s marketing specialists, but I will give you some thoughts about what keeps Mohamed and me up at night. Mohamed, the creator of the “New Normal” characterization of our post-Lehman global economy, now focuses on the possibility of a” T junction” investment future where markets approach a time-uncertain inflection point, and then head either bubbly right or bubble-popping left due to the negative aspects of fiscal and monetary policies in a highly levered world. We are both in agreement on the perilous future potential of market movements. Mohamed’s T, I believe, was meant to be more descriptive than literal, and is a concept, like the New Normal, that may gain acceptance over the next few months or years. But aside from a financial nuclear bomb à la Lehman Brothers, our actual scenario is likely to play out more gradually as private markets realize that the policy Kings/Queens have no clothes and as investors gradually vacate historical asset classes in recognition of insufficient returns relative to increasing risk.
The market has been rising in what Gross has called a period of “stable disequilibrium.” When that ends, we either go parabolic toward heaven, or gravity-like into hell.
Every time I read about Immigration reform and failure to reach a meaningful budget outcome, I get a whiff of sulfur. And that, dear reader, is the dynamic when good news is bad.
More after this…
Lots of talk around Washington about how young people are not signing up for Obamacare. Gee, golly, look surprised for me, please?
Even more on point, with recent revelations about just how much of “Obamacare” implementation is just being “made up” without authorizing statues from Congress, is the law professor who says “Obama’s become the very danger the Constitution was designed to avoid…”
One of our neighbors just put an impeach Obama sticker on his truck. I don’t expect it will be too long before those start showing up en masse.
So here’s where it gets interesting: Obama is now reportedly saying that healthcare laws need to work “For the sake of Economic Security.”
And so with the nanny state putting on jackboots, we can help but notice (concurrently) that the NSA is now tracking (5) billions of phone calls per day, just as a matter of “routine.”
So let me ask you (and echoing professor Turley’s concerns): “How long before ‘economic security’ turns the police state apparatchik loose on We the People” for calling for impeachment and an end to the Bush/Obama imperial presidential template which has become acceptable to a brain-dead congress?”
Ask someone who’s on a no fly list about that.
Still, in an effort to continue with (semi) balanced thinking about here, one of our readers (who’s a doc) pointed out that about 1-2 people per hundred in any population are nuts and 0.5 to 1% of those are dangerously crazy.
So, when you run out the numbers on 317-million people, that point suggest that probably 3.17 million people do have the potential to be dangerous psychopaths (if they’re not already corporate leaders). So when you read about how 700,000 are on the federal government watch list, there may be reason for that…
Gee, I may not need as many meds this morning, as I thought… although, golly: 3.17 million crazy people in America! Let me see…if the population of Washington DC is 6.8-million….hmmm…
Yes, humans cause SOME (small) part of global warming, but if the weather this week hasn’t convinced you otherwise, maybe a paper cited in this NY Post story out this morning will convince you that Global Warming was just not all it was cracked up to be…
Pot Causes Boobs?
We have to read with some curiosity the story which appears on CNN’s website that wonders “Does smoke pot cause man boobs?”
One, one might cynically ponder: Does playing the homophobia card mean the war of drugs is going tits up?
Knocking Out Knockout
Says over on this CBS NY site that “Sharpton, other civil rights leaders launch fighting against “Knockout Game.”
Meanwhile, I’m trying to decide whether a 22 point or 45 point program would be most effective.
Fortunately, I won’t have to worry about it since I’ll be 101 by then and the odds of that are slimmer than I’d like to admit.
By then I’m likely to be providing valuable soil nutrients. Everyone takes part in that recycling program, like it, or not.
Ashes to ashes, George to carrots, yada, yada…
Got to love those “enlightened” people in Hamsterdamn. Not that I have a problem with officially approved red light districts or coffee houses selling weed, mind you. (they take credit cards, right?)
But do you really think paying people in beer is really how tor make an alcoholism program work?
We’ve already for such a program here on the ranch, turns out, although sometimes it’s wine or a martin.