US Economy, the stock market , and other investment/savings strategies

[Crafty_Dog]

Monday Morning Outlook
________________________________________
The QE-xcuse To view this article, Click Here
Brian S. Wesbury - Chief Economist
Bob Stein, CFA - Deputy Chief Economist
Date: 5/6/2013

The higher the stock market goes, the more the bears argue that it’s all about easy money from the Federal Reserve. The “QE-xcuse” – says Wall Street is flying high on a wave of new money from Quantitative Easing.
But, this explanation is getting long in the tooth. The S&P 500 and the Dow Jones Industrial Average both reached all-time record highs last Friday, up 161% and 156%, respectively, from their lows of four years ago.
The last time stocks had such sharp and sustained gains near these levels was in the late 1990s when optimism was rampant. Then, the psychology was the opposite. Stocks were over-valued, but talking heads were unwilling to say anything even remotely negative.
When equity indices were hitting records in 1999, after-tax economy-wide corporate profits were just $600 billion. Last year, in 2012, they were $1.5 trillion. Nonetheless, the Pouting Pundits of Pessimism are pounding the podium and spewing pessimistic pabulum on a daily basis. Every tick higher in stocks seems to create even more anger, cynicism and disbelief.
All the talking heads have to do is say “QE” and it seems every viewer/reader has been trained to understand that, “the stock market is going up because the Fed is buying bonds.” They say the market is riding a “sugar high” of new money.
But, it doesn’t stop there. It gets curious-er and curious-er the deeper we dig into the mindset of these bears. The very same people who argue the rise in stocks is phony-baloney-money-printing are also saying that the economy is about to tank and fall into a double dip recession. And, some are now talking about the rising spectacle of deflation.
This defies logic. How can money boost stocks, but not the economy or inflation? This is a mistake in monetary logic. If money were so easy then the economy, inflation and stocks would be lifted together.
But, the pouting pundits never let logic get in the way of a really scary story. For them, nothing can be good. And if it is good, it’s either phony or a lie. For example, if the unemployment rate comes down, or if jobs are created, they start arguing that the Labor Force Participation Rate is falling or the “real” unemployment rate is really much higher. When the data doesn’t cooperate they accuse the government of being wrong or lying.
We don’t claim to have a lock on the truth. As forecasters we know that we will be wrong on occasion and we don’t expect everything to go our way.
What we attempt to do is provide an explanation that is based on fact and not emotion. We want our forecast based on a consistent model, not piecemeal beliefs based in political ideology.
So, let’s build a story that holds together.
1.   The Fed is easy, but not as easy as many think. The monetary base has grown roughly 25% annualized since QE started, but M2 money supply is up just 6% annualized during that same period. The difference is sitting idly on bank balance sheets as excess reserves.
2.   Government spending and regulation have increased sharply since 2000, but spending has been reduced from 25% of GDP to 22% in the past three years.
3.   The stock market – based on a capitalized profits model – is undervalued by at least 25%.
4.   New technology – the cloud, smartphone, tablet, fracking, 3-D printing, etc. – is boosting productivity, efficiency and profits.
5.   The collapse of 2008/09 was a case of government failure, not market failure. Mark-to-market accounting and TARP were huge mistakes.
We believe new technology is so powerful that it has been able to create new wealth and growth despite the increased size and scope of government. In other words, the Plow Horse recovery is not a case of a “new normal” – where the economy grows slowly after a financial crisis. Instead, new technology is offsetting the cost of government, and the net effect is 2% to 3% real GDP growth.
We also believe the Fed is easy, but not as easy as conventional wisdom believes. This explains two things – why inflation hasn’t surged and also why a recession is not likely. A relatively easy Fed and new technology will continue to boost growth and inflation in the quarters ahead.
Finally, stocks are cheap. They are rising because that’s what cheap things do. We don’t need a QE-xcuse to explain the markets or the economy. Be wary of those who do.

[DougMacG]

A different view:

Part time is replacing full time employment because of Obamacare.

http://www.realclearmarkets.com/articles/2013/05/06/why_fridays_jobs_report_was_ominous_100301.html

May 6, 2013
Why Friday's Jobs Report Was Ominous
By Louis Woodhill   Forbes contributor / Real Clear Markets

Excerpts:

"The April jobs numbers describe a mass replacement of full-time workers with part-time employees, coupled with a fall in the length of the average workweek. This happens to be precisely what you would expect, given the perverse incentives baked into Obamacare, which took effect on January 1."

"During April, the FTE jobs ratio fell for the fifth month in a row, to 53.09." (Now that jobs are part time, the totals are measured in 'full time equivalent'.)

"there also has never been a case where the FTE jobs ratio fell for five months in a row and a recession did not follow."

"If labor force participation had remained at the level it was when Bush 43 left office, April's unemployment rate would have been reported at 10.9%." (Confirming Crafty's recent post.)

"During the first 76 months of the Reagan recession/recovery, the value of the dollar in terms of gold actually went up by 6.47%. During the equivalent period of [this] recession/recovery, the gold value of the dollar fell by 56.9%."

"The dollar debasement under Bush 43 and Obama has been driven by three rounds of the Federal Reserve's "quantitative easing" (QE), which have produced a massive (and completely unprecedented) 257.19% increase in the monetary base."

"The recent five-month decline in the FTE jobs ratio coincides exactly with Ben Bernanke's QE3."

[Crafty_Dog]

Very cogent.

[G M]

http://cnsnews.com/blog/joe-schoffstall/record-number-households-food-stamps-1-out-every-5


Record Number of Households on Food Stamps-- 1 out of Every 5



 April 25, 2013

By Joe Schoffstall


The latest available data from the United States Department of Agriculture (USDA) shows that a record number 23 million households in the United States are now on food stamps.
 
The most recent Supplemental Assistance Nutrition Program (SNAP) statistics of the number of households receiving food stamps shows that 23,087,886 households participated in January 2013 - an increase of 889,154 families from January 2012 when the number of households totaled 22,188,732.

The most recent statistics from the United States Census Bureau-- from December 2012-- puts the number of households in the United States at 115,310,000. If you divide 115,310,000 by 23,087,866, that equals one out of every five households now receiving food stamps.
 
As CNSNews.com previously reported, food stamp rolls in America recently surpassed the population of Spain. A record number 47,692,896 Americans are now enrolled in the program and the cost of food stamp fraud has more than doubled in just three years.

[G M]

Jim Rogers: ‘Race To Insanity’ Producing ‘Artificial’ Market Gains
 



Wednesday, 24 Apr 2013 01:32 PM
 
By Michelle Smith
 

With central banks printing like never before, legendary investor Jim Rogers warns that markets and economies are likely to get hurt in the aftermath.

“This is the first time in recorded history where nearly all the central banks in all countries are pumping out lots of money, debasing their currencies, printing money. I've never seen this in history, and now we've got everybody — or nearly everybody — doing it,” he told Money Morning.

 Japan's central bank dominated headlines when it announced an unprecedented stimulus program that devalues the yen. This action was said to be an effort to battle deflation.


Central bank policies that weaken national currencies are seen as competitive. When other nations do not follow suit, they essentially become less competitive because a weaker currency results in cheaper exports.

Countries’ efforts to competitively weaken their currencies is commonly called the race to the bottom.

Rogers told Money Morning that instead it is a “race to insanity.”

While the gains in the U.S. and Japanese stock markets may be euphoric now, Rogers warns that they are “artificial” and likely to lead to pain.

“The central banks are determined to keep printing money. But, underneath that, eventually there are going to be more and more skeptics. I'm not going to be the only one. And more and more people will start heading for the door. And by the time they stop, printing the damage may already have been done to the markets,” Rogers noted.

But similar statements have often raised the comeback question — when will the stimulus stop? Many argue that there is little reason for investors to be concerned about that now if it will happen much later.

Even Rogers admits that though the market gains are artificial, the bubble may not burst anytime soon. Investors could continue to see soaring markets for some time.

Central banks’ policies could cushion any sell off, he explained to Money Morning. But ultimately, the ending is still a bad one — the results of that type of distortion could be a “slow-speed crash,” not only for the markets, but also for the broader economies.

Read Latest Breaking News from Newsmax.com http://www.moneynews.com/InvestingAnalysis/Rogers-US-Japan-markets/2013/04/24/id/501187

[G M]

http://money.cnn.com/2013/04/26/news/economy/gdp-report/index.html?iid=SF_E_Lead

U.S. economy revved up, but it's probably temporary
 By Annalyn Kurtz

 @AnnalynKurtz April 26, 2013: 11:36 AM ET


NEW YORK (CNNMoney)
 
The U.S. economy accelerated at the beginning of the year, but don't get too excited. Economists aren't very optimistic that trend will continue in the months ahead.
 
Gross domestic product -- the broadest measure of economic output -- rose at a 2.5% annual pace in the first three months of the year, driven largely by a pick-up in consumer spending, the Commerce Department said.





Consumer spending, which alone accounts for roughly two-thirds of GDP, rose at a 3.2% annual pace, the fastest pace since the end of 2010.

At first glance, that's pretty remarkable, since most workers saw their take-home pay drop in January, following the end of the payroll tax cut.

But the data also shows that consumers funded that spending in part by saving less. Americans saved an average of 2.6% of their disposable income in the first quarter, down from 4.7% at the end of 2012.

"Households are drawing down savings, and they are borrowing to continue spending," said Steve Cunningham, director of research and education for the American Institute for Economic Research. "That won't last forever."

What were people buying? Primarily, more services. That too could be partly temporary in nature.

Americans spent more on housing and utilities, which rebounded after slumping following Hurricane Sandy in the prior quarter. This March was also the coldest since 2002, a weather patten that boosted the demand for heating.

Consumer spending on durable goods like autos also contributed to stronger economic growth, but to a lesser extent.

On the business side, investment in equipment and software added slightly to growth. An even bigger boost, however, came as businesses restocked their shelves and warehouses after drawing down their inventories in the fourth quarter. That effect is also likely to be temporary, Cunningham said.

Related: The global economy is losing steam

Meanwhile, cuts in government spending, mainly related to defense, dragged on the economy in the first quarter.

The last two quarters marked the biggest six-month contraction in the federal government's economic activity since the months following the Korean War, which ended in 1953, noted Paul Ashworth, chief U.S. economist of Capital Economics.

Spending by federal, state and local governments is now lower than it was in mid-2007, before the recession began.

Given the fiscal squeeze, Ashworth said it's rather impressive that the economy still grew 2.5% in the first quarter. Since the recovery began in mid-2009, the economy has grown an average of 2.1% a year. Once you strip out the government's spending, though, that growth looks more like 3.1%.

"It's becoming more and more clear that the public sector is the real thing holding the economy back now," he said.

Public-sector cutbacks are likely to continue dragging on the economy through the rest of the year as the federal government alone cuts $85 billion over a seven-month period.

Economic growth isn't likely to be as strong in the second quarter. Other economic data already shows the economy may have lost some steam starting in March.

Job growth slowed, retail sales slumped and the manufacturing sector showed signs of weakness.

Overall, the first quarter GDP report was a bit of a letdown. Economists had been expecting the economy to grow at an even stronger rate of 2.8%.

"Even this weaker-than-hoped-for growth rate exaggerates the true underlying momentum in the economy," said Chris Williamson, chief economist at Markit.

U.S. stocks were mixed Friday morning, following the report.

[Crafty_Dog]

http://news.investors.com/economy/050313-654674-retail-workweek-3-year-low-on-obamacare.htm

[G M]

http://news.investors.com/economy/050313-654674-retail-workweek-3-year-low-on-obamacare.htm

The economy is Wesbury-riffic!!!

[Crafty_Dog]

It's Not That Bad Out There To view this article, Click Here
Brian S. Wesbury - Chief Economist
Bob Stein, CFA - Deputy Chief Economist
Date: 5/13/2013

Certain things, like the sun rising, or the tides shifting, can be counted on. It’s also true that when government shrinks as a share of GDP, things start to pick up.
For the past three years, gridlock in Washington has held total spending by the federal government basically flat. This means federal spending has fallen from more than 25% of GDP to 22%, creating more room for the private sector.
Contrary to popular Keynesian thinking, this means entrepreneurship will have a more pronounced, and positive, economic impact on the economy. In other words, the “end of the world” trade, which hasn’t really worked in the past four years is becoming more dangerous. We expect gold to fall, while bond yields, the dollar, and stock prices rise.
We don’t disagree with the angst of many over deficits and debt, but things are rapidly getting better. Tax revenues are up sharply and we are forecasting a budget deficit of about $725 billion, or 4.5% of GDP, this year. In 2014 and 2015, we expect deficits of near 3% and below 2%, respectively. This is not magic. It’s what happens when spending is contained.
It’s not that deficits matter all that much; but it’s a sign of how wrong the pessimists can be. And the same thing is happening in markets. The “smart guys” at hedge funds have been short the dollar and stocks, while long gold and bonds. But, in the past year, this trade has not worked.
And the fundamentals suggest this trade will continue to be a loser. We think stocks and growth are still underappreciated.
Gold is well above fair value. Comparing its value to oil, corn, copper, M2, nominal economic growth or even the monetary base suggests that it is worth somewhere between $800 and $1,100 an ounce today. We’re forecasting further declines in gold over the next 12 months. It probably won’t be a bloodbath, but it’s not the asset to be long.
The same goes for bonds. At the start of the year, we were forecasting a 10-year Treasury yield of 2.85% at year end. Historically, this would have been an outsized jump in yields, especially if the Fed does not move to tighten. A more sanguine forecast of 2.4% still means capital losses.
Even if you think the Fed won’t raise rates until 2015, yields are too low. If the Fed held short-term rates near zero for two years and then hiked them to 4% over the next two years and held them there, the average funds rate for the next decade would be 2.8%. Slap a premium of 0.5% on this for the 10-year Treasury and a yield of 3.3% is the result.
Meanwhile, despite a sharp increase in equity prices recently, the S&P 500 still has a generous earnings yield of 6%. Stocks are still cheap and we expect further increases. In other words, not letting the conventional wisdom get you down has been, and will continue to be, the profitable trade.

[objectivist1]

I have only one response to Wesbury's inane arguments, and it doesn't take a degree in economics to understand:  Who are you going to believe - your own experience and what you see going on all around you, or what some pinhead economist tells you SHOULD be happening?  I believe my own eyes and ears.  I speak to small business people all over the country every day, and I have yet to hear from ANY of them that business is picking up, let alone booming.  On the contrary, they tell me they are struggling, have been forced to lay off multiple employees, and don't see any light on the horizon. In short, business is NOT getting better - it is continuing to get worse.  I also see dozens of completely empty strip malls within 10 miles of my location here in metro Atlanta. Many of them were thriving 5 years ago. Foreclosures here remain extremely common.  In other words, I don't believe someone who tells me it is raining when I see with my own eyes that he is pissing on my leg.

[G M]

Exactly.

[G M]

http://finance.yahoo.com/blogs/breakout/payroll-data-plough-horse-recovery-continues-westbury-145748548.html

This month's edition of the Most Important Number Ever came out better than expected, sending stocks to all-time highs and pushing the S&P 500 (^GSPC) over 1,600 for the first time ever. The move was driven by Non-Farm Payrolls (NFP) coming in at a better than expected 165k vs official estimates of 140k and unofficial expectations that were much worse than that.
 
Brian Wesbury of First Trust Portfolios says the numbers were consistent with the glacial pace of the recovery investors have come to expect. "We've described it as the plough horse economy," Westbury explains in the attached video. "We have the Kentucky Derby this weekend, [but] this horse is not going to win the Kentucky Derby. Not even close."
 
After a spate of weak data heading into the non-farm payrolls release, analysts were expecting evidence that the recovery was ready for the glue factory. Pessimists have been expecting the economy to drop back into a recession at any moment since the March 2009 stock market lows. When mediocrity is a pleasant surprise, the odds favor a bullish reaction to data.
 
The fly in the ointment was labor participation. At 63.5%, the number of Americans opting out of the labor market is stuck at levels last seen more than 30 years ago. Wesbury thinks the participation is a function of an aging population coupled with some unknowable expansion in the so called "grey market" jobs where workers are paid in cash or trade to avoid taxes.
 
Although "we're not booming," Wesbury concludes this isn't an economy that's "going to fall back into another recession" either.
 
For at least the moment that's good enough for the stock market.

Click on the link to read the comments

[Crafty_Dog]

We have missed you Obj, good to have you with us once again.

You raise well the points of the other side of the coin.

[Crafty_Dog]

When an economy is humming, there are lots of job openings and low unemployment. When the economy is malfunctioning, there are few openings and unemployment is high. The regular relationship between job openings and unemployment is called the Beveridge Curve.
•   According to the American Enterprise Institute's Kevin Hassett, it has been almost four years since the end of the recent recession, but the U.S. has yet to return to its previous levels of unemployment. The shift in the Beveridge curve suggests that it may never do so.
•   In February 2013, the job-openings rate (unfilled jobs as a percentage of total jobs) was 2.8, a rate that would have corresponded with an unemployment rate of about 5.2% on the Beveridge curve from 2001 through August 2009. The unemployment rate in February, however, was 7.7%—almost two and a half points higher.
•   Hassett argues the shift is mainly explained by a) the more than doubling of long-term unemployment from pre-recession levels, and b) the now-documented reluctance of business to hire folks who’ve been out of work for more than six months.

[Crafty_Dog]

Continuing with my presentation of an opposing point of view:

Industrial Production Declined 0.5% in April To view this article, Click Here
Brian S. Wesbury - Chief Economist
Bob Stein, CFA - Deputy Chief Economist
Date: 5/15/2013

Industrial production declined 0.5% in April, coming in below the consensus expected decline of 0.2%. Including revisions to prior months, production was down 0.8%. Production is up 1.9% in the past year.
Manufacturing, which excludes mining/utilities, declined 0.4% in April (-0.5% including downward revisions to prior months). Auto production declined 1.2% in April, while non-auto manufacturing declined 0.3%. Auto production is up 5.2% versus a year ago while non-auto manufacturing is up 1.1%.
The production of high-tech equipment rose 1.0% in April, and is up 2.0% versus a year ago.
Overall capacity utilization declined to 77.8% in April from 78.3% in March. Manufacturing capacity use declined to 75.9% in April from 76.3% in March.
Implications: Not a pretty report for industrial production in April. Output at factories, mines, and utilities, fell 0.5%, the largest decline in 8 months (-0.8% including revisions to prior months). Worse, the drop can’t be attributed to the volatile mine and utility sectors; manufacturing production declined 0.4% (-0.5% including revisions to prior months). However, we believe the report is an outlier and expect a rebound next month. Production is up 1.9% over the past year and up at a 2.5% annual rate over the past three months, exactly what we would expect in a plow horse economy. The autos sector has led the manufacturing gains, up 5.2% in the past year, but even manufacturing outside the auto sector has done OK, up 1.1% in the past year. We expect the gap between those two growth rates to narrow considerably in the year ahead, with slower growth (but still growth!) in autos and faster growth elsewhere in manufacturing. Capacity utilization fell to 77.8% in April, not far off from the average of 79.0% in the past 20 years. Continued gains in production should push capacity use higher, which means companies will have an increasing incentive to build out plant and equipment. Meanwhile, corporate profits and cash on the balance sheet are at record highs, showing they have the ability to make these investments. In other news today, the Empire State index, a measure of manufacturing sentiment in New York, declined to -1.4 in May from +3.0 in April. On the housing front, the NAHB index, which measures confidence among home builders, rose to 44 in May from 41 in April. The indexes for future sales, foot traffic, and current sales all increased, another sign that the housing market continues to recover.

[Crafty_Dog]

Wesbury makes his prediction.  I'd like to invite each of us to make his own 

Monday Morning Outlook
________________________________________
Still Bullish To view this article, Click Here
Brian S. Wesbury - Chief Economist
Bob Stein, CFA - Deputy Chief Economist
Date: 5/20/2013

Like Rip Van Winkle, imagine you went to sleep on October 9, 2007 and didn’t wake up until yesterday. On 10/9/2007, equities were at record highs: 14,165 for the Dow Jones Industrial Average and 1,565 for the S&P 500.
You slept right through a housing bust, a financial panic, the deepest recession since the Great Depression, the passing (and upholding) of Obamacare, multiple bouts of debt-limit brinksmanship, two fiscal cliffs, the European financial “crisis,” a tsunami in Japan, the BP oil fiasco, and a long list of other media-obsessions over the past 67½ months.
You woke up, and the Dow and S&P 500 were up 8.4% and 6.5%, respectively, from when you fell asleep, with both at new record highs. Including dividends, the S&P 500 has returned 3.3% per year since you went to sleep, while consumer prices rose 2% per year and short-term rates averaged 0.5%.
Now…imagine that no one would tell you what happened in the past six years. All you could do was compare current market data to what it was when you fell asleep. Would you buy equities, or sell them?
Corporate profits rose 34% during the deep sleep, so Price-to-Earnings (P-E) ratios are lower. Short-term interest rates were 4%, now they are near zero; yields on long-term Treasury notes were 4.5% back then, and now below 2%. Gold has jumped from $740 per ounce to $1,350; oil from $73 per barrel to $96.
In a nutshell, relative to fixed income and commodity markets, equities look significantly cheaper today than they did in 2007. There is even more reason to buy.
The unemployment rate was only 4.7% when you fell asleep: now it’s 7.5%. Believe it or not, that is good news. Historically, high unemployment means things are going to get better, while periods of low unemployment suggest things are about to get worse. We get the flu when we feel good; we get over it when we feel bad.
It was this focus on fundamentals that motivated our forecast that equity values would rise this year. At the beginning of 2013, we forecast the Dow at 15,500 and S&P 1700 by year-end. We felt that this higher-than-consensus forecast was realistic and, yet, conservative. We’ve been proven right. Equities have gone up even faster than we thought and we see no reason the bull market won’t continue.
As a result, we are raising our forecast. We now expect a year-end Dow of 16,250, with the S&P 500 at 1,765, a respectable gain of 5.8% from Friday’s close. That’s an annualized gain of almost 10% for the rest of the year, with dividends boosting the total return to 12% annualized.
This would boost the 2013 return for the Dow to 24%, the most for any year since 2003. So even though bearish forecasters are saying the 2013 increase in equity prices is “insane,” it is actually well within historical norms.
We use a capitalized-profits model to find fair-value for equities. We divide corporate profits by the current 10-year Treasury yield (1.95%), and then compare the current level of this index to each quarter for the past 60 years. This method gives us a fair-value for the Dow of 48,000 – three times the current level. Obviously, this is crazy.
But it’s what happens when the Fed holds interest rates at artificially low levels. So, we adjust by using a 10-year Treasury yield of 4.5% - the same as the Federal Reserve’s estimate of long-term growth in nominal GDP (real GDP growth plus inflation). Using 4.5% as our discount rate suggests a much more reasonable fair value of 21,000 on the Dow and 2,250 for the S&P 500.
But what if record high corporate profits –12.7% of GDP – revert to their historical norm of about 9.5%, at the same time the 10-year Treasury yield moves to 4.5%? If that happened, the fair value of the Dow would be 15,650, and the S&P 500 would be 1700. In other words, if profits fall 25% and interest rates more than double, broad stock market indices are still slightly undervalued. That said, this scenario is highly unlikely. If rates are rising, it will most likely be because the economy is doing well, which means corporate profits will not collapse.
This does not mean markets will rise in a straight line. Volatility is part of life. But, if you can find a way to sleep through the next few years, and be long equities at the same time, you should wake up wealthier. Stay bullish.

[DougMacG]

Wesbury makes his prediction.  I'd like to invite each of us to make his own 

A fair challenge.  Crafty, what say you? 

Personally, I will decline to predict the market.  We know that the indices of big, cronied-up companies can prosper while America fails.

On the larger question (not asked), the movement of the economy, I will say that if the economic policies will be more of the same, the results will be more of the same - best case.

Quantifying:  My understanding is that benchmark for breakeven growth for the U.S. economy is normally around 3.1%.  Rapid growth coming out of a severe downturn with pro-growth policies should be more like 7.75%, see the Reagan recovery.  My prediction is that nationwide economic growth will be no more than 3.1%, snail's pace growth, until policies change.  I predict that general economic conditions will not return to the levels before Pelosi-Reid-Obama took majorities in congress, of real unemployment 4.6% nationally and 3% in our metro for example, EVER, until policies change.

Can a shrewd investor make money anyway?  Yes.  Can a generation of new grads with closed off opportunities, told by their President to lower their ambitions, ever get back what they lost with the current focus on destructive economic policies?  I don't see how.

[Crafty_Dog]

Based upon my track record in the market, I am a counter indicator.  I no longer take myself seriously.   

[objectivist1]

http://www.marketwatch.com/Story/story/print?guid=3BDA6EE6-C248-11E2-BA61-002128040CF6

[Crafty_Dog]

OTOH here´s Wesbury 

New Orders for Durable Goods Increased 3.3% in April
       
       
               
                       
                               
                                        Data Watch
                                       
                                       
                                        New Orders for Durable Goods Increased 3.3% in April To view this article,
Click Here
                                       
                                        Brian S. Wesbury - Chief Economist 
 Bob Stein, CFA - Deputy Chief Economist
                                       
                                        Date: 5/24/2013
                                       

                   

                                       
New orders for durable goods increased 3.3% in April (3.0% including revisions to
prior months), coming in well above the consensus expected gain of 1.5%. Orders
excluding transportation increased 1.3% (1.0% including revisions to prior months),
also well above the consensus expected 0.5% gain. Overall new orders are up 2.4%
from a year ago, while orders excluding transportation are up 0.9%.

All major categories of orders rose in April, led by aircraft, autos, and
computers/electronics.

The government calculates business investment for GDP purposes by using shipments of
non-defense capital goods excluding aircraft. That measure declined 1.5% in April
(-0.1% including revisions to prior months). If unchanged in May and June, these
shipments will be down at a 2.5% annual rate in Q2 versus the Q1 average.

Unfilled orders rose 0.3% in April and are up 2.0% from last year.

Implications: A very solid report out on durable goods this morning. New orders for
durables rose 3.3% in April, with all major categories of orders up for the month.
The largest gains were in the transportation sector – aircraft and autos
– which is extremely volatile. However, orders were still up 1.3% excluding
transportation, much better than the consensus expected. The worst news in the
report was that shipments of “core” capital goods, which exclude defense
and aircraft, were down 1.5% in April. This suggests business investment in
equipment will be tepid in Q2, consistent with our forecast of 2.5% real GDP growth
for the quarter. But new orders for core capital goods increased 1.2% in April and
unfilled orders were up 0.9%. This hints at an acceleration in business investment
beyond Q2. We expect orders to continue to trend upward over the next several
months. Monetary policy is loose and, for Corporate America, borrowing costs are low
and balance sheet cash and profits are at a record high. Meanwhile, the obsolescence
cycle and higher capacity use should goad more firms to replace and build-out their
capital stock. In addition, the recovery in home building should generate more
demand for big-ticket consumer items, such as appliances. The bottom line is that
today’s report shows the Plow Horse economy is moving along just fine and may
even be starting to pick up its gait.

[G M]

Wesbury has predicted 12 of the last zero recoveries.

 

[Crafty_Dog]

And you predicted a 6000 DOW and incipient disaster all the way from 6500 to 15,000 plus 

[objectivist1]

The stock market alone is NOT a barometer for the health of the economy as a whole.  This is lost on MANY people.

[G M]

And you predicted a 6000 DOW and incipient disaster all the way from 6500 to 15,000 plus 

Record levels of poverty in America, are you sure the disaster hasn't happened?

[Crafty_Dog]

We are in agreement that the situation is dire for dramatic numbers of Americans.

However in this moment that is NOT th point.  I posted Wesbury in response to a prediction of market collapse. Yes?

[G M]

Listening to Wesbury about the economy is like listening to the commentary from a Three card Monte dealer.

[DougMacG]

We lost 12% of our economy per year to the failure of the policies still in place.  Instead of making up for lost ground we have been growing at half the rate that we should have been for 4 years, digging that hole deeper.  In 6 years since Pelosi-Reid-Obama policies became the direction of the country and the law of the land that makes a total loss of economic activity of approximately 50 trillion dollars over 6 years.  Real unemployment, black unemployment, number of people in need of food assistance, etc., all doubled.  We can spin that failure any way we want.

Washington (CNN) - Two-thirds of Americans say that the nation's economy is in poor shape
http://politicalticker.blogs.cnn.com/2013/05/24/poll-how-do-you-rate-the-economy/

http://dogbrothers.com/phpBB2/index.php?topic=1467.msg61857#msg61857

The market for crony companies operating globally in a Fed tampered environment went up enormously and we missed it.  Like the lottery and a Kentucky Derby longshot, I could not place that bet. The losers were the small operators, startups that never started, a generation of new grads, and the millions who left the workforce unwillingly.  

The other negative is that of the 50% who will pay in, every family of four just added the debt of a median house without getting the house.

[Crafty_Dog]

Agreed!

[ccp]

http://www.creebulb.com/

[Crafty_Dog]

Closing in on a 200% gain with CREE!!! 

[ccp]

Have you tried the lightbulb yet?  I still use halogens.

[ccp]

moved to the Economics thread on SCH because it deals with econ theory,-- Marc

[Crafty_Dog]

Is QE Really THAT Important?
       
       
               
                       
                               
                                        Monday Morning Outlook
                                       
                                       
                                        Is QE Really THAT Important? To view this article, Click Here
                                       
                                        Brian S. Wesbury - Chief Economist 
 Bob Stein, CFA - Deputy Chief Economist
                                       
                                        Date: 6/3/2013
                                       

                   

                                       
As the Chicago Blackhawks started their seven game conference championship (final
four) series with the Los Angeles Kings, the national sports punditry had decided it
was going to be hard for the Hawks to advance to the final round of Stanley Cup
play.

LA is just too big and punishing, they said. In Biblical terms (as in Numbers 13),
the punditry had crossed over into the Promised Land, taken one look at the giants
over there and decided it was too scary to go fight them.

In the more mundane world of hockey, thank goodness the players didn’t listen
to the fearful punditry. The Blackhawks have dominated – winning both games by
a combined score of 6-3. As of right now, it is hard to imagine the series going
more than five games. Chicago is faster and deeper than LA and Chicago’s goal
tending is better.

The same thing is happening in the economy. The punditry has decided that anything
good happening is actually bad. It is all just a sugar high – based on
Quantitative Easing and government stimulus – and that talk of winding down or
tapering QE is negative. So the latest fear is that any good data on growth is
actually bad, because it means the Fed will wind down QE. They say “the
economy can’t possibly grow on its own – without support from the Fed
and Ben Bernanke.”

But the Fed did not invent fracking, or the cloud, or the smartphone, or 3-D
printing. QE has not lifted Price-to-Earnings ratios. Corporate profits, which the
Fed does not control, have risen in tandem with stock prices.

Yet, every time equities sell off, as they did last Friday, when the Dow Jones
Industrial Average fell 209 points and the S&P 500 dropped 23.7, or 1.4%, the
punditry said it was a clear sign that the “sugar high” of QE was losing
its magic and that equities couldn’t possibly keep rising if tapering was on
its way.

But, with all of this, we still view the world in the same way we have for the past
four years. A “V-shaped” recovery has now given way to a
“checkmark” recovery. The right side is longer and higher than the left
side. The declines due to the crisis are behind us and cyclical stocks are starting
to lead the market; QE is not the driving force behind these gains and the end of QE
will not bring them to an end.

Stay confident, believe in the underlying technology and fundamentals and
don’t let the punditry put fear in your heart by saying the good times cannot
possibly last or be true.
                         

[DougMacG]

Wesbury: "The punditry has decided that anything good happening is actually bad."...
"don't let the punditry put fear in your heart by saying the good times cannot possibly last or be true."
---------------

U.S. manufacturing index for April unexpectedly declines - hits a 4 year low

http://www.washingtonpost.com/business/economy/us-manufacturing-index-for-april-unexpectedly-declines/2013/06/03/6aa12ce6-cc8a-11e2-8845-d970ccb04497_story.html

Ooops.  Now which side of punditry needs to spin?

Wesbury's rosy scenario outlook seems to only apply to the existing company indices - companies generally connected to the regulators, operating globally, that happen to still be listed on U.S. exchanges.  Startups still suck.  Employment sucks.  Tax rates are up, state and federal.  Welfare rolls are up.  Regulations are still exploding.  Inner cities are still in shambles.  Refineries are closing.   Obamacare 2014 is creating enough business uncertainty to make up for most positive forces.  Growth in Asia is fizzling.  Europe is dismantling.  I think I'll buy 100 shares...

[DougMacG]

Famous people caught reading the forum?  AEI comes to the defense of my previously unsubstantiated claim that in the face of our unprecedented regulatory climate, the business startup rate is the worst in our nation's history.  I'm not talking about LLCs filed for existing assets or one person operations, but referring to the dearth of real entrepreneurs risking real capital to give birth to new businesses that hire new employees.  Implementation of Obamacare is one more step taking us further from having a dynamic economy with full employment and full time employees.  Meanwhile, Wesbury dwells on the performance of the unchallenged, entrenched companies with their teams of regulatory compliance officers replacing innovation in the pursuit of zero-sum profits.  Good luck America.
----------

Where are the entrepreneurs? More evidence the very heart of the US economy is failing
James Pethokoukis | June 3, 2013  AEI



America makes a grievous error if it dismisses the weak economic expansion — this month marks the fourth anniversary of the end of the Great Recession – as nothing more than the expected aftermath of a deep downturn and financial crisis. Sluggish GDP growth and yet another “jobless” recovery point to a secular problem rather than merely cyclical forces at work.

The US entrepreneurial spirit may be faltering. Check out these data points from The Wall Street Journal: a) In 1982, new companies made up roughly half of all US businesses, according to census data. By 2011, they accounted for just over a third; b) from 1982 through 2011, the share of the labor force working at new companies fell to 11% from more than 20%; c) Total venture capital invested in the US fell nearly 10% last year and is still below its prerecession peak, according to PricewaterhouseCoopers.



New companies are best at creating what business guru Clayton Christensen has termed “empowering innovation” (creating new consumer goods and services) as opposed to process innovation (creating cheaper, more efficient ways to make existing consumer goods and services). Empowering innovation produces new jobs, while efficiency innovation eliminates them, often through automation.

Don’t let Apple and Google and Facebook fool you. Right now, Christensen wrote in The New York Times last year, “efficiency innovations are liberating capital, and in the United States this capital is being reinvested into still more efficiency innovations. In contrast, America is generating many fewer empowering innovations than in the past.”

Not only do we need a vibrant entrepreneurial ecosystem so startups can flourish and generate disruptive innovation, these new entrants raise the competitive intensity for established players to become more innovative. In other words, explains banker and entrepreneur Ashwin Parameswaran, “unless incumbent firms face the threat of failure due to the entry of new firms, product innovation is unlikely to be robust. The role of failure in fostering product innovation has sometimes been called the ‘invisible foot’ of capitalism.” Big business must be subject to maximum competitive intensity.

In the WSJ piece, reporter Ben Casselman offers several possible causes for the decline in risk taking from the aging of the US population to rising health care costs to increased state and local licensing requirements: “One recent study found that roughly 29% of U.S. employees required a government license or certificate in 2008, up from less than 5% in the 1950s.” Parameswaran thinks Washington’s backstop of “too big to fail” banks play a role by encouraging the financial sector to take on macroeconomic risk of the sort the Federal Reserve worries about (housing, derivatives) rather than lending to small business or new firms. Another factor could be restrictive land-use regulations that prevent our most productive cities from being as populous as they could be. And Christensen sees schools at all levels failing to teach the “skills necessary to start companies that focus on empowering innovations.”

US workers need America to be as entrepreneurial and innovative as possible. So does the global economy. But right now we are taxing capital, educating kids, regulating banks, and managing cities in ways that are crippling America’s greatest economic asset.

[Crafty_Dog]

Both of those are strong responses Doug.

[ccp]

*****June 5, 2013, 1:13 p.m. EDT

Madoff, other felons say markets are unfair

By Ronald D. Orol, MarketWatch
WASHINGTON (MarketWatch) — Faced with a rash of insider trading in the markets, federal prosecutors and securities regulators in recent years have stepped up efforts to crack down on violations.

But insider trading and market fraud persist, perhaps at epidemic levels. Even though the Securities and Exchange Commission has brought more insider-trading actions in the past three years than in any three-year period in the agency’s history, and even though the U.S. attorney in New York City has convicted 73 people in insider-trading cases since 2009, the crime remains all too common.

 Bernie Madoff.
That’s what MarketWatch found in a series of interviews with people convicted of insider trading and fraud. These felons painted a picture of an unfair market driven by widespread cheating that favors those with privileged information and expensive technology. The cheating also hurts individual investors and retirement savers trying to follow the rules of the road and produces a deeply unfair market environment.

MarketWatch reporters conducted a series of in-depth interviews with ex–investment brokers and others who lost their trading licenses and are either in prison serving multiyear sentences or have done their time in the slammer and now advise others on what not to do.

The results were discouraging.

MarketWatch found that insider trading may be one of the most common crimes on Wall Street and one of the least prosecuted. And that was only the beginning. MarketWatch discovered that the problem for retail investors goes far beyond a failure of regulators to identify insider-trading violations.

The financial criminals we spoke with said that not only do many investors routinely skirt insider-trading laws, but the explosion of computerized high-speed trading in recent years has made the situation even more unfair for the retail investor.

Those retail investors should be careful when relying on audited financial statements because accounting fraud continues unabated, according to one interview. Accounting-fraud cases are complex, and regulators don’t have the resources to enforce the law effectively, according to one felon.

As one fraudster put it to MarketWatch, the Securities and Exchange Commission has roughly 4,000 employees to regulate the financial industry while there are 35,000 cops in New York fighting blue-collar crime.

Insider trading may be one of the most common crimes on Wall Street and one of the least prosecuted.

Bottom line: The markets aren’t fair for retail investors. Regulators at the U.S. attorney’s office declined to comment. However, Daniel Hawke, chief of the SEC enforcement division’s market abuse unit, defended the agency’s actions, arguing that it is difficult to identify how much insider trading is going on that regulators aren’t catching.

He said felons behind bars are not going to be credible witnesses because, having been successfully prosecuted, these are people with an ax to grind against the government.

“There was blatant deception implicit in their crimes,” Hawke said. “I don’t think it is credible for someone convicted of insider trading or securities fraud to talk about the ineffectiveness of the government in investigating or prosecuting insider trading.”

Nevertheless, MarketWatch spoke with four ex-brokers, three of whom are in prison with years to go on their sentences and a fourth who is out of prison and advises others about to enter custody.

To get a perspective on the world of accounting fraud, MarketWatch also spoke with a former chief financial officer of a publicly traded company behind a well-known criminal enterprise.

Among them was the poster child for brokers-turned-felons: Bernie Madoff. The perpetrator of a $50 billion Ponzi scheme — the largest in history — explained that retail investors can avoid being scammed by fraudsters like him by putting money in an index fund. (If only he had offered that advice earlier.)

On a smaller scale, MarketWatch spoke with the so-called Bernie Madoff of New Jersey, an ex-broker who is now behind bars for running a Ponzi scheme. He said insider trading is impossible to stop and that retail investors will never be able to compete with the pros unless they splash out for sophisticated, and expensive, trading tools.

An ex–New York stockbroker and hedge-fund manager currently serving 16 years for defrauding investors said insider trading is a black hole that leaves regulators in the dark. A former Wall Street broker who spent 12 years as a broker at big New York investment banks before pleading guilty to wire fraud says no one on Wall Street can be successful without cheating.

For a different perspective MarketWatch turned to a felon and former chief financial officer of Crazy Eddie Inc., a criminal business passing itself off as a New York electronics retailer in the 1980s. This felon explains why he thinks “audit” is a fraudulent term.
Ronald D. Orol is a MarketWatch reporter based in Washington. Follow him on Twitter @rorol.*****
 

[ccp]

VVUS drug qsymia -  the launch has been a dismal failure for a drug that should be a semi-blockbuster.   It still has to be specially ordered.   It is not perfect.  But it is clearly the most effective weight loss drug (combination) approved by the FDA.   Belviq, Arena's drug - a safer version of desfenfluramine - is probably ok too though it is only one half as effective - maybe a five percent total weight loss.  Qsymia can be up to 10-12 % at maximum dosage.   I own neither stock.  I am contemplating VVUS.  I agree with the major shareholder who is trying to get the entire board of directors replaced.  Or they need to team up with a major pharma that has the skill, talent, sales and marketing prowess to get the drug prescribed more.  Their are two generic alternatives to the qsymia combination which will cut into sales.  The dosages are not equivalent though. 

http://seekingalpha.com/article/1483911-vivus-fighting-3-front-war?source=yahoo

[DougMacG]

Watch the employment rate, now below 60%, not the unemployment rate which headlines U3.  The number receiving food stamps is up by 39% since 2009.  U3 only includes Americans actively seeking work.

The Hidden Jobless Disaster 
At the present slow pace of job growth, it will require more than a decade to get back to full employment defined by prerecession standards.

By EDWARD P. LAZEAR   WSJ June 6, 2013  (excerpt)
...
Yet the unemployment rate is not the best guide to the strength of the labor market, particularly during this recession and recovery. Instead, the Fed and the rest of us should be watching the employment rate. There are two reasons.

First, the better measure of a strong labor market is the proportion of the population that is working, not the proportion that isn't. In 2006, 63.4% of the working-age population was employed. That percentage declined to a low of 58.2% in July 2011 and now stands at 58.6%. By this measure, the labor market's health has barely changed over the past three years.

Second, the headline unemployment rate, what the Bureau of Labor Statistics calls "U3," uses as its numerator the number of individuals who are actively seeking work but do not have jobs. There is another highly relevant measure that captures what is going on in the economy. "U6" counts those marginally attached to the workforce—including the unemployed who dropped out of the labor market and are not actively seeking work because they are discouraged, as well as those working part time because they cannot find full-time work.

Every time the unemployment rate changes, analysts and reporters try to determine whether unemployment changed because more people were actually working or because people simply dropped out of the labor market entirely, reducing the number actively seeking work. The employment rate—that is, the employment-to-population ratio—eliminates this issue by going straight to the bottom line, measuring the proportion of potential workers who are actually working.

During the past three decades the relation between unemployment and employment has been almost perfectly inverse. (See the nearby chart.) When the employment-to-population ratio rises, the unemployment rate falls. When the unemployment rate rises, the employment-to-population ratio falls. Even the turning points are aligned. Consequently, the unemployment rate has been a very good proxy for the employment rate. But that relationship has completely broken down during the most recent recession.

While the unemployment rate has fallen over the past 3½ years, the employment-to-population ratio has stayed almost constant at about 58.5%, well below the prerecession peak. Jobs are always being created and destroyed, and the net number of jobs over the last 3½ years has increased. But so too has the size of the working-age population. Job growth has been just slightly better than what it takes to keep the employed proportion of the working-age population constant. That's why jobs still seem so scarce.

The U.S. is not getting back many of the jobs that were lost during the recession. At the present slow pace of job growth, it will require more than a decade to get back to full employment defined by prerecession standards.

The striking deficiency in jobs is borne out by the Bureau of Labor Statistics' Job Openings and Labor Turnover Survey. Despite declining unemployment rates, the number of hires during the most recent month (March 2013) is almost the same as it was in January 2009, the worst month for job losses during the entire recession (4.2 million then, 4.3 million now).

Why have so many workers dropped out of the labor force and stopped actively seeking work? Partly this is due to sluggish economic growth. But research by the University of Chicago's Casey Mulligan has suggested that because government benefits are lost when income rises, some people forgo poor jobs in lieu of government benefits—unemployment insurance, food stamps and disability benefits among the most obvious. The disability rolls have grown by 13% and the number receiving food stamps by 39% since 2009.

These disincentives to seek work may also help explain the unusually high proportion of the unemployed who have been out of work for more than 26 weeks. The proportion of unemployed who are long-termers reached 45% in April 2010 and again in March 2011. It is still above 37%. During the early 1980s, when the economy experienced a comparable recession, the proportion of long-term unemployed never exceeded 27%.

The Fed may draw two inferences from the experience of the past few years. The first is that it may be a very long time before the labor market strengthens enough to declare that the slump is over. The lackluster job creation and hiring that is reflected in the low employment-to-population ratio has persisted for three years and shows no clear signs of improving.

The second is that the various programs of quantitative easing (and other fiscal and monetary policies) have not been particularly effective at stimulating job growth. Consequently, the Fed may want to reconsider its decision to maintain a loose-money policy until the unemployment rate dips to 6.5%.

Mr. Lazear, chairman of the president's Council of Economic Advisers from 2006-2009, is a Hoover Institution fellow and a professor at Stanford University's Graduate School of Business.

[ccp]

Anyone know if any business actually has been successful over the longer haul with type of investment support?

http://en.wikipedia.org/wiki/Crowd_funding

[Crafty_Dog]

I have no opinion on this but perhaps of interest


http://advisorperspectives.com/newsletters13/pdfs/Gundlach-Dont_Sell_Your_Bonds.pdf

<<Don’t sell your bonds just yet, according to Jeffrey Gundlach. Global economic
growth is slowing, he said, and the U.S. will be competing for a larger slice of a
shrinking worldwide pie. A weaker economy dims the prospects for higher interest
rates. The benchmark 10-year Treasury yield – currently 2.08% – will be 1.70% by the
end of the year, according to Gundlach, providing profits for holders of long-term
bonds.>>

Much data in the deck linked within:
http://advisorperspectives.com/newsletters13/pdfs/TR-Core_Webcast_Slides.pdf

[DougMacG]

Interest costs up 32% in one month.  Much more to come.  We all know that.  If we are comparing to Paul Volcker's time, there is a potential for interest rates to go up 10 points (or more) with interest on the debt consuming more over half of all revenues.  I would call that a 'workhorse economy'.  Did ANYONE see this coming?
---------------------
National Debt Could Skyrocket As Interest Rates Rise

Paying off the national debt just got a bit more dangerous, and potentially a lot more expensive.

The interest rates on federal debt began climbing last month, jumping from 1.66 percent on a 10-year U.S. Treasury note at the start of May to a stunning 2.2 percent on Tuesday.

That 54-basis point increase looks small to the casual eye. But if it continues, the higher yield could increase by billions of dollars how much money the federal government spends to service the $16.7 trillion national debt.

http://www.thefiscaltimes.com/Articles/2013/06/13/National-Debt-Could-Skyrocket-as-Interest-Rates-Rise.aspx#page1

[Crafty_Dog]

"Did ANYONE see this coming?"

Ummm , , , why yes I believe it has been mentioned around here a time or three , , ,

[G M]

The One Chart That Shows Just How Stuck Our Economy Is

By Matt Berman

 June 12, 2013 | 2:39 p.m.



The U.S. jobs picture is bleaker than the most recent jobs reports may make you think. The economy added 175,000 jobs last month, but at the rate things are going, it would take almost a decade to get back to prerecession employment levels. A Job Openings and Labor Turnover Survey report released Tuesday by the Bureau of Labor Statistics digs in on the bad news: The number of job openings in the U.S. actually fell by 118,000 in April to 3.8 million.
 
How bad can 3.8 million job openings be? The Economic Policy Institute looks at the number and sees that "the main problem in the labor market is a broad-based lack of demand for workers—and not, as is often claimed, available workers lacking the skills needed for the sectors with job openings." To bolster this point, they put forward this chart:
 
 
 


In every industry, the number of unemployed workers outpaces the number of job openings. To state the obvious: To get that disparity to dramatically shrink, we've got a long way to go.

[G M]

Two more downgrades to the U.S.’s credit rating on the way: Analyst


Matthew Boesler, Business Insider | 13/06/12 | Last Updated: 13/06/12 12:43 PM ET
More from Business Insider
.


BloombergThe Bank of America Merrill Lynch strategist says the downgrades could actually catch the market by surprise. .


Monday, credit rating agency Standard & Poors revised its credit rating outlook on U.S. sovereign debt to “stable” from “negative.”
 
In 2011, S&P was the first of the three major rating agencies to strip the U.S. of its AAA rating (currently, it has the U.S. at AA+).
 
BofA Merrill Lynch interest rate strategist Priya Misra warns clients in a note that the other two major raters, Moody’s and Fitch, will probably also strip the U.S. of its AAA rating sometime this year – and, believe it or not, the downgrades could actually catch the market by surprise.
 
.
Misra writes:
 

Expect Moody’s and Fitch to downgrade later this year

We continue to believe that Moody’s and Fitch are more likely than not to downgrade the US one notch this year, which would put them in line with S&P. Based upon their reports and our own analysis, to maintain AAA status, Moody’s and Fitch would need to see approximately US$1tn in additional deficit reductions over the decade – on top of the existing full sequester – to produce medium-term stabilization, followed by a decline in the US debt/GDP ratio.
 
CBO’s GDP estimates are likely optimistic relative to rating agency assumptions. Even if Moody’s and Fitch agree with CBO’s deficits, a 4% nominal GDP growth assumption beyond 2013 would result in debt-to-GDP declining to 73.2% before rising again.
 
Market implications

To the extent that US downgrade risks are still at play for the market, the removal of S&P from the rating story is a positive for Treasury rates, relative to swaps and spread products in general. But we do not think the market is fully pricing in a Moodys/Fitch single-notch downgrade this year. While the surprise factor of a Moody’s move this summer would be quite mild relative to the S&P downgrade in August 2011, we think it could catch the market off guard, given the recent improvements on the deficit front. We believe a downgrade would result in a steeper 5s-30s curve, tightening of swap spreads and a marginal underperformance of Treasuries with respect to corporates and MBS.
 
Yesterday, the S&P announcement did seem to have a marginal impact on markets, at least in the morning.

[Crafty_Dog]

Data Watch
________________________________________
Retail Sales Increased 0.6% in May, Above the Consensus Expected Gain of 0.4% To view this article, Click Here
Brian S. Wesbury - Chief Economist
Bob Stein, CFA - Deputy Chief Economist
Date: 6/13/2013

Retail sales increased 0.6% in May, coming in above the consensus expected gain of 0.4%. Sales are up 4.3% versus a year ago.
Sales excluding autos rose 0.3% in May, matching consensus expectations. These sales were up 0.6% including revisions to prior months and are up 3.4% in the past year.
The increase in sales in May was led by autos and grocery stores. There were no major gains or losses in other categories.
Sales excluding autos, building materials, and gas rose 0.3% in May but were up 0.6% including revisions to prior months. Even if unchanged in June, these sales will be up at a 2.6% annual rate in Q2 versus the Q1 average.

Implications: So much for the theory that the federal spending sequester or end of the payroll tax cut was going to kill the consumer. Sales were up 0.6% in May and are up at a 3.8% annual rate since the beginning of the year. With consumer prices up at an annual rate of only about 0.6% since the start of the year, “real” (inflation-adjusted) sales are up at more than a 3% annual rate. “Core” sales, which exclude autos, building materials, and gas, rose 0.3% in May and 0.6% including upward revisions to prior months. Other analysts, who had been forecasting roughly 1.5% real GDP growth in Q2 are reacting to this report by marking up their forecasts; we’re holding steady where we’ve been all along, at 2.5%. Nonetheless, this growth is nothing to write home about – it’s still Plow Horse growth – but much better than many analysts were projecting at the beginning of the year. For the rest of 2013, we still expect two major themes to play out for the consumer: first, an acceleration in consumer spending growth versus the past couple of years despite higher taxes and the sequester; second, a transition away from growth in auto sales and toward other areas, like furniture, appliances, and building materials. Consumer spending should accelerate because of continued growth in jobs, hours, and wages. In addition, households have the lowest financial obligations ratio (debt service plus other recurring monthly payments) since 1981. In other news this morning, new claims for unemployment insurance declined 12,000 last week to 334,000. Continuing claims ticked up 2,000 to 2.97 million. Plugging these figures into our employment models suggests a solid nonfarm payroll gain of 185,000 in June. On the inflation front, no sign that loose monetary policy is having an effect yet on trade prices. Import and export prices fell in May, both for overall and core measures and are also down from a year ago. An easy Fed will eventually generate higher inflation figures, but those numbers certainly aren’t here yet.

[Crafty_Dog]

Another beautiful call from David Gordon.

Although my timing in getting in was not perfect, I have done very nicely in a short amount of time.

Question presented now is whether to take the money and run or let it ride as a longer term play.

[ccp]

Crafty,

What do you think about DDD or SSYS the two bigger names in the space?

[Crafty_Dog]

Huh?

I know nothing!

I just slip streamed behind David!

[Crafty_Dog]