The Big Stall

Regular readers of The Big Picture will recognize the sentiment presented below. Its a simple 3 part analysis: 1) The economy is soft; 2) Job creation is weak, and getting weaker; and 3) most of the shills you see on TV are idiots.

The following is via Alan Abelson’s Barron’s column, titled The Big Stall:

"For reasons that have invariably eluded us — except that’s what their paymasters tell them to do — the incorrigible cheerleaders on Wall Street and in Washington have been insisting that the economy was strong, a sentiment, we regret to say, with few exceptions, mindlessly echoed by our colleagues in the press and in the electronic media. And by way of confirmation they cited the particular "strength" in employment.

Comes now Friday’s employment report for August, and guess what? It’s a bummer. Compared with the recently scaled-down consensus estimates of 90,000-100,000 additions, the Bureau of Labor Statistics reports that, in fact, last month saw a loss of 4,000 jobs. It looks like a long goodbye to Goldilocks. What’s more, in another poke in the eye to the received wisdom, the job picture was much worse in both June and July than originally reported: Revisions slashed June by a whopping 57,000 slots and July by 24,000.

Nor is that the whole sad story. For were it not for the enhancement of August’s sickly totals by a formidable 120,000 jobs mythically created by the BLS’s "birth/death" contraption, the final tally would have been downright ugly. And the so-called household data, which bulls used to eagerly parade because it consistently outdid the establishment count, continued this year’s dismal — or, should we say, accurate — performance, shedding 316,000 jobs last month.

What last month’s dismal employment showing does is pretty much cinch the case for a cut in the federal-funds rate. It also, we think, pretty much cinches the case for recession, late this year or early next."

Hard to argue with most of that . . . and as mentioned recently, we think the odds of a recession are about 65%.

>



Source:
The Big Stall
UP AND DOWN WALL STREET
Alan Abelson
Barron’s September 10, 2007   
http://online.barrons.com/article/SB118920647821821156.html

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What's been said:

Discussions found on the web:
  1. Winston Munn commented on Sep 8

    The question is will a rate cut help? It might cause temporary euphoria in the stock markets, but it will not restore confidence in assets.

    There is more than one issue with which to deal. There is a liquidity problem in the CP markets – but more than that – there is a crisis of confidence both in the CP and ABCP markets – not only in the assets held for collateral but in the ratings agencies that issued the ratings.

    It is like borrowing money to make a bet on a game of Russian Roulette. If there is one bullet in a sixshooter, everyone can calculate his risk and borrow accordingly; however, the problem with the game today is that nobody knows for sure how many bullets are in the gun – it could be zero or it could be six.

    Lowering the Federal Funds target rate does not add transparency to the Russian Roulette game – if risk cannot be guaged accurately, a slight lowering of the rate of borrowing will not help. All it will do is add fuel to existing speculative bubbles, setting up a bigger collapse.

  2. Anthony commented on Sep 8

    I have been wondering for a long time why the highly qualified and highly paid Wall Street analysts and economists have been ‘blind’ to the gathering storm. At the same time many of the financial blogs and untrained armchair economists have been fully aware of the impending issues. It seem perverse that the Wall Street ‘experts’ should be so wrong and the small guys so right.

  3. Winston Munn commented on Sep 8

    Anthony,

    The armchair economists are not paid 6+ figure incomes to support stock prices.

    Paid hucksters don’t point out the flaws in the vacuum cleaner they are selling.

  4. lurker commented on Sep 8

    On the topic of interest rate cuts, the old pushing on a string metaphor seems more appropriate than ever. Folks out of work do not qualify for prime mortgages no matter how low interest rates go or house prices drop. If a negative consumer pychology starts to take hold…oh wait…I think I hear the sound of helicopters so no worries mate.
    sardonic laughter soundtrack here…

  5. lurker commented on Sep 8

    Barry-be careful about biting the media hand that feeds your fame. you appear on TV plenty and you are no idiot…Kudblow however clearly qualifies.

  6. John F. commented on Sep 8

    Kudlow had his “they know nothing” on his show yesterday, then slobbered all over Barney Frank. Appalling.

  7. Old Ari commented on Sep 8

    But how can they cut with real inflation so high? Won’t they just start another “Bubble”? What was the expression being used not so long ago? “Zung… ? from chess.

  8. Ross commented on Sep 8

    Ponder this. IF Government inflation stastics are being manipulated for political gain and IF as I suspect inflation for Ma and Pa is runnung closer to 5%, then we are by defination already in a recession. One need only look at food inflation to see why Wally World beat their own deminished same store sales gains. My black cows eat grass, hat and corn. It takes diesel, fertilizer and depreciation on my Jonny Jump to produce the same. Expect $10/lb T bones in the near future. My Pop has never owned a computer. He gets broadcast T.V. and drives an 89 ford Tempo. Clearly hedonics does not work for him. His pathetic cost of living increases in Social Security are annually offset by the increases he pays for Medicare. But he is still a proud American, one who was on the beaches in WWII. I fear that we baby boomers will not be so forgiving of Government largress.

  9. coveredwagon commented on Sep 8

    From my perch, seems the “recession” is here. Only question is whose gonna be the first to call it.

  10. techy commented on Sep 8

    Barry, it will be great if you can write on the effect of interest rate.

    Since now we are near a done deal that rates will be cut (my guess .25 on sept 18 to boost morale, and then continue till the world collapses).

    I have a belief that rate cut is not going to tank the dollar much due to the below reasons:
    1. Europe will not let euro apprecaiate a lot anymore, they are already suffering since their exports are very expensive compared to yen,yuan,rupee etc (pegged or depreciating currencies).

    if you notice,USDEUR is pretty much hanging in the range of .75-.72 since Dec 06, even though the doom and gloom has grown multiple times.
    http://finance.yahoo.com/q/bc?s=USDEUR=X&t=1y

    2. emerging economies will not let their currency appreciate.

    i am not saying dollar will not lose another 5-8%, but nothing like 15-30% which should happen since FED will be fanning inflation with rate cuts.

    US is like the only consumer for many products from the world, and they will support his debt so that he can continue buying.

  11. SPECTRE of Deflation commented on Sep 8

    How exactly will the FED lower rates with the dollar already below 80 and the YEN below 115? The United States DOLLAR just fell through the McMansion floor, and it can’t get back up.

    Forget about everything else. This is the central issue moving forward. We are about to see a debacle like the 1930’s only worse.

  12. Chief Tomahawk commented on Sep 8

    “3) most of the shills you see on TV are idiots.”

    Yes, I remember summer ’06 one of the guests on Fox Saturday Business Block said “the market is going up because it wants the U.S. to attack North Korea.” Well I didn’t know that was coming. I went to the Fox News website to look for video of the show and/or find out the name of the nut. No such info existed. I guess I’d try to keep something like that under wraps too.

    And this I believe will be Fox Business Channel’s undoing. Supposedly they’re going to be “more business friendly”. I think just about everyone here would say CNBC is already pretty business friendly, most recently evidenced by the their Dow record close cheering. How can Fox be more friendly? I guess load their telecasts with permabulls who never advise to sell. But if a bear market comes, Fox Business Channel watchers will get hurt. Bad. And the viewing public will abandon ship.

  13. Fred commented on Sep 8

    Well, where do i park my money? under the bed?

  14. Winston Munn commented on Sep 8

    Fred,

    It may be time to adopt the Will Rogers credo: “I’m not concerned about the return on my money but the return OF my money.”

  15. techy commented on Sep 8

    about a year back i used to hear that investors will flee the falling dollar…….it did not happen and i dont see it happening (i dont know why).

    i forgot to mention that only group which will not like the falling dollar is the Oil producing nations, well they will raise the price of oil as they have done since last 2-3 years.

    right now US debt is a problem of world economy, if they inflate it will get reduced and that will buy time for them to take correction instead of outright depression.

  16. Aaron commented on Sep 8

    Unless I missed it, you haven’t said much about commercial paper. This from Minyanville:

    “Total commercial paper outstanding has fallen 13.4% in one month. During the 2001 downturn, commercial paper peaked in November 2000 and slid through to December 2003. Over that three-year period it declined by only 22%.”

    Isn’t this a big deal?

  17. techy commented on Sep 8

    Spectre if i remember right….yen jumps around in the range of 122-113 since a year.
    and it has more to do with carry trade flowing out of japan than people investing from US to japan (my understanding, correct me if i am wrong)

    and i dont understand the significance of the dollar index…its been moving around 80+-2, since 2005. does that means dollar has been up and down only by around 5% since 2 years?

  18. me commented on Sep 8

    BR

    You left out the funniest line, the first sentence, “Like father, like son.”

  19. Winston Munn commented on Sep 8

    Aaron,

    CP could in fact become a big deal if the crunch lasts a few months. CP is akin to business credit cards, used for short term financing – if short term financing is not available, assets must be sold to provide needed cash – but if you don’t hold assets that can be sold or if selling will cause a loss on those assets – you are pretty well screwed without access to the CP market.

  20. “They know nothing” –Jim Cramer- commented on Sep 8

    It is amazing how most of you are so myopic and rear view minded (looking at old inflation data) and see only one side of the coin, inflation and weak dollar.

    There are astronomical deflationary pressures building up. The Fed is behind the curve by at least three months. The Fed needs to slash down rates ASAP to boost the economy.

    Rome is burning but the Fed is watching and doing nothing due to their arrogance and incompetence.

    “They know nothing” –Jim Cramer-

  21. Jdesmond commented on Sep 8

    soon everyone will be shopping at IKEA AND putting it all together by themselves….. ;)

  22. OkieLawyer commented on Sep 8

    Old Ari:

    “Zung… ? from chess.”

    I think you are trying to think of the word “zugzwang” which means essentially: “every move you make loses, but you must move.”

    It’s a good analogy, I think.

  23. Tex commented on Sep 8

    Barry-

    You, like all of us on Wall Street, feel the desperate need for the rate cut cycle to begin. We are all so convinced that one is needed, that we have talked ourselves into its eventuality on Sept. 18. But the fact of the matter is that we are a long way off from that foregone conclusion.

    First, the Fed has a history of acting too late and while you and I would probably argue that it is already too late, the Fed does not think that. Just read thier speeches carefully. Second, all of us on Wall Street are singly focused on a financial liquidity crunch that may or may not actually spread into the real economy. No matter what we think may happen, there is really only one concrete piece of evidence in the employment report. But, as you know, there are problems with that measure. You know as well as I do that next month, August’s numbers will be revised upwards when they count the pupblic school jobs they missed this month. The Fed will look at this as one piece of the puzzle. To make the change, they historically need more evidence.

    Now, we know that Ben said he was looking at more evidnece than just statisitcs in Wy. In fact, he said he would be talking to people. And indeed, he and his venerable district presidents are doing exactly that. But the evidence we see from this effort is also far from conclusive. The Beige book survey (heavily relied upon at the Fed) suggested that growth outside of housing was not slowing as much as is being presumed. Look at Fisher’s remarks on Thursday. What we have building at best (assuming that the Board of Governors favor a cut) is a divided house between governors and the district presidents about where growth is headed. And, while the Chairman controls the agenda at any FOMC meeting, he still only has one vote. The Fed runs monetary policy by concensus and if there is a significant and beligerent group of presidents that don’t want to cut, then the meeting’s result will only be a change in the stated bias, not a cut.

    Basically, outside of NY, the real economy is only moderately slowing. And while that picture may change by spring, it is still too early (in the Fed’s eyes) for a cut. If, as I suspect, economic data continues to disappoint between now and year end, we will see Fed cuts starting in the new year.

    The final evidence I would put forth is that the Fed (and economists in general) are not good at analyzing credit markets. The Fed is set up (literally) to understand the real economy. They have local boards and beige book contact lists made up of small, medium and large companies. But they don’t allocate that many resources understanding credit markets (outside of the NY Fed). Secondly, the Fed is not terribly well equipped to handle the current type of crisis. Why? Because they work through the FF market at primary dealers and we all know that the real problem today is with European banks. That is the epicenter of this earthquake. And while the ECB has provided tremendous liquidity to their banks, it is all in euros and banks the world over borrow and lend in dollars. Thus the spike in the dollar on August 9.

    I would posit that the best chance of a rate cut by or before Sept. 18 will only come from a true financial crisis, a significant interruption in financial markets. We have not seen that yet and while the various commercial paper desks are experiencing significant lock up, they are for the most part still able to issue overnight paper. Only when that stops, will the Fed enter the picture.

  24. dukeb commented on Sep 8

    What still amazes me is how greedy people are…so afraid that they’ll miss something by getting into cash & finding the various reasonably secure and liquid places in which to keep it. I’ve been doing that since January and I can’t believe how much I’ve learned about areas I previously considered to be as complex as a hotdog. If the economy is just taking a breather and will continue its long run, what’s the big deal about sitting out for a segment or two and then getting back in? (Especially if you are gainfully employed, since that is in itself a form of economic investment.) And if everything goes to hell in a handbasket while you’re in safe forms of cash– expecially if it turns out to be a deflationary instead of inflationary or stagflationary environment–you’re still looking decent. Maybe the fear just comes down to something akin to that no-savings-at-all friend of mine who can’t stop buying lotto tickets for fear of missing out on the big win. Pathetic.

  25. SPECTRE of Deflation commented on Sep 8

    Unless I missed it, you haven’t said much about commercial paper. This from Minyanville:

    “Total commercial paper outstanding has fallen 13.4% in one month. During the 2001 downturn, commercial paper peaked in November 2000 and slid through to December 2003. Over that three-year period it declined by only 22%.”

    Isn’t this a big deal?

    Posted by: Aaron | Sep 8, 2007 10:43:43 AM

    Aaron, it’s a big deal. It means ABCP isn’t being rolled over because interest in ABCP has dried up due to uncertainty that the counterparty will be around to actually pay you back.

  26. techy commented on Sep 8

    dukeb exactly my sentiments.

    bears want to play short….and they get hammered since no one like things to go down.

    and bulls are always pushing for market…saying its better to counter inflation…..but what if things go down as much as 30% (if someone was invested in home builders they already last 75%).

    i would prefer to stay in cash till things become clear.

  27. Stuart commented on Sep 8

    “I have been wondering for a long time why the highly qualified and highly paid Wall Street analysts and economists have been ‘blind’ to the gathering storm.”

    It’s quite simple. Most analysts and many economists work for firms that generate fees by charging a % to manage assets. They cannot say anything that will encourage investor redemption in their firms’ holdings, reducing the size of the asset base upon which they charge fees. This means less fees charged. Any analyst or economist that as a result of his or her words, results in the firm raking in less fees will likely be demoted or fired. Their first responsibility is to their employer.

  28. SPECTRE of Deflation commented on Sep 8

    Spectre if i remember right….yen jumps around in the range of 122-113 since a year.
    and it has more to do with carry trade flowing out of japan than people investing from US to japan (my understanding, correct me if i am wrong)

    and i dont understand the significance of the dollar index…its been moving around 80+-2, since 2005. does that means dollar has been up and down only by around 5% since 2 years?

    Posted by: techy | Sep 8, 2007 10:53:38 AM

    techy, 80 is the line in the sand. Why is that so?

    1. Things will be more expensive for Americans because a falling dollar will create inflationary pressure on everything we import.

    2. At the same time we have falling asset values in America which is deflationary, and puts a real crimp in Americans ability to borrow as they have done in the past to offset a negative saving rate.

    3. This leads to a business cycle downturn which will kill employment and consumer spending.

    4. The twin deficits we face make us totally dependent on Foreigners to finance these debacles, and these countries have already sustained/suffered a 1/3 reduction in the value of the dollar. Do we really think they will stand by and watch another 25% reduction from here?

    I will add more later. This is just scratching the surface as to why 80 matters. The rest is nothing more than BS from the elites whose main goal is to confuse long enough for them to dump their own personal and company shit piles.

  29. “They know nothing” –Jim Cramer- commented on Sep 8

    Tex,

    The probability of a recession has increased dramatically. The Fed cannot possibly afford to overlook this fact. If they cut interest rates, we stand a better chance of avoiding a recession. If the Fed does not cut, there will be riots in the White House, US Congress and on Wall Street.

    “The deeply troubling August employment report should end any debate” about what the Fed should do, Representative Barney Frank, the Massachusetts Democrat who chairs the House Financial Services Committee, said in a statement. “A strong response is required — specifically, a meaningful interest-rate cut.”

    The Fed is preparing for a rate cut; otherwise they would not allow Mishkin to present his paper.

    Mishkin: “Fed models show the best policy in the case of a slump in housing prices would be to react immediately by cutting rates”.
    “The federal funds rate is lowered more aggressively and substantially faster” in the “optimal response,” according to the Fed’s economic model, Mishkin said.

    I am surprised to see you in denial about the imminent rate cut. There is not much doubt that the Fed will cut, the only question whether they will move by a quarter or a half percentage point.

  30. blam commented on Sep 8

    Al Greenspan says (as reported by Minyanville)

    But that’s not all, Mr. Greenspan also said there were still other signs that this market resembles similar markets [from the former fed chief’s boyhood]in 1834, 1858, 1974, definitely 1983, a little bit 1984, not so much 1985 and 1986, but kind of 1989, and from certain angles 1991 and 1992,although 1994 is in no way like today unless you turn the chart sideways.

    Greenspan then took out his wallet and removed from it a small piece of a Dow Jones Industrial Average chart from 1977 that he says looks exactly like the Shroud of Turin

    hint (a little bit of the old tongue in cheek)

  31. SPECTRE of Deflation commented on Sep 8

    techy, here’s a link that helps explain the devastating effect a falling dollar will have from here forward:

    The Big One Just Hit
    http://www.oftwominds.com/blog.html

    PS…I did a 10 year lookback on the Dollar, and not once did we ever break 80 let alone close below it. If I’m not mistaken, and if I am please correct me, the dollar has never broken 80 in over 3-4 decades.

  32. SPECTRE of Deflation commented on Sep 8

    Tex,

    The probability of a recession has increased dramatically. The Fed cannot possibly afford to overlook this fact. If they cut interest rates, we stand a better chance of avoiding a recession. If the Fed does not cut, there will be riots in the White House, US Congress and on Wall Street.

    Pure unadulterated BS. Explain to all of us how lowering the FFR will help the economy with so many systemic problems, and I will be more than glad to list our systemic problems if you like?

  33. “They know nothing” –Jim Cramer- commented on Sep 8

    “Pure unadulterated BS. Explain to all of us how lowering the FFR will help the economy”

    SPECTRE of Ignorance,

    You can start learning by reading Mishkin’s paper. The Fed models show how aggressive and substantial reductions in interest rates help the economy.

    Mishkin: “Fed models show the best policy in the case of a slump in housing prices would be to react immediately by cutting rates”.
    “The federal funds rate is lowered more aggressively and substantially faster” in the “optimal response,” according to the Fed’s economic model, Mishkin said.

  34. SPECTRE of Deflation commented on Sep 8

    SPECTRE of Ignorance,

    You can start learning by reading Mishkin’s paper. The Fed models show how aggressive and substantial reductions in interest rates help the economy.

    Mishkin: “Fed models show the best policy in the case of a slump in housing prices would be to react immediately by cutting rates”.
    “The federal funds rate is lowered more aggressively and substantially faster” in the “optimal response,” according to the Fed’s economic model, Mishkin said.

    Cramerica,

    The Greenspan model? Let’s pile on more liquidity/debt into the economy to fix things. You are pushing on a string with your theory but opinions are like A-holes, we all have one.

    PS…You quoting a former FED official doesn’t exactly bolster my opinion of your thoughts. These are the same assholes who have devalued the dollar 94% to 96% since the wizards of oz were created.

  35. “They know nothing” –Jim Cramer- commented on Sep 8

    “You quoting a former FED official doesn’t exactly bolster my opinion of your thoughts.”

    SPECTRE of Ignorance,

    Frederic S. Mishkin is a voting member.

    Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; Timothy F. Geithner, Vice Chairman; Thomas M. Hoenig; Donald L. Kohn; Randall S. Kroszner; Frederic S. Mishkin; Michael H. Moskow; William Poole; Eric Rosengren; and Kevin M. Warsh.

    http://www.federalreserve.gov/boarddocs/press/monetary/2007/20070807/

    P.S. Cutting interest rates stimulates the economy via (to name a few)

    Lowers mortgage rates
    Boosts auto sales
    Increases consumer spending
    Boosts investor confidence
    Boosts business investing
    Boosts exports (assuming lower dollar)
    Etc.

  36. SPECTRE of Deflation commented on Sep 8

    “You quoting a former FED official doesn’t exactly bolster my opinion of your thoughts.”

    SPECTRE of Ignorance,

    Frederic S. Mishkin is a voting member.

    Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; Timothy F. Geithner, Vice Chairman; Thomas M. Hoenig; Donald L. Kohn; Randall S. Kroszner; Frederic S. Mishkin; Michael H. Moskow; William Poole; Eric Rosengren; and Kevin M. Warsh.

    http://www.federalreserve.gov/boarddocs/press/monetary/2007/20070807/

    P.S. Cutting interest rates stimulates the economy via (to name a few)

    Lowers mortgage rates
    Boosts auto sales
    Increases consumer spending
    Boosts investor confidence
    Boosts business investing
    Boosts exports (assuming lower dollar)
    Etc.

    Thank you for the correction on the FED official. Retired or active the point is these jackasses have allowed 95% devaluation of our purchasing power since the FED inception.

    Let’s take your so called benefits one by one:

    Lowers mortgage rates – LIBOR is used for setting many of the variable mortgages out there. LIBOR is up substantialy. In fact the Chrysler deal used LIBOR. That should pay off handsomely. LOL!

    Boosts auto sales – How much lower can auto loans go than 0? Many of the auto makers have used financing incentives to move inventory. Aren’t they cutting production?

    Increases consumer spending – Public and private debt stands at 350% of GDP TODAY. The US consumer is tapped to the tune of 130-135% of disposable income. They can’t meet their current obligations, and you would have them pile on more debt to their personal balance sheets.

    Boosts investor confidence – What investors are you talking about? Investors have been voting with their feet. Their individual money has been heading to foreign markets in order to take advantage of currency appreciation and profits. What good is a gain when we consider the effects of inflation and curreny depreciation. You must factor these in in order to see where you stand NET.

    Boosts business investing – Why would they be investing in anything at the end of a business cycle? Wouldn’t they prefer to hold cash for future needs like a slowing business model and economy?

    Boosts exports (assuming lower dollar) – You don’t have to assume a lower dollar. It’s down a third and just broke 80. As to the wonderful export theory, why do we continue to run higher and higher trade deficits even while exports increase?

    The FED is nothing more than a bunch of assclowns! They are there to protect the banks and elites. They can goive a rat’s ass concerning the average Joe, but by all means go long 100%, and we can see how you feel next year.

  37. ari5000 commented on Sep 8

    “Cutting rates will help the economy”

    Hey, if it works for the Weimar Republic, I’m sure it’ll work for us.

    http://stockcharts.com/h-sc/ui?s=$USD&p=M&yr=10&mn=11&dy=0&id=p27928154131

    I like that term Zugzwang. Cutting = hyperinflation = Asia dumps T-bonds and rates go up anyway. No cutting = massive deflation / recession.

    Two bad choices but I don’t understand how anyone would prefer inflation over a recession. Recessions would eventually end at some point.

    I really don’t want my cup of coffee to cost $150 bucks. (And I’m not talking about Starbucks, I mean my local gas station.)

  38. SPECTRE of Deflation commented on Sep 8

    You mentioned Mishkin, so let me introduce you to Minsky who is much more relevant than a current assclown:

    What’s a Minsky moment?

    The phrase “Minsky moment” has been popping up a lot in financial news reports about the turmoil roiling financial markets worldwide. It’s named after Hyman Minsky (1919-1996), an economist known as a rather pessimistic contrarian during his lifetime for arguing that markets are inherently unstable and long stretches of good times just end in bigger collapses.

    If you’re not sure exactly what a Minsky moment is, the Wall Street Journal’s Justin Lahart offered a wonderfully clear explanation today:

    At its core, the Minsky view was straightforward: When times are good, investors take on risk; the longer times stay good, the more risk they take on, until they’ve taken on too much. Eventually, they reach a point where the cash generated by their assets no longer is sufficient to pay off the mountains of debt they took on to acquire them. Losses on such speculative assets prompt lenders to call in their loans. “This is likely to lead to a collapse of asset values,” Mr. Minsky wrote.

    When investors are forced to sell even their less-speculative positions to make good on their loans, markets spiral lower and create a severe demand for cash [that can force central bankers to lend a hand]. At that point, the Minsky moment has arrived.

  39. Estragon commented on Sep 8

    Tex,

    I’m in agreement with you that a fed cut cycle starting now isn’t necessarily a done deal. The weak jobs report, even with revisions, doesn’t fit with a lot of other datapoints. Many are well discussed, but I’ll like to toss a couple more into the mix.

    1. Tax receipts on corp income – see this chart showing annualized changes in receipts since 1929. Note that virtually every recession has been preceded by negative growth in corp tax receipts.

    I don’t know enough about the derivation and revision of the data to say it won’t turn out that we’re seeing drops in corp tax receipts now, but it does kind of make you go Hmmm.

    2. No doubt the fed is burning up the phone lines trying to sort signal from noise in the employment situation. The beige book reported that “Nearly every District reported at least modest increases in employment during the recent survey period” and “New York, Richmond, Atlanta, Minneapolis, and Dallas described their labor markets as tight. Nine of the twelve Districts reported that there were shortages of some skilled workers, including those in the information technology, accountancy, legal, and health care professions. In addition, Kansas City noted shortages for workers with lower skills, such as housekeepers and waiters, while San Francisco reported that agricultural workers were in increasingly short supply”.

    Those quotes, based on information collected just a few weeks ago, don’t exactly confirm a punk job market.

    What we MAY be seeing is job market friction wherein hiring is limited by availability of workers with skills in demand. When the fed calls around, it MAY be told something along the lines of “I didn’t hire because all I see is a sea of underemployed real estate agents and mortgage originators. I want experienced nurses/millwrights/whatever”.

    IF that’s the case, cuts risk igniting wage pressures in the higher demand jobs and potentially reversing the hard fought well-anchored inflation expectations. Cuts might help soften the blow to the underemployed agents and originators, but the reality is that many of those people need to go to nursing (or whatever) school and the sooner they get on with it the better.

    FWIW.

  40. SPECTRE of Deflation commented on Sep 8

    “They know nothing” –Jim Cramer-

    Your hotlink takes me to a Reuters page for Titanium Met Corp. Are you touting a stock with your hotlink? I thought I might learn something going to your page, and I did. You are a pumper!

    It’s no damn wonder you want a rate cut. Investments not working out as planned? LOL!

    You picked your name well, as Cramer is one of the most famous pump and dumpers around. Look at his calls in 2000 and 2001. A frigging monkey did better than Jimbo. LOL!

  41. dukeb commented on Sep 8

    SPECTRE:

    I’m not usually too receptive to lowbrow humor, but the close of the “The Big One Just Hit – http://www.oftwominds.com/blog.html ” piece was hilarious(!!!)…..

    “So exactly what will a Fed funds rate cut do? I am reminded of the schoolyard joke about the short-term benefits of peeing in your pants: it will give the stock market a warm feeling for a very brief moment. ”

  42. David commented on Sep 8

    Because of Alan Greenspan, ours has become an economy that runs on debt with it’s ‘credit swaps’, ‘CDO’s’ and sub-prime mortgages.

    Well, I love my country, so I will buy US bonds. That what it take to win. The most crucial test… still before us.

    “From this day to the ending of the world,
    But we in it shall be remember’d;
    We few, we happy few, we band of brothers;”
    William Shakespeare

  43. howard commented on Sep 8

    here’s what amuses me about people like “they know nothing – jim cramer:” the odds of a recession are always 100%. Capitalism features a phenomenon known as the business cycle, after all. the question is when the recession will hit, not whether.

    now, as a separate matter, i think the fed is between a rock and a hard place: the notion, for instance, that a fed rate cut will lead to lower mortgage rates is only true if the market doesn’t conclude that a fed rate cut is going to lead to an increase in inflationary pressures.

    were i a governor, i’d sit tight, too: people that are sure they know the future don’t have a particularly good track record over the course of human (or market) history.

  44. “They know nothing” –Jim Cramer- commented on Sep 8

    “You picked your name well, as Cramer is one of the most famous pump and dumpers around.”

    SPECTRE of Ignorance,

    Your accusations are completely unfounded and you are wrong again. The reason I picked it was because I agree with Jim about “They know nothing” statement. “They know nothing” and always late (late raising rates and late cutting rates).

    In addition to many other mistakes, the Fed has underestimated the role that housing plays in triggering recessions. Ask Barry, and he will tell you that housing is vulnerable to persistent trends that, once underway, are difficult to restrain.

    The Fed (Greenspan Fed) ought to have raised interest rates much earlier and much more aggressively to prevent the bubble in home prices (2003-2005) and should have already lowered rates by now to prevent a recession. They need to be more forward looking but they tend to look at a rear view mirror (lagging data).

    As I said before, the Fed is behind the curve and should have already lowered the rates by now.

    P.S. I have changed the link pointing to your friend, another bear.

  45. brion commented on Sep 8

    “There are astronomical deflationary pressures building up. The Fed is behind the curve by at least three months. The Fed needs to slash down rates ASAP to boost the economy.
    Rome is burning but the Fed is watching and doing nothing due to their arrogance and incompetence.”

    Boost the economy?
    The inevitable rate cut (i agree, prolly .25 bips) has already been baked into the market. The dollar slid, the “rally” came & went.
    At this point in the play, further rate cuts/bubble creations aren’t going to save us…..they will only trash the dollar, spook our asian creditors, propel oil prices ever higher and cause lending rates to RISE,
    Oh, and perhaps lure a few more retail bagholders into the endgame.

    Bernie and the jets know this.

    imho, i too believe we are already in recession.

  46. randy commented on Sep 8

    i’m alittle late hear and this may have already been discussed, but does’nt it seem strangly coincidental that all the markets have been crying and begging for a rate cut and the fed won’t give as it will look like a bail out. so,all of a sudden,a week before the fed meets we have these labor numbers that suck.if they can be doctored up,why not down? don’t get me wrong ,i’m a bear,not just on the economy but life in general.i’ve been watching my country get stolen and sold off for the last twenty years and damn it i want it back.wtf.

  47. KnotRP commented on Sep 8

    1. Things will be more expensive for Americans because a falling dollar will create inflationary pressure on everything we import….

    ….from countries that don’t peg to our currency. Major caveat.

    We may have to get use to leaded toys.

  48. randy commented on Sep 8

    okielawyer,how about fubar. thats another good german expression for whats happening.

  49. KnotRP commented on Sep 8

    One more point….it’d take one heckofa rate cut just to halt the slide in house prices….probably 1% again, and even that’s unlikely because everyone now has it in their head that it can go back to 5% in short order and crush the price again. With this inventory, there isn’t much chance of reinflating housing….it will have to lower to it’s true value. Seems unavoidable.

    And at this point, it isn’t a lack of willingness to lend that’s the problem. It’s a buyers strike — no one wants to buy what the
    lenders are reselling.

  50. KnotRP commented on Sep 8

    Was? fubar? F*cked Up Beyond All Recognition, ist Deustche? Wie?

  51. Fullcarry commented on Sep 8

    People who argue there is a deflationary outcome here obviously don’t understand the nature of money.

    Dollar money demand is collapsing and it doesn’t matter if money supply slows. Accelerating inflation is baked in.

  52. Estragon commented on Sep 8

    KnotRP – “….from countries that don’t peg to our currency. Major caveat.”

    Keep in mind that many of the countries that peg are showing signs of capacity constraints and overheating. As/if their currencies drop with the USD, they may decide to up prices as they gain share in non-pegged countries.

    Even leaded toys may cost more.

  53. Estragon commented on Sep 8

    Fullcarry – “Dollar money demand is collapsing”

    What leads you to this conclusion? What do you mean by dollar money demand?

  54. randy commented on Sep 8

    hey knotrp let me get my german for dummies book out and i’ll get back with you.

  55. Fullcarry commented on Sep 8

    Estragon

    It means people around the world no longer want to move their savings into dollars.

  56. techy commented on Sep 8

    guys i am damn sure china and india are not going to ask more money for their stuff/service.

    they will not let their currency appreciate more than 2-3%.

    so some stuff will not take the inflationary path due to falling dollar (if it falls, for me thats a big question)

    ok lets forget about what FED will do, lets say we are the FED, what will we do to ward off recession?? (we dont care what happens to usa after 1.5 years, till then we want song and dance and happy people)

    in other words, our only goal is to ward of recession….inflation is welcome…falling dollar is welcome. please suggest what will you do??

  57. Fullcarry commented on Sep 8

    techy

    It might not really matter what they want. Inflation in China and India is running at close to double digits. They need to stop monetary inflation. At some they will stop supporting the dollar. The only question is when.

  58. Fullcarry commented on Sep 8

    From the great Charles Hugh Smith Blog:

    “All that is peachy–until the dollar weakens below 80. Why buy an asset in dollars if you fear the dollar will lose 20% of its value in a few months? What exactly is so “safe” about a Treasury in which you can lose 20% of your capital? Nothing. It’s a lousy investment. Technical analysts such as Louise Yamada have been warning for years that there is no support under 80 for the dollar– there is literally no bottom.

    Why do we care? Because the Treasury and the Fed have to worry what happens if they let the dollar drop to 76, then 70, then 65 and then who knows how low. While the MSM is focused on the Fed bailing out Wall Street speculators and those who gambled on housing and lost, the Really Big Board Game–foreign currency exchange–makes the domestic-economy interest-rate noise look like a couple of kids playing tiddly-winks.

    Can the Fed really afford to sacrifice the dollar, and hence the entire U.S. position in the global financial structure to placate a few loud-mouthed TV entertainers (Oops I mean “analysts”) and pandering politicos? This is why the Fed and other central banks are playing around with all these “liquidity enhancement” games; they all fear a collapse in the dollar and are absolutely loathe to see the Fed cut interest rates, which would sink the dollar faster than the torpedo which sank the Lusitania (the grand ship sank in half an hour).”

  59. waiting_ commented on Sep 8

    C’mon. The Fed doesn’t give a f… about what “everybody” thinks should be done. They believe in the business cycle and only incremental change in management of the economy. They don’t read the Journal and absolutely don’t give a f- for the whining on CNBC. They are academics, as are all of the big players in the market. Pals from school. Insight: read theory, apply data, avoid hype and hysteria. In the immortal words of Carl Spackler, “In order to conquer the animal, I have to learn to think like an animal. And, whenever possible, to look like one. I’ve gotta get inside this guy’s pelt and crawl around for a few days.”

  60. wunsacon commented on Sep 8

    >> “I didn’t hire because all I see is a sea of underemployed real estate agents and mortgage originators. I want experienced nurses/millwrights/whatever”.

    God, I sure hope that happens. Hawking real estate and loans to people who can’t afford it is a filthier profession than changing bed pans. Helping people walk into miserable financial situations isn’t just an “inefficient allocation of capital”. It’s a sin. Thousands of leading participants should be sued for previous years’ bonuses, unemployed, and ex-communicated.

  61. cheap opportunity to quote bart simpson commented on Sep 8

    >> Lowering the Federal Funds target rate does not add transparency to the Russian Roulette game – if risk cannot be guaged accurately, a slight lowering of the rate of borrowing will not help. All it will do is add fuel to existing speculative bubbles, setting up a bigger collapse.

    Well, if they don’t cut, that doesn’t improve transparency either. So, whether we understand the risks or not, we all have to pull a trigger (make some decision on where to put our money), yes?

    What part of “di, di mau!” didn’t you understand??
    – Bart Simpson

  62. SPECTRE of Deflation commented on Sep 9

    SPECTRE:

    I’m not usually too receptive to lowbrow humor, but the close of the “The Big One Just Hit – http://www.oftwominds.com/blog.html ” piece was hilarious(!!!)…..

    “So exactly what will a Fed funds rate cut do? I am reminded of the schoolyard joke about the short-term benefits of peeing in your pants: it will give the stock market a warm feeling for a very brief moment. ”

    Posted by: dukeb | Sep 8, 2007 2:25:17 PM

    LOL! These jackasses running around calling for a cut are like addicts. It’s all about the fix. Nevermind that it will kill you. Does this sound like a cut coming for the poor slobs:

    Fed’s Plosser: Financial Disruptions Don’t Require Rate Cut

    “I believe disruptions in financial markets can be addressed using the tools available to the Federal Reserve without necessarily having to make a shift in the overall direction of monetary policy.”
    Charles I. Plosser. Philly Fed President, Sept 8, 2007

  63. me commented on Sep 9

    “C’mon. The Fed doesn’t give a f… about what “everybody” thinks should be done. They believe in the business cycle and only incremental change in management of the economy.”

    Bingo

    They worry about the real big boys and not us low lifes. They don’t care if unemployment goes to 7% as long as they control inflation. They don’t want the little guy paying back the big guy with inflated dollars. You can’t keep people in slavery if their standard of living is rising.

  64. me commented on Sep 9

    >> “I didn’t hire because all I see is a sea of underemployed real estate agents and mortgage originators. I want experienced nurses/millwrights/whatever”.

    Maybe we can turn them into all those technical people we need, oh wait, they probably aren’t smart Indians either. Forgive me, I keep hearing how companies can’t hire qualified people because it is booming and yet IT employment is still not back to 2000 levels.

  65. SPECTRE of Deflation commented on Sep 9

    “C’mon. The Fed doesn’t give a f… about what “everybody” thinks should be done. They believe in the business cycle and only incremental change in management of the economy.”

    Bingo

    They worry about the real big boys and not us low lifes. They don’t care if unemployment goes to 7% as long as they control inflation. They don’t want the little guy paying back the big guy with inflated dollars. You can’t keep people in slavery if their standard of living is rising.

    Posted by: me | Sep 9, 2007 10:41:14 AM

    “The new capitalist gods must love the poor – they are making so many more of them.” Bill Bonner, “The Daily Reckoning”

  66. SPECTRE of Deflation commented on Sep 9

    I’m with the FED, and I’m here to help:

    Greenspan: Champion of Subprime loans:

    “Innovation has brought about a multitude of new products, such as subprime loans and niche credit programs for immigrants. Such developments are representative of the market responses that have driven the financial services industry throughout the history of our country. With these advance in technology, lenders have taken advantage of credit-scoring models and other techniques for efficiently extending credit to a broader spectrum of consumers.”

    Greenspan: Main Proponent of Toxic CDOs

    “The development of a broad-based secondary market for mortgage loans also greatly expanded consumer access to credit. By reducing the risk of making long-term, fixed-rate loans and ensuring liquidity for mortgage lenders, the secondary market helped stimulate widespread competition in the mortgage business. The mortgage-backed security helped create a national and even an international market for mortgages, and market support for a wider variety of home mortgage loan products became commonplace. This led to securitization of a variety of other consumer loan products, such as auto and credit card loans.”

    Greenspan: Supporter of Loans to People with Bad Credit

    “Where once more-marginal applicants would simply have been denied credit, lenders are now able to quite efficiently judge the risk posed by individual applicants and to price that risk appropriately.

    These improvements have led to the rapid growth in subprime mortgage lending…fostering constructive innovation that is both responsive to market demand and beneficial to consumers.”

    “Improved access to credit for consumers, and especially these more-recent developments, has had significant benefits.

    Unquestionably, innovation and deregulation have vastly expanded credit availability to virtually all income classes. Access to credit has enabled families to purchase homes, deal with emergencies, and obtain goods and services. Home ownership is at a record high, and the number of home mortgage loans to low- and moderate-income and minority families has risen rapidly over the past five years. Credit cards and installment loans are also available to the vast majority of households”

    Greenspan: Big Fan of “Structural Changes” which increase Consumer Debt

    As we reflect on the evolution of consumer credit in the United States, we must conclude that innovation and structural change in the financial services industry have been critical in providing expanded access to credit for the vast majority of consumers, including those of limited means. Without these forces, it would have been impossible for lower-income consumers to have the degree of access to credit markets that they now have.

    This fact underscores the importance of our roles as policymakers, researchers, bankers, and consumer advocates in fostering constructive innovation that is both responsive to market demand and beneficial to consumers.” (Federal Reserve Chairman, Alan Greenspan; Federal Reserve System’s Fourth Annual Community Affairs Research Conference, Washington, D.C. April 8, 2005

  67. wunsacon commented on Sep 9

    Wow, this Greenspan fellow sure sounds like he was either asleep at the wheel or wanted to screw the lower classes.

  68. Domino commented on Sep 11

    It will be better..it has to be better..there is no other way…

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