End of the Road - How Money Became Worthless

Haven't watched the film yet, but looks like something our politicians and government definitely do not want us to watch, much less understand.

What's the problem? Just make the y-axis on the chart below higher. Duh.

Source: http://100thmonkeyfilms.com/endoftheroad/
Source: http://www.ritholtz.com/blog/2012/01/living-in-a-qe-world/

As Good as it Got

Greece has had a great run. It cheated its way into the Euro, borrowed way too much money for rates way too low for such an irresponsible country (courtesy of being in the Euro that was anchored by much stronger economies), it allowed its citizens to retire early with generous pensions, it subsidized enormously unprofitable industries without thought for sustainability (think public trains), it allowed its entire cabinet to cheat property taxes, didn't chase tax evaders, and on and on.

Here's some data showing why the PIIGS (Portugal, Ireland, Italy, Greece, and Spain are in trouble now.

Apparently, labor costs impact international trade competitiveness:

Source: http://www.economist.com/blogs/graphicdetail/2012/05/daily-chart-13

China, the Second Canary in the Coalmine (Next to Spain)

It appears that a bunch of EU countries (as of May) are now in recession.

This is not good for China, because apparently, the EU buys the most garbage from China (the US is a close second; the US was dethroned in 2010).

This makes sense, given that the EU, as a whole, is the largest economy in the world.

Unfortunately, if the EU is struggling, it won't buy as much garbage from China, which in turn will have less money to spend on German cars, French clothes, Italian cars and cheese, and Greek olive oil from the EU. This isn't good because China is the EU's second-largest export market.

Source: http://graphics.thomsonreuters.com/12/04/EZ_RECCMP0412_SB.html

Source: http://en.wikipedia.org/wiki/List_of_the_largest_trading_partners_of_the_People's_Republic_of_China

Source: http://en.wikipedia.org/wiki/European_Union

Source: http://en.wikipedia.org/wiki/List_of_the_largest_trading_partners_of_the_European_Union

Source: http://www.youtube.com/watch?v=tv39fen7Dek&feature=player_embedded
Source: http://trimtabs.com/blog/

Diapers for the Whole Family

More on Japan's problem with issuing government debt at sub-1% for 10 years.

Plus, some insight into China's future, especially those that believe it will be the world's largest economy. Hint: it'll be very challenging with a fast-aging population due to social policies of the last few decades.

Bloomberg:

Unicharm Corp.’s (Japan's largest diaper maker) sales of adult diapers in Japan exceeded those for babies for the first time last year. At Daiei Inc. supermarkets, customers can feel Japan aging -- literally: It has made shopping carts lighter.
...
Japan’s fertility rate is 1.39 for women, compared with 1.93 in the U.S., according to the Ministry of Health, Labour and Welfare. Japan’s population, which peaked in 2005, is poised to shrink to 125.2 million in 2014 from 126.5 million last year, according to data compiled by Bloomberg.
...
The Tokyo-based company said the lessons it’s learning in Japan will help its expansion in China, where the population at or above 65 rose to 8.87 percent of the total as of Nov. 1, 2010, up 1.91 percentage points from the 2000 census. China introduced a one-child policy in 1979 to curb population growth.

“China will necessarily face the aging society at a faster pace than Japan because of the one-child policy,” said Unicharm Chief Executive Officer Takahisa Takahara in April.

Source: http://www.bloomberg.com/news/2012-05-09/elderly-at-record-spurs-japan-stores-chase-1-4-trillion.html

Japanese Bond Salesmen Over the Last Few Years

Japan's government bonds, JGBs, total around $14 trillion. US treasury securities are its equivalent (>$11 trillion of public debt; >$15 trillion of total debt), is in trouble to say the least. US Total Debt as a % of GDP is >100%; Japan is >200%.

Currently, 10-year US bonds yield 1.74% (people are actually willing to lend the US government money for 10 years to only get an annual yield of less than 2%). Granted, Europe is spiraling down the toilet bowl and investors are fleeing to safe havens such as US Treasuries. While the Federal Reserve owns more than any other country (yes, it "buys" its own government's bonds), more than 30% are purchased by foreign investors.

Japan on the other hand, is also considered a safe haven, but has had two decades of failed monetary policy and deflation. Japan's 10-year bonds yield 0.89%. Why so low you ask? Because 95% of the holders are institutions, pensions, and individuals in Japan.

What's the worry? Japan is the oldest developed country in the world and it is only getting older. Pension funds have stated that they will become net sellers of bonds vs. buyers. When people retire, they start drawing down on their savings, which means no savings that banks and institutions will use to buy more JGBs. Not to mention that Japan's savings rate has been plummeting over the last decade.

So what's the solution? Well, it's definitely not to go to international lenders as no one is that stupid to lend the Japanese government money for 10 years for a <1% annual yield. Another solution is not to expect its population to work forever or un-retire so that they can continue to save and have pension funds buy more of that garbage. Is the solution to convince patriotic and women-loving Japanese men to buy them! Yes!

Here's a 2010 ad pushing JGBs:

“I want my future husband to be diligent about money,” a 27-year-old woman says in an ad being run in free magazines promoting a fixed-rate, three-year note that Japan started selling last week. “Playboys are no good.” She’s one of five women featured in the page, which says “Men who hold JGBs are popular with women!!”

Ridiculous you say? Probably.

How about...

2012 strategy: Japan hires top girlband AKB48 to sell government bonds.

WSJ: The all-female pop group will headline a summer campaign for "reconstruction bonds" aimed at financing projects in regions hammered by last year's quake-tsunami disaster.

Source: http://www.telegraph.co.uk/finance/economics/9290071/Japan-hires-top-girlband-AKB48-to-sell-government-bonds.html
Source: http://www.zerohedge.com/news/japanese-girl-band-wants-you-buy-jgbs
Source: http://www.theatlantic.com/business/archive/2010/06/japan-men-who-buy-government-bonds-are-super-sexy/58249/
Source: http://www.bloomberg.com/news/2010-06-09/women-prefer-men-holding-government-bonds-japan-finance-ministry-ad-says.html
Source: http://www.sify.com/finance/Breakdown-of-JGB-holders-imagegallery-others-ldupjRfjgfg.html
Source: http://www.nytimes.com/2011/07/19/business/china-largest-holder-of-us-debt-remains-tied-to-treasuries.html?pagewanted=all
Source: http://ftalphaville.ft.com/blog/2011/02/14/487246/japans-savings-rate-about-to-go-negative-goldman-says/
Source: http://online.wsj.com/article/SB10001424052970204624204577182424205452462.html
Source: http://www.stat.go.jp/english/data/handbook/c02cont.htm

Don't Cry for Me Argentina

Here's a documentary about the decades of corruption, greed, oppression, first-world governments (Spain, France, and the US) bribing Argentine politicians to privatize public companies for pennies on the dollar under the guise of "economic development," and abuse by those in power in Argentina that led up to its financial collapse in the early 2000s.

Here's an interview with a guy that experienced the collapse and his blow-by-blow account of what happened:

Source: http://www.youtube.com/watch?v=Zsqa-YHE36A&feature=related
Source: http://www.youtube.com/watch?v=6b3BpWiUgso

Dear Greece, Take Your Money Out of the Bank NOW

What's the best thing to do with your savings or checking account in a Greek bank?

Take it out of the bank, go to Switzerland or Germany, and stick your Euros in one of their banks. And if possible, don't go back to Greece because it will be riddled with riots, cuts in social services -- pretty much everything that will make life in Greece miserable.

When Greece gets kicked out of the Euro, EU, Eurozone, or whatever it's called that enables it to use the Euro, Greece will do what Argentina did to its people -- screw them. It will do this by declaring a bank holiday, converting all accounts denominated in Euros into Drachmas, and before the banks reopen, the Drachma will have devalued vs. the Euro, USD, AUD, etc. by 30-40%.

Here's Citi's research on budget deficits of countries that experienced banking crises:

Government debt as a % of GDP:

Exchange rate depreciation 1 month, 3 months, 1 year, and 3 years after the crises:

Ok, so it looks like you're all well on your way. Now, Spain. Follow their lead.

Source: http://www.businessinsider.com/this-is-what-happens-if-greece-exits-the-euro-2012-5
Source: http://willembuiter.com/grexit.pdf
Source: http://twitter.com/EdConwaySky/statuses/203105940503924736

So Easy Even a Baby Can Do It

Buy! Buy! Buy!

Source: http://www.youtube.com/watch?v=qqF83-FmVpM

Global Financial Meltdown, Coming Up (Again)

It's 2012 and the global financial meltdown of 2008 that governments around the world scrambled to save us from delay seems like a distant memory.

The following videos show the chaos that ensued, probably not in your neighborhood, and reveals how everything is interconnected. Unprecedented levels of debts were amassed to "save" us from a worldwide financial collapse.

Now that it's 2012, think about what changed:

- Are the banks that were too big to fail broken apart? No.
- Have housing prices in the US been allowed to correct and stabilize? No. Even the trillions of dollars thrown at the problem have not gotten us to stable prices.
- Have banks paid out record bonuses to executives who led us to the collapse? Yes.
- Did we work down the debts amassed that were used to bailout banks, plowed into infrastructure spending, bailout homeowners, and stimulate "growth"? No.

So, now that we know that nothing has changed, how confident are you that all the events that took place in 2008 (and have clearly gotten worse in Europe) will not come back?

"Stabilized" US House Prices (Case Shiller):

The videos cover crises in the US, China, Iceland, France, Dubai, UK, Greece, Japan, and others.

Part 1 of 4:

Part 2 of 4: 

Part 3 of 4:

Part 4 of 4:

Source: http://www.youtube.com/watch?v=T3CDGh4cXU0&feature=related
Source: http://www.youtube.com/watch?v=VBmOEI7Ob9M&feature=relmfu
Source: http://www.youtube.com/watch?v=JB4wefzZLNc&feature=relmfu
Source: http://www.youtube.com/watch?v=h3VgY1_PzUs&feature=relmfu

The Eurozone Neighborhood

The Eurozone neighborhoood:

- Got your car on cinder blocks? Then you are Spain, Ireland, Portugal, and Greece.
- The affluent house? Germany.
- The wanna-be affluent house? France.

HOA regulations are being ignored, challenged, and defied. And some are no longer paying their monthly dues.

Source: http://www.zerohedge.com/news/will-european-union-destroy-itself-just-save-euro
Source: http://www.davidmcwilliams.ie/

Jeopardy Answer: Just Take on a Lot More Debt!

Question: How do we generate more GDP growth?

Trim Tabs:

From 1975 to 1980, each $1 increase in GDP was accompanied by an increase in debt of between 20 and 47 cents.  In other words, the increase in GDP was two to five times the increase in debt.

From 1981 to 2007, the amount of debt required to produce $1 of GDP growth crept higher, and it ranged from a low of 3 cents in 2000 to a high of $2.25 in 1991.  In only eight of those years did it take more than $1 of debt to produce $1 of GDP growth—1982, 1986, 1990 to 1993, 2002, and 2003.  On average, it took 79 cents of debt to produce $1 of GDP growth.  In other words, the increase in GDP was nearly 1.3 times the increase in debt.

Along came the Great Recession.  Since 2009, the traditional relationship between debt and GDP growth has been turned upside down.  Each $1 increase in GDP has been accompanied by, on average, a $2.50 increase in debt.  Before the recession, an increase in debt generally generated a greater increase in GDP, but now it takes an enormous increase in debt to eke out a small increase in GDP.  At some point, the amount of debt required to generate even modest GDP growth will suffocate the economy and trigger another financial shock.

Source: http://www.zerohedge.com/news/guest-post-how-long-massive-government-debt-buildup-triggers-another-financial-shock
Source: http://trimtabs.com/blog/2012/05/11/stimulus-tactic-of-increasing-government-debt-to-increase-gdp-broken-and-unsustainable-how-long-before-massive-government-debt-buildup-triggers-another-financial-shock/

Treasury on TARP: Victory!

TARP Victory!!!

WSJ (April 13, 2012):

US Treasury: Taxpayers Likely to Profit From Financial Rescue Programs

The Obama administration, mounting a broad defense of its response to the financial crisis, said Friday taxpayers are likely to realize an overall profit from the suite of government rescue programs launched from 2008.

********

Reality :(

HuffPo (April 25, 2012):

Christy Romero, the Special Inspector General for the Troubled Asset Relief Program: "It is a widely held misconception that TARP will make a profit," she writes right at the top of her 327-page report. "The most recent cost estimate for TARP is a loss of $60 billion. Taxpayers are still owed $118.5 billion (including $14 billion written off or otherwise lost)."

********

More Reality :(


WSJ (April 24, 2012):

Ms. Romero noted that taxpayers are still owed $118 billion, a figure she said included investments in AIG, GM, Allly Financial and other smaller programs under the TARP umbrella in addition to the outstanding loans to smaller banks. She also counted $4.2 billion Treasury had written off and realized losses of $9.8 billion "that taxpayers will never get back."

351 small banks with some $15 billion in outstanding TARP loans face a "significant challenge" in raising new funds to repay the government. ... "The status of those banks is one of the major issues facing TARP nearly four years after the financial crisis," the report says. ... Their numbers and profitability have been declining due in part to regulatory and technological changes that made bigger institutions more profitable.

********

More More Reality :(

Daniel Indiviglio, Reuters Breakingviews columnist (April 25, 2012):

What it calls a gain looks more like a loss of at least $230 billion.

Treasury’s rosy projections aren’t half as bad as its methodology. The government declares a return when an investment’s payments exceed the initial cash outlay. That boldly disregards the cost of money and its value over time.

By contrast, consider Warren Buffett’s bet on Goldman Sachs. In the thick of the crisis, he loaned the bank $5 billion in exchange for 10 percent annual interest and stock warrants. Goldman paid back the Oracle of Omaha a few years later. Though hanging on to the warrants may cost him in the end, even without them he booked an annualized return of 14 percent.

Compare that to TARP, which had seven broad components. Start with the banks. Treasury estimates an ultimate profit of $22 billion. Even if that’s achieved by year’s end, taxpayers will have earned a paltry annualized return of 2 percent. Simply investing in the S&P 500 index would have earned 14 percent a year. Worse, applying Buffett’s Goldman return as the risk-based cost of capital turns the net present value of the bank rescue into a loss exceeding $15 billion.

Source: http://blogs.wsj.com/economics/2012/04/13/treasury-taxpayers-likely-to-profit-from-financial-rescue-programs/
Source: http://economics21.org/blog/tarp%E2%80%99s-illusory-profits
Source: http://www.breakingviews.com/tarp-success-doesn%E2%80%99t-make-it-good-finance/21013884.article
Source: http://www.huffingtonpost.com/2012/04/25/tarp-profit-a-myth_n_1450363.html
Source: http://www.businessweek.com/news/2012-04-13/treasury-says-crisis-stability-programs-expected-to-break-even
Source: http://online.wsj.com/article/SB10001424052702303978104577364262736412398.html
Source: http://www.sigtarp.gov/Quarterly%20Reports/April_25_2012_Report_to_Congress.pdf

BTFD!

Get rich quick!

It's so simple, BTFDYFI:

Source: http://www.zerohedge.com/news/btfd
Source: http://finance.yahoo.com/echarts?s=%5EGSPC+Interactive#symbol=%5Egspc;range=1y;compare=;indicator=volume;charttype=area;crosshair=on;ohlcvalues=0;logscale=off;source=undefined;

It's Great to be a... Federal Worker

From the CATO Institute (2012):

During the last decade, compensation of federal employees rose much faster than compensation of private-sector employees. As a consequence, the average federal civilian worker now earns twice as much in wages and benefits as the average worker in the U.S. private sector. A recent job-to-job comparison found that federal workers earned higher wages than did private-sector workers in four-fifths of the occupations examined.
...

In 2010, federal workers enjoyed average benefits of $42,462, which compared to average benefits in the U.S. private sector of just $10,771. That huge advantage stems both from more federal workers receiving certain types of benefits and from particular federal benefits being more lucrative than those available in the private sector.

Federal workers receive health insurance, retirement health benefits, a pension plan with inflation protection, and a retirement savings plan with a government match. They typically receive generous holiday and vacation schedules, flexible work hours, training options, incentive awards, generous disability benefits, and union protections.

From the CATO Institute (2009): 

It is true that there are some elite agencies in the government that need to have high compensation levels. But the bulk of the federal workforce is in sprawling bureaucracies such as the U.S. Department of Agriculture, which has a huge army of about 100,000 workers. The main job of USDA workers is to administer farm aid, food stamps, and other subsidy programs. That sort of paper-pushing work is not rocket science.

Avg. wages 2000 to 2010:

Avg. Total Compensation (includes benefits):

2008 Comparison of Federal Workers to Other Industries:

2000 to 2008 Growth:

Source: http://www.downsizinggovernment.org/overpaid-federal-workers
Source: http://www.cato-at-liberty.org/wall-street-big-oil-and-federal-workers/

Greece, Down into the Rabbit Hole

Business Insider: Preliminary results in the Greece election show that 16% Of The New Greek Parliament Is Communists (KKE) And Nazis (Golden Dawn).

Bloomberg: The Golden Dawn (Nazi) party wants to put land mines along Greece’s borders to prevent illegal immigration, and the Independent Greeks party wants Germany to pay compensation for World War II war crimes.

Credit Suisse's overview of the political parties in Greece:

Parties that have "x"s under Euro Membership and EU/IMF Program are not good for those in desperate need to prop up the banking system (i.e. Germany, China, US, and practically every country run by wealthy people that control the government).

Apparently, Greecians know that when Greece exits the Euro, their assets will be converted into the new Drachma and devalue by >50% (see Argentina in the early 2000s).

Here's a chart showing deposits flooding out of the Greece banks over the last two years of this slow-motion train wreck:

Source: http://www.businessinsider.com/20-of-the-new-greek-parliament-will-be-comprised-of-communists-and-nazis-2012-5
Source: http://www.zerohedge.com/news/greek-deposit-run-update-hopeless-and-getting-worse
Source: http://www.zerohedge.com/news/previewing-first-many-greek-elections
Source: http://www.bloomberg.com/news/2012-05-06/greek-election-gridlock-raises-risk-for-bailout-euro-future.html

Stop Buying Gold! Warren Buffett and Charlie Munger Will Not Be Happy With You

Dear everyone buying physical gold and gold ETFs,

Stop it! Listen to great investors of yesteryear. They have decades of investing experience and as we all know, past performance is a reliable indicator of future performance, right?

They are both in their eighties -- don't forget, people only get sharper and more open-minded as time goes on, right?

The world that they knew equals the world we all live in today, right?

Sincerely,
Canned Goods

********

Gold Demand for ETFs (paper gold) and Physical Gold. I guess people have realized that electronic claims to gold might not mean that there is actual physical gold at the other end of the trade:

Helpful image for the upcoming charts:

The world we live in today:

World Population in 2012 is >7 billion:

Source: http://www.zerohedge.com/news/whole-lot-uncivilized-people-out-there
Source: http://www.gold.org/investment/research/regular_reports/gold_demand_trends/
Source: http://www.gold.org/about_us/what_we_do/
Source: http://www.chrismartenson.com/crashcourse/chapter-3-exponential-growth
Source: http://en.wikipedia.org/wiki/World_population

Do What I Say, Not What I Do -- Warren Buffett

In 2003, Warren Buffett said derivatives were weapons of mass financial destruction. In 2008, Berkshire Hathaway made a $37 billion bet (using derivatives) that stock markets around the world (US, Japan, and Europe) will be higher in 2019 and 2028.

What drives stocks higher? Let's see:

- Bailouts funded by taxpayers that prevent companies from going bankrupt (and their share prices going to zero)? Check.
- Governments around the world creating money from thin air (Quantitative Easing, Operation Twist, Long-Term Refinancing Options, Currency Swaps to Europe from the US)? Check.
- Promoting a gold-backed currency as an alternative to fiat (paper money backed by nothing, which, by the way, has grown by trillions over the last few years)? No! Encouraging a gold-backed currency or people to hold gold in fear that their paper money will lose value equates to losing faith in the US Dollar (and implicitly the US Government) -- this is no way to push stocks higher.

No wonder Buffett is so anti-gold and pro anything-that-will-juice-stock-prices...

*******

Warren Buffett (2003, BBC News): "Derivatives generate reported earnings that are often wildly overstated and based on estimates whose inaccuracy may not be exposed for many years."

BBC News (2003): The profits and losses from derivates deals are booked straight away, even though no actual money changes hand. In many cases the real costs hit companies only many years later.

*******

St. Louis Federal Reserve (2009): Why did Mr. Buffett make a special point about derivatives being financial  weapons of mass destruction?  Most likely, he meant to highlight at least three features of derivatives that distinguish them from other assets: 1) they contain a great deal of “implicit” leverage, 2) they often have very complex payoff patterns and 3) they lack transparency when they are traded over the counter (OTC), or away from an organized exchange.

*******

Berkshire's Annual Report (2008): Our put contracts total $37.1 billion (at current exchange rates) and are spread among four major indices: the S&P 500 in the U.S., the FTSE 100 in the U.K., the Euro Stoxx 50 in Europe, and the Nikkei 225 in Japan. Our first contract comes due on September 9, 2019 and our last on January 24, 2028. We have received premiums of $4.9 billion, money we have invested. We, meanwhile, have paid nothing, since all expiration dates are far in the future.

Canned Goods: Great news! No collateral has been posted by Berkshire! What can possibly go wrong when no collateral was required?

*******

Zero Hedge on Berkshire's Annual Shareholder Meeting (2012): ...with a $58 billion bet (on $37.8 billion in cash and equivalents) that asset prices will go higher, it is rather clear on what side of the 'bail out' argument, and its 'all in' fallback: central planning, Warren Buffett sits.

Source: http://www.ritholtz.com/blog/2008/11/markman-buffett-in-trouble/
Source: http://articles.businessinsider.com/2011-11-05/markets/30363151_1_derivatives-berkshire-hathaway-financial-weapons
Source: http://seekingalpha.com/article/116989-buffett-s-s-p-500-puts-big-blunder
Source: http://www.futureblind.com/2008/03/berkshire-part-2-selling-puts/
Source: http://news.bbc.co.uk/2/hi/2817995.stm
Source: http://www.stlouisfed.org/publications/pub_assets/pdf/re/2009/b/reader_xchg.pdf
Source: http://www.berkshirehathaway.com/letters/2008ltr.pdf
Source: http://www.zerohedge.com/news/berkshire-annual-meeting-highlights

'Civilized People Don't Buy Gold': Berkshire's Munger

Charles Munger, 88, on CNBC (May 4, 2012): "Gold is a great thing to sew into your garments if you’re a Jewish family in Vienna in 1939," the Berkshire vice chairman said, "but I think civilized people don’t buy gold, they invest in productive businesses."

Charles Munger (Feb. 2011): “I don’t have the slightest interest in gold. If you’re capable of understanding the world, you have a moral obligation to become rational. And I don’t see how you become rational hoarding gold. Even if it works, you’re a jerk.”

Warren Buffett (Feb. 2012): What motivates most gold purchasers is their belief that the ranks of the fearful will grow. During the past decade that belief has proved correct. Beyond that, the rising price has on its own generated additional buying enthusiasm, attracting purchasers who see the rise as validating an investment thesis. As "bandwagon" investors join any party, they create their own truth -- for a while.

*******

Berkshire Hathaway made a killing in the earlier part of its history in the '80s and '90s and also handily beat the S&P 500 in the last 5- and 10-year periods. But if you think the only thing that's worth comparing to is the S&P 500, think again.

Don't look now, but here's a comparison of Berkshire Hathaway vs. Commodities in the past 5- and 10-year period:

Makes one wonder why Buffet and Munger would attack something the world has considered a currency for thousands of years especially in the backdrop of today's world of paper (fiat) currencies that are backed by "promises" and "full faith and credit" of sovereign governments.

Also, let's not forget the fact that central banks around the world are simultaneously printing money at speeds and levels never seen in the history of the world. Afraid, damn right I'm afraid:

Here's a reminder of how the purchasing power of our precious US Dollar has fared since going off that thing called the Gold Standard (where money was backed by something of value):

See that red line? That's what happens when you can print as many dollars as you want to fund wars, entitlement spending, bridges to nowhere, and housing bubbles. What's backing that paper in your wallet called US dollars? The full faith and credit of the United States government. Let's hope that our lenders continue to believe that the US will be able to pay back the >$10 trillion in external debt as well as interest payments (assuming the US doesn't issue more debt, haha, that was a joke).

Here's gold's purchasing power since 1971:

I bet central banks could figure out a way to print gold too.

Source: http://www.cnbc.com/id/47298734
Source: http://www.jimslater.org.uk/wp-content/uploads/Gold-vs-Berkshire-Hathaway.pdf
Source: http://www.forbes.com/sites/timworstall/2012/02/10/why-warren-buffett-doesnt-invest-in-gold/
Source: http://finance.fortune.cnn.com/2012/02/09/warren-buffett-berkshire-shareholder-letter/

Remember Those Great Jobs Numbers in January?

CNBC on the April Jobs Report (May 4, 2012): "Weak Jobs Report Keeps More Fed Easing in Play"

Canned Goods Translation: The crappier the economy, the more likely the Fed will announce Quantitative Easing 3 (QE3), which effectively manipulates interest rates, punishes savers, raises prices on food and oil, and rewards banks with carry trades where they borrow billions of dollars at near 0% and buy US Treasuries yielding 0.5% to 2% (depending on the note/bond) and pocket the difference (note $1 billion at 0.5% equals a gain of $0.5 million for doing nothing; now imagine hundreds of billions, or trillions, if you believe QE3 will be the same size as prior QEs).

*********

CNBC (May 4, 2012): "Job Growth Just 115,000 in April, Rate Drops to 8.1%"

Canned Goods Translation: Great! A drop to 8.1%! Don't look at the fact that it was driven by people leaving the workforce. Leaving the workforce? Great! That means they're retiring early! Nope. That means they're collecting unemployment insurance (up to 99 weeks, still, until next year when they expire and Congress extends the benefits, again) and when that runs out, they go to our handy entitlements program called Social Security and collect disability!

*********

Bloomberg (May 3, 2012): The number of workers receiving SSDI (Social Security Disability Insurance) jumped 22% to 8.7 million in April from 7.1 million in December 2007, Social Security data show. That helps explain as much as one quarter of the decline in the U.S. labor-force participation rate during the period, according to economists at JPMorgan Chase & Co. and Morgan Stanley.

*********

Federal Reserve's Data of People Not in the Labor Force (for those that are old enough to have a job):

Data going back to 2007 (last employment peak):

And the one that matters, Participation as a % of Eligible going back to 1980 (this is a terrible chart for those saying anything bullish about the job market):

Unemployment Percentages Compared to the Employment Level from March 2012 (those percentages looks pretty fishy to me; I guess that Labor Participation Rate might be true):

Social Security Disability:

Source: http://www.cnbc.com/id/47294515
Source: http://research.stlouisfed.org/fred2/graph/?s[1][id]=LNS15000000
Source: http://www.zerohedge.com/news/its-official-st-louis-feds-not-labor-force-data-officially-chart
Source: http://www.zerohedge.com/news/people-not-labor-force-soar-522000-labor-force-participation-rate-lowest-1981
Source: http://www.bloomberg.com/news/2012-05-03/disabled-americans-shrink-size-of-u-s-labor-force.html
Source: http://news.investors.com/article/608418/201204200802/ssdi-disability-rolls-skyrocket-under-obama.htm?p=full
Source: http://www.ssa.gov/OACT/ProgData/icp.html
Source: http://www.zerohedge.com/news/guest-post-what-data-can-we-trust

Death of the Canadian Penny

Bloomberg: Canada minted its final penny today as Finance Minister Jim Flaherty said the coin was too expensive to produce and no longer needed for business. ...eliminating the coin that he says costs 1.6 cents to mint. ... The mint has produced 35 billion pennies since it began production in 1908. ... The penny, with two maple leaves on one side and a portrait of Queen Elizabeth II on the other, has lost 95 percent of its purchasing power since it was first produced by the mint.

Next question: When will the US Penny join Canada's? Get your pre-1983 pennies ready to take to the smelters.

Canadian Penny Melt Values as of May 5, 2012:

US Penny Melt Values as of May 5, 2012:

Source: http://www.coinflation.com/canada/
Source: http://www.coinflation.com/
Source: http://www.bloomberg.com/news/2012-05-04/canada-stops-making-cents-as-flaherty-lets-penny-drop.html

Job Ungrowth in Europe

Again, it's the young ones that are hardest to chase while they're rioting and looting.

US data:

Source: http://www.zerohedge.com/news/europes-scariest-chart-just-got-scarier-er
Source: http://www.ilo.org/washington/ilo-and-the-united-states/spot-light-on-the-us-labor-market/spot-light-on-us-youth/lang--en/index.htm

Voting: Outlook Not So Good

Good luck to us all.

Source: http://www.zerohedge.com/news/guest-post-new-world-order-paranoia-or-reality

Source: http://www.youtube.com/watch?v=MWBzUuo9_eo&feature=player_embedded