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Thursday, May 29, 2014

Being Eeyore on the Economy

Its a gloomy rainy day in our neck of the 100 Acre Woods and we see Eeyore off by the babbling brook smiling as she slumbers..  So at least someone's happy

Let's begin..

So how's the economy and the glorious recovery doing?

In the first quarter of 2014, the economy shrank by 1% - the first 'official' contraction since 2011.  

In fact, if not for ObamaCare (healthcare spending was a record $40 Billion this quarter), the contraction would have been by 2%.
If the economic contraction continues into this second quarter (April-June) and we won't know officially for another couple months, then Praise Be....  We can finally do away with all that "recovery" bullshit and officially we can re-name things what they've always been..

Recession..

You see, when you get negative growth for two consecutive quarters, then the math nerds in Washington declare it as such..

Next..  How is the consumer faring?

Despite record highs in stock markets and talking-heads explaining that a terrible Q1 GDP is nothing to worry about, Bloomberg's Consumer Comfort index collapsed to its lowest level in 6 months as economic expectations plunged from 48 to 42.5 (7-month lows).
Interestingly Bloomberg charts two income groups..  Those making under and above $100k and their confidence level rose from 52 to 57 which correlates quite smoothly with housing sales and really the entire economy of the two Americas

So don't say we at A&G never write anything 'positive'...

Now back to the stock market..  Why is it going up?

We mean beyond the fact the Fed is still meddling albeit it with $45 billion monthly being pumped instead of $85B?

Who is the big buyer of stocks?   Professional investors?  Governments?  Everyday people?
Answer:  The S&P 500 companies themselves which cumulatively repurchased a whopping $160 billion of their own stock in the first quarter!

Should the Q1 pace of buybacks persist into Q2 which has just one month left before it too enters the history books, this 6 mth period will be the greatest annual buyback tally in market history.

Why?  

Well its a good place to park extra reserves while not having to use that profit to increase salaries/benefits or convert those temps to perm

Also it makes their stock look even more attractive for naive everyday mom & pop investor simps who think they understand the market because they read WSJ and Forbes
So when company X pumps hundreds of millions of dollars into their stock, it portrays a false stockholder confidence that isn't really there and allows the corporation to beat estimates for another quarter..

So.. add everything up..  the GDP, the dead consumer making $100k and less.. the stagnant real estate market.. the entire fraud which is the stock market

And hopefully for those who still believe things are getting better, we shattered your illusions because that is the goal..

"Hope" is the thought of a Dope..

When you know how things really are and how things truly will be, only then can you be empowered to make the best personal choices for you and yours to ride out the storm