Great News! Yellen Says No Sign of Recession, Krugman Says Economy Will Shrink

Hip, Hip Hooray! Perhaps the recession has left town, according to Janet Yellen, who sees solid growth and a strong labor market as positive signs the Fed's efforts to fight inflation are not hurting the economy significantly. I guess she doesn't drive, fill up her car, eat food, or buy groceries. 

Janet Yellen said she doesn’t see signs of a recession, but Nobel laureate Paul Krugman argues the worst is yet to come | Fortune 

But the good news is Paul Krugman speaking up in disagreement with the Treasury Secretary. Krugman sees an upcoming downturn: "While this report made all the people who screamed 'recession!' look as foolish and partisan as they were, it was not, if you look under the hood, a sign that the worst is over," Fortunately the Krugman prediction phenomenon can be put into play here. He does not get it right everytime, or some say, even most of the time. So, in fact, he may be in agreement with Yellen, using some obscure prediction logic analysis. Be keep in mind, past performance does not indicate future performance.

The Daily Caller has categorized the Krugman prediction phenomenon. Here Are Paul Krugman’s Worst Predictions Ever–They’re Really Bad | The Daily Caller

Recession Alert! Bloomberg Calls It 100% Certain! Prepare!

Bloomberg has predicted the absolute certainty of a US economic recession in 2023, most likely before October. The economic model may mean the Federal Reserve has gone too far in raising interest rates in their thus far futile attempts to constrain inflation.

No model is certain, just an educated guess disguised as a mathematical projection by experts. Have faith, these experts are not always right. But this one seems pretty dire any way you look at it, especially when we have a flock of other experts parroting similar outlooks. 

Your best bet? Beware and Prepare! The next Fed meeting November 1-2 may give us some direction. 

The stock market is highly volatile right now. Be careful! Watch for a 'risk-off' flight to quality. And CD's are becoming more and more attractive for safety and income. 

Bloomberg: https://www.msn.com/en-us/money/markets/forecast-for-us-recession-within-year-hits-100-in-blow-to-biden/ar-AA133nzh

But be sure of one thing, when the rate hikes stop, there will be a few months of wait and see, then we might just see one great stock buying opportunity.

Can the Fed Deliver a Soft Landing? Maybe!

The Fed has a chance to avoid a deep prolonged recession and avoid the disaster that it would entail. They may even come to their collective senses. 

There is a voice of reason from Chicago Fed President Charles Evans in his optimistic speech to a National Association for Business Economics conference could be heard clearly describing a path to a soft landing.

Check it out: Evans: Close Alignment On Rate Hikes, Still Chance For Soft Landing – Options Trading Report

So, is the rest of the Fed Board listening? 

Thursday will bring a lot of information, Inflation and unemployment rates being the most anticipated. Maybe the economic tailspin we are in right now can be stopped before we crash.

Drill, Baby, Drill is out, No More Offshore Drilling is In. Gas Crisis Ahead.

Has the Biden Administration gone completely into the rabbit hole? Gas prices are rising all over the country. And now the Biden Administration wants to shut down offshore drilling leases. 

They have already drawn down the strategic petroleum reserve about as far as they can without totally emptying the tank. Shutting down offshore leases will reduce the USA GDP, cause the loss of thousands of jobs, reduce domestic production and cause gas prices to rise. 

What are they thinking?

Here's the take from Fox Business: Biden admin weighs complete block on offshore oil drilling as gas prices keep rising | Fox Business

The Fed Will Pivot - First They Must Find a Way to Save Face.

There is no question the consensus of the Federal Reserve Board is to slow rate hikes and quickly restart a quantitative easing program to avoid a 2008 style international financial crisis.

No Question.

So, will they do it? Of course, just as soon as they can manufacture a plausible reason for their sudden reversal. Ah ha, here we go. October 13 brings the newest inflation report for September. Prepare for it to be spun like a yo-yo doing walk the dog. Whatever the number is, it will be 'positive news on inflation, proof the Fed is winning the battle' or something similar. 

But that's ok. The USA economy will benefit, and so will all the citizens, except maybe the Democrats who have been in charge of the country for the last couple years. 

Here's a good take from MarketWatch. (Long but good read)  

Investors are dismissing --- or maybe even welcoming --- signs of cracks in the global financial system. Here's what's at stake. - MarketWatch

Biden Inflation Reduction ACT will FAIL - Per the Congressional Budget Office and Bernie Sanders

Amazing, isn't it? When the CBO makes a determination seems to support a bill the party in power likes, then the CBO can never be wrong. BUT, if they make a determination, as they did this time, that a bill will not do what the politicians say it will, they of course they are often wrong, or make the wrong assumptions, or just plain don't understand how the bill works.   White House stands by Inflation Reduction Act after CBO warns inflation won't drop as a result (msn.com) 

Both PennWharton and the CBO agree, the bill just won't do much for inflation. I wonder if PennWharton is now on the political shade throwing hit list.   Inflation Reduction Act: Comparing CBO and PWBM Estimates — Penn Wharton Budget Model (upenn.edu)

Even Bernie Sanders knocks the bill!   Bernie Sanders knocks Schumer and Manchin's big climate and healthcare bill, calling it the 'so-called Inflation Reduction Act' (msn.com)

And then we have a group of 230 economists predicting the bill will fail to curb inflation, and in fact may actually cause ore of it. And, of course, these economists must be labeled as WRONG. Senator Schumer even said it out loud.   Schumer calls economists 'wrong' who are cautioning Manchin's spending bill will increase inflation | Fox Business

Plain as the nose on your face? Is Senator Schumer now deriding the nose-less? Or is it the nasally challenged?   Senate poised to work through the weekend to advance economic package - The Washington Post

Here's the CBO report. You can actually judge for yourself.   H.R. 5376 Inflation Reduction Act of 2022-Revised Tables (cbo.gov)

Inflation Continues under Biden's Watch.

The hits just keep coming and coming. Inflation is harder to beat than a downtown traffic ticket. 

So what do they decide to do? Pass bills to put more money out for climate change, among other items. Update will follow.

Inflation figure that the Fed follows closely hits highest level since January 1982 (cnbc.com)

Biden's Recession is here! 2022 Q2 and Q3 GDP drops and inflation is raging at 9%

Well, that didn't take too long. 

Almost to the day, 18 months after Joe Biden took office the USA has officially entered into a recession. Two sequential quarters of economic data reported a declining Gross Domestic Product (GDP).

And don't let anyone fool you! This is the definition of a recession. They may try to call it by another name or even deny it. Every possible distraction will be announced and pronounced, proclaimed and exclaimed.  

Economy shrinks for second consecutive quarter as Biden mocks recession 'chatter' - Washington Times

A Recession Before the Midterms: History is Not on Biden's Side (msn.com)

Biden: Economy slowing down but not in recession (usatoday.com)

Trouble Ahead, Trouble Behind. China Bank Runs Cause Mass Panic, Authorities Crush Protesters.

 It started with 4 rural banks and a vanished bank officer. Accounts were frozen and funds not available to depositors. Video at the source. 

China crushes mass protest by bank depositors demanding their life savings back (msn.com)

Could this mark the beginning of the end?  The Chinese economy has been gliding high on updrafts and paper wings for years, but paper wings won't last long in a storm. Is there a Crash on the horizon?

A Good Jobs Report, or Was It? June 2013 BLS Report.

The BLS just released the June 2013 jobs report, to cheers and applause. It seems the number of jobs created exceeded the economists predictions, and resulted in the creation of 195,000 jobs in June and revisions of previous months added another 70,000 jobs.

Seems like good news all around, does it not?

But take a closer look at the numbers, as ZeroHedge does and you find the numbers a bit troubling. Their analysis: "...In June, the household survey reported that part-time jobs soared by 360,000 to 28,059,000 - an all time record high. Full time jobs? Down 240,000.  And looking back at the entire year, so far in 2013, just 130K Full-Time Jobs have been added, offset by a whopping 557K Part-Time jobs." Great charts at the source.

More sadly, the majority of the gains were in hospitality (often short term positions), waitpersons and bartenders, while the manufacturing sector lost about 6,000 jobs. A recovery will need a much better mix to take hold. Low paying part time jobs in an industry with high turnover certainly won't do it.

In other notes to the report, hourly wages crept up a bit, $.10 but the unemployment rate was unchanged at 7.6%

The Dow smashes record high, when will the crash come?

As I write this the Dw is at 14,276, well above the record high of 2007 and seemingly set for stratosphereic heights. What is fueling this surge? Let's see where we are:

• Dow Jones Industrial Average: Then 14164.5; Now 14,276
• Regular Gas Price: Then $2.75; Now $3.73
• GDP Growth: Then +2.5%; Now +1.6%
• Americans Unemployed (in Labor Force): Then 6.7 million; Now 13.2 million
• Americans On Food Stamps: Then 26.9 million; Now 47.69 million
• Size of Fed’s Balance Sheet: Then $0.89 trillion; Now $3.01 trillion
• US Debt as a Percentage of GDP: Then ~38%; Now 74.2%
• US Deficit (LTM): Then $97 billion; Now $975.6 billion
• Total US Debt Oustanding: Then $9.008 trillion; Now $16.43 trillion
• US Household Debt: Then $13.5 trillion; Now 12.87 trillion
• Labor Force Particpation Rate: Then 65.8%; Now 63.6%
• Consumer Confidence: Then 99.5; Now 69.6
• S&P Rating of the US: Then AAA; Now AA+
• VIX: Then 17.5%; Now 14%
• 10 Year Treasury Yield: Then 4.64%; Now 1.89%
• EURUSD: Then 1.4145; Now 1.3050
• Gold: Then $748; Now $1583
• NYSE Average LTM Volume (per day): Then 1.3 billion shares; Now 545 million shares
• courtesy of Investment Watch

That takes a bit of the shine off, since the underlying economics simply just do not seem sustainable.

What to do? Maintain the ability to swiftly move your stock exposure at the first sign of a correction, anything over a 7-8 percent drop in the Dow, and take a look at options to any mutual fund accounts you have to move into a safethy zone.

And this time when the Dow crash comes, as it inevitably will, the safety of gold and especially silver will be where the money flows. Get there first.

Inflation and the (Rising) Cost of Living - Prepare NOW

For years the US government has consistenly understated both the rate of inflation and the impact this form of hidden taxation takes on you and your fellow citizens. The BIG MAC TM Index shows the penalty inflation applies to all of us.



Coutesy of Seeking Alpha - The Big Mac And Your Financial Health

James Cornehlsen takes us furthur along this path applying the BIG MAC TM Index results to bonds, stocks and investments, with a very worrying conclusion.

As for myself, I am a believer in commodities over the next several years verses stocks or bonds. Why? Accelerating dollar inflation and the proven track record of gold and silver. 

Prediction: Year end 2013 brings gold at $1,950 per troy ounce and silver to $55.00. And the currently overvalued stock market sinks the Dow to $11,300.

 

September Jobs Report - Math Challenged and Too Convenient

Even Morning Joe Scarborough questions this one, as does his panel. Listen in: September Job Numbers Don't Make Sense.

And he is right, 366,000 people seem to have just disappeared. Poof! Vanished. Gone.
Check U6 - Seasonally Adjusted - no change there at all. So how can this be?

Has the BLS reporting become political? This dramactic drop in U3 unemployment could not be accomplished with such a dismal 114,000 jobs growth report. It certainly is convenient for the administration, but ut may turn out to be an inconvenient truth if these jubmers have been finagled.

Jack Welch seems to think so, here is his tweet:  "Unbelievable job numbers..these Chicago guys will do anything..can't debate so change numbers" CNNMoney posted it here:  Questions on the Jobs Report

This could get interesting. Listen for the leaks.

Romney Best Choice Say Majority of Respected Economists

Yup, even though the CNN headline is about as misleading as it can get, the facts in the article are about as clear as they can be. The Romney Economic Plan is the best choice for the USA according to the majority of repsonding economists to the CNN survey. And please recall, the biggest issue in this election is the ECONOMY! Who can jumpstart job creation? Romney!

Read more at CNN: Romney Best for Economic Recovery!

Romney Staff Memo Leaked, Lowers the Debate Bar

Strange way to leak it. Romney will most likely win the first debate and prevail in the eyes of the voters, however the MSM probably already have their Obama Wins BIG headlines and articles ready to go, no matter what happens in the actual debate. Obama can disclose recipes for tastily cooked Dog Dishes he enjoyed as a child and the MSM will tell us how nutricious and healthy they are. But the voters won't be fooled, now or in November.

Keep in mind the questions posed by the moderators will just be white noise for the candidates to ignore. Their answers will be the stock phrases memorized as the position least likely to offend the majority of voters. Follow up questions may challenge the original answer, and in this are Mitt will shine. He can actually think on his feet somewhat. POTUS often does not.

Keep it on track. It's the economy. The only answer is "I will create the conditions for more JOBS!!"

WSJ: Fed Buying 61 Percent of US Debt

Don't expect interest rates on savings deposits to rise at all over the next several years, or more, if the Fed keeps on buying up the majority of US Treasuries at this rate. And most likely they will, since no one else seems to want them anymore.Julie Crawshaw and Forrest Jones at MoneyNews give us this recap of the original Lawrence Goodman WSJ article here: Federal Reserve Propping up US Economy and presents a dire scenario. In the original article at the WSJ by Goodman Demand for U.S. Debt Is Not Limitless  (Possible Paywall) he makes the point that " Federal Reserve purchases of Treasury debt mask reduced demand for U.S. sovereign obligations." this creates the impression of stronger demand for US debt  and could be especially dangerous.

In consensus, Crawshaw and Jones make the point that the Fed, by propping up the treasury sales, may be delaying action on fiscal responsibility, perhaps even postponing "serious attempts to curb spending and narrow its gaping deficits" by the US Government.

"Without foreign buyers and a shrinking base of U.S. corporate and bank buyers, the Treasury has had to resort to the Federal Reserve itself to make the purchases. The Fed purchasing not only makes up the shortfall, but can keep long term interest rates artificially low."

So for now don't wait for the banks to start offering any reasonable interest rates soon, and look to the market for investments in solid stocks. But take care, the bulls are here for a short term, leading up to the elections. Then pay attention, because the results of this one will determine the financial future of not just this country, but of the world.