Sunday, May 5, 2013

50 Signs That We’re Due For A Major Crash

This indicator is suggesting slower economy and lower stock prices

Lumber prices over the past 25 years have been a quality leading indicator for the future direction of the economy and the stock market, in both directions.
Back in March, the Power of the Pattern pointed out that Lumber was at the top of a 25-year channel (formed a bearish rising wedge), where 50% declines in Lumber often happen in the past…. which was followed by a slowing economy and lower stock prices.  (see post here)

CLICK ON CHART TO ENLARGE
This trend/pattern has only happened for the past 25 years!!! 

Doc Copper bullish sentiment plunges… Critical price point for Copper & Crude Oil!!!


CLICK ON CHART TO ENLARGE
Speaking of Dogs, Copper comes to mind over the past two years as Copper has lost 25% of its value.  The decline of late has few people liking Copper as bullish sentiment has plunged. (see inset chart).
I believe Copper is a quality barometer for the global economy, especially the Emerging markets/China story.  Copper is on a three-year support line that needs to hold!  With Copper on support and sentiment so low, a short-term rally should not be a surprise!


Global Slowdown – 70% Of China’s Export Partners Saw Orders Plunge

Growth in China exports to its Top 20 trading partners…


Source: Bloomberg Briefs
We discussed previously the slowing of the global economy and the drag on global trade and it appears that despite some hope-ridden headline data from China, things are definitely troubling under the surface. As Bloomberg Brief’s Michael McDonough notes, while superficially, export growth was a rare bright spot in the first quarter, it may have been exaggerated by exporters inflating invoices. Excluding exports to Hong Kong, March’s export growth would have fallen 4.8 percent year-on-year compared with the reported 10 percent. China’s exports to 14 of its top 20 trading partners declined in March year-on-year. Tepid global demand may continue to weigh on China’s exports and domestic economy – and in its vicious cycle manner, feed back into global growth (and stain the US ‘clean’ shirt).

Dark side to jobs report: Big drop in hours worked - Shorter work week equivalent to 500,000 jobs lost



MarketWatch
Hours worked in April fell 0.4%, equivalent to the loss of more than 500,000 jobs.
Think of it this way: If companies had hired all 12 million unemployed people in April, but had cut everyone’s hours in half, the unemployment rate would have fallen to zero, but we’d be much worse off. Our paychecks would be much smaller, and the economy would contract violently.

In April, companies hired 165,000 more workers, but they cut everyone’s hours (on average) by 12 minutes. That doesn’t sound like much of a decline, but spread out over the 135 million-strong work force, the decline in hours worked is the equivalent of firing more than 500,000 workers while keeping hours steady.
….

Too Much Debt And Too Little Savings Continue To Be The Major Problems

It has long been our underlying thesis that the huge amount of household debt accumulated during the housing boom would inhibit consumer spending and economic growth for some time to come, and this is what has been happening over the last few years.  The errors recently found in the famous Rogoff-Reinhart (RR) book do not change this view.
Simply put, household debt averaged 77% of disposable personal income (DPI) over the 61-year period since 1952.  It crossed over the average line in 1985 and took a sharp upward turn in 2000, eventually peaking at 130% of DPI in 2007.  Since that time, consumers have reduced their debt to a level that is now 105% of DPI, still significantly higher than in the past.  The result has been a significant slowdown and tepid recovery in consumer spending growth, a process that is far from finished.
The role of household savings is a key element in analyzing both debt and spending.  For 41 years between 1951 and 1992 household savings rates as a percent of disposable income were consistently between 7% and 11%.  However, as income growth started to slow down, consumers increasingly maintained their old spending habits by going into more debt and reducing their savings rate.  This reached an extreme during the prior decade, when the savings rate stayed below 2% from 2005 through 2007, while debt soared.  We all know how that ended….

CONFIRMED: GLOBAL ECONOMY IS COMING TO A SCREECHING HALT

The magic number for the PMI is 50. A reading of 50 or higher generally indicates that the economy is expanding.
Manufacturers Around The World Slowed Down In April
April 29, April 30 (All Times EDT)
April 30, May 1
May 1, May 2
…

Margin debt hitting levels only seen ONE other time in history!


Some times in history, investors feel so confident about the future of stocks, they actually use up all their available cash and then borrow money to invest in the stock market.  Now is one of those times!!!
The chart below was created by Doug Short, see his outstanding work here.

CLICK ON CHART TO ENLARGE
Positive net worth takes place when.….Investors have little money borrowed and plenty of cash in their brokerage accounts.  (2003 & 2009)
Negative net worth takes place when.…Investors have large amounts of money borrowed (on margin) and little cash in there brokerage accounts. (2000, 2007, 2011 & now)

The Worse The Numbers, The Greater The Misses, The HIGHER The Markets Will Rally!!!

The worse the data, the more parabolic the move. This is great news. Let’s all hope for a negative non-farm payroll on Friday. That could push the dow to 16,000 by Monday.
Here’s The Great Disconnect That Has People Saying The Market Is Rigged By The Fed
s&p 500 versus cesi usd
Business Insider/Matthew Boesler, data from Bloomberg

HALF of all Americans over 14 ate at McDonald’s in March

Staggering figure despite a reported one percent sales drop in first quarter of 2013
The numbers are out for 2013 and the verdict is in: More people make purchases under the golden arches than anywhere else.
McDonald’s beat out such behemoth’s as Wal-Mart, Walgreen’s, and Target to stake its claim as the country’s most visited retail business.
And the numbers behind it are staggering. In March, 49 percent of Americans over 14 years old ate at McDonald’s.

22 Facts That Prove That The Bottom 90 Percent Of America Is Systematically Getting Poorer


#1 According to the Pew Research Center, the top 7 percent of all U.S. households own 63 percent of all the wealth in the country.
#2 Between 2009 and 2011, the wealth of the bottom 93 percent of all Americans declined by 4 percent, while the wealth of the top 7 percent of all Americans increased by 28 percent.
#3 On average, households in the top 7 percent have 24 times as much wealth as households in the bottom 93 percent.
#4 In the United States today, the wealthiest one percent of all Americans have a greater net worth than the bottom 90 percent combined.
#5 According to the Economic Policy Institute, the wealthiest one percent of all American households have 288 times the amount of wealth that the average middle class American family does on average.
#6 According to Forbes, the 400 wealthiest Americans have more wealth than the bottom 150 million Americans combined.
#7 The six heirs of Wal-Mart founder Sam Walton have as much wealth as the bottom one-third of all Americans combined.
#8 According to the U.S. Census Bureau, the middle class is taking home a smaller share of the overall income pie than has ever been recorded before.
#9 In the United States today, corporate profits as a percentage of GDP are at an all-time high, but wages as a percentage of GDP are at an all-time low.
#10 In 1980, CEOs at S&P 500 companies made 42 times as much as their employees did on average.  Today, CEOs at S&P 500 companies make 354 times as much as their employees do on average.  In fact, there are many CEOs that make more than 1000 times what the average employees in their companies make.
#11 According to a report recently issued by the Pew Research Center, Americans over the age of 65 have 47 times as much wealth as Americans under the age of 35 on average.
#12 U.S. families that have a head of household that is under the age of 30 have a poverty rate of 37 percent.
#13 Back in 2007, about 28 percent of all working families were considered to be among “the working poor”.  Today, that number is up to32 percent even though our politicians tell us that the economy is supposedly recovering.
#14 At this point, one out of every four American workers has a job that pays $10 an hour or less.
#15 Today, the United States actually has a higher percentage of workers doing low wage work than any other major industrialized nation does.
#16 The U.S. economy continues to trade good paying jobs for low paying jobs.  60 percent of the jobs lost during the last recession were mid-wage jobs, but 58 percent of the jobs created since then have been low wage jobs.
#17 As I mentioned yesterday, the homeownership rate in America is now at its lowest level in nearly 18 years.
#18 The United States now ranks 93rd in the world in income inequality.
#19 Approximately one out of every five households in the United States is now on food stamps.
#20 The number of Americans on food stamps has grown from 17 million in the year 2000 to more than 47 million today.
#21 According to the U.S. Census Bureau, more than 146 million Americans are either “poor” or “low income”.
#22 At this point, the poorest 50 percent of all Americans collectively own just 2.5% of all the wealth in the United States.

20 Signs That The Next Great Economic Depression Has Already Started In Europe - it just hasn’t reached the United States yet.


#1 The unemployment rate in France has surged to 10.6 percent, and the number of jobless claims in that country recently set a new all-time record.
#2 Unemployment in the eurozone as a whole is sitting at an all-time record of 12 percent.
#3 Two years ago, Portugal’s unemployment rate was about 12 percent.  Today, it is about 17 percent.
#4 The unemployment rate in Spain has set a new all-time record of 27 percent.  Even during the Great Depression of the 1930s the United States never had unemployment that high.
#5 The unemployment rate among those under the age of 25 in Spain is an astounding 57.2 percent.
#6 The unemployment rate in Greece has set a new all-time record of27.2 percent.  Even during the Great Depression of the 1930s the United States never had unemployment that high.
#7 The unemployment rate among those under the age of 25 in Greece is a whopping 59.3 percent.
#8 French car sales in March were 16 percent lower than they were one year earlier.
#9 German car sales in March were 17 percent lower than they were one year earlier.
#10 In the Netherlands, consumer debt is now up to about 250 percent of available income.
#11 Industrial production in Italy has fallen by an astounding 25 percent over the past five years.
#12 The number of Spanish firms filing for bankruptcy is 45 percenthigher than it was a year ago.
#13 Since 2007, the value of non-performing loans in Europe has increased by 150 percent.
#14 Bank withdrawals in Cyprus during the month of March were double what they were in February even though the banks were closed for half the month.
#15 Due to an absolutely crippling housing crash, there are approximately 3 million vacant homes in Spain today.
#16 Things have gotten so bad in Spain that entire apartment buildings are being overwhelmed by squatters…
A 285-unit apartment complex in Parla, less than half an hour’s drive from Madrid, should be an ideal target for investors seeking cheap property in Spain. Unfortunately, two thirds of the building generates zero revenue because it’s overrun by squatters.
“This is happening all over the country,” said Jose Maria Fraile, the town’s mayor, who estimates only 100 apartments in the block built for the council have rental contracts, and not all of those tenants are paying either. “People lost their jobs, they can’t pay mortgages or rent so they lost their homes and this has produced a tide of squatters.”
#17 As I wrote about the other day, child hunger has become so rampant in Greece that teachers are reporting that hungry children are begging their classmates for food.
#18 The debt to GDP ratio in Italy is now up to 136 percent.
#19 25 percent of all banking assets in the UK are in banks that are leveraged at least 40 to 1.
#20 German banking giant Deutsche Bank has more than 55 trillion euros (which is more than 72 trillion dollars) of exposure to derivatives.  But the GDP of Germany for an entire year is only about 2.7 trillion euros.
Yes, U.S. stocks have been doing great so far this year, but the truth is that the stock market has become completely and totally divorced from economic reality.  When it does catch up with the economic fundamentals, it will probably happen very rapidly like we saw back in 2008.
Our politicians can try to kick the can down the road for as long as they can, but at some point the consequences of our foolish decisions will hunt us down and overtake us.  The following is what Peter Schiff had to say about this coming crisis the other day…

The Percentage Of Self-Employed Americans Is At A Record Low

The other day I came across the following two charts in an article by Charles Hugh Smith, and I was absolutely stunned by what I saw.  This first chart shows that the number of unincorporated self-employed Americans has dropped back to levels that we have not seen since the mid-1980s even though our population has increased by tens of millions of people since that time…
The Number Of Self-Employed Americans
As you can see, from 1970 to the mid-1990s the number of unincorporated self-employed Americans rose steadily.  But in the mid-1990s it began to level off and now it is falling rapidly.
This next chart shows the percentage of self-employed Americans as a share of non-farm employment.  In other words, those that work on farms are excluded from this chart.  The percentage of self-employed Americans was fairly stable between 1970 and 1990, but since 1990 it has been steadily eroding and it has now reached a level never seen before…
Self-Employed As A Share Of Non-Farm Employment

Seth Klarman: “If The Economy Is So Fragile That Government Can’t Allow Failure Then We Are Indeed Close To Collapse”

From Seth Klarman of Baupost:
Is it possible that the average citizen understands our country’s fiscal situation better than many of our politicians or prominent economists?
Most people seem to viscerally recognize that the absence of an immediate crisis does not mean we will not eventually face one. They are wary of believing promises by those who failed to predict previous crises in housing and in highly leveraged financial institutions.
They regard with skepticism those who don’t accept that we have a debt problem, or insist that inflation will remain under control. (Indeed, they know inflation is not well under control, for they know how far the purchasing power of a dollar has dropped when they go to the supermarket or service station.)
They are pretty sure they are not getting reasonable value from the taxes they pay.
When an economist tells them that growing the nation’s debt over the past 12 years from $6 trillion to $16 trillion is not a problem, and that doubling it again will still not be a problem, this simply does not compute. They know the trajectory we are on.
When politicians claim that this tax increase or that spending cut will generate trillions over the next decade, they are properly skeptical over whether anyone can truly know what will happen next year, let alone a decade or more from now.
They are wary of grand bargains that kick in years down the road, knowing that the failure to make hard decisions is how we got into today’s mess. They remember that one of the basic principles of economics is scarcity, which is a powerful force in their own lives.
They know that a society’s wealth is not unlimited, and that if the economy is so fragile that the government cannot allow failure, then we are indeed close to collapse. For if you must rescue everything, then ultimately you will be able to rescue nothing.
…

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