It’s the real economy, stupid

[girl gone mad]

http://www.zerohedge.com/sites/default/files/Sprott%20comment%20July%202009.pdf">It’s the real economy, stupid (pdf)

We are now in the early stages of a depression. The economic indicators we follow to track real
economic activity are all signaling a slowdown of massive proportions. You wouldn’t know it
reading the mainstream papers of course – they all focus on the relative decline in the
slowdown’s intensity. Reading about the slowdown ‘slowing down’ is not the same as growth
however, and does not warrant excitement in our opinion.

Our title this month paraphrases one of Bill Clinton’s presidential campaign messages from 1992.
As one of the three key themes in Clinton’s campaign, “The economy, stupid” was printed on a
sign in his headquarters in Little Rock to help campaign workers stay on message. This month
we’re keeping it simple by focusing on the real economy and its implications for the stock market.

Here is the real economy summarized in numbers:

Industrial Capacity Collapse:

• US industry used only 68.3% of available capacity in May 2009, according to a monthly
  report from the Federal Reserve.1 That represents almost one third of all US industrial
  capacity sitting idle. Prior to the current recession, the lowest rate recorded since the
  Fed started this series of records in 1967 was 70.9% in December 1982.
  
• CHART A depicts worldwide industrial production in a comparison between April 2008
  and June 1929. Very similar trajectories.

Government Tax Revenue Declining:

• 32 of the 46 states whose fiscal year ended midnight July 1, 2009, did not have budgets
  signed by their Governors. States are grappling with deficits totaling a collective $121
  billion, and all states but Vermont require that their budgets be balanced.
  
• Personal income tax, which accounts for more than a third of state revenues, dropped by
  26% in the first four months of 2009, according to the Albany, New York – based
  Rockefeller Institute of Government.
  
• The US government has spent $2.67 trillion thus far in fiscal 2009, but has only collected
  $1.59 trillion.
  
• The US government collected $685.5 billion in individual income taxes so far this year, a
  22% drop from the $877.8 billion the government took in during the first nine months of
  2008.
  
• US corporate income taxes plunged 57% to $101.9 billion in 2009, down from $236.5
  billion in the first nine months of fiscal year 2008.5
  Retail Sales Slump:
  
• The International Council of Shopping Centers (ICSC)/Goldman Sachs same-store sales
  tally for June was down 5.1% from June 2008, worse than the latest forecast for a 4.5%
  decline.
  
• Privately held luxury department store Neiman Marcus Group Inc. posted a 20.8% drop
  in same-store sales. Abercrombie & Fitch Co.'s same-store sales fell 32%, even more
  than the 26.6% decline Wall Street had projected.

Unemployment Catastrophe:

• The June 2009 jobless rate reached 9.5%, the highest since 1983.
  
• 4 million Americans have been looking for work for more than 26 weeks, representing
  29% of the unemployed – the most since records began in 1948.
  
• During the last 30 years, Americans who lost their jobs took an average 15.8 weeks to
  find new positions. In June 2009, the average duration of unemployment was 24.5
  weeks, the longest since records began in 1948.
  
• The number of people collecting unemployment benefits reached a record 6.88 million in
  the week ended June 27, 2009.
  
• Approximately six people are seeking work for every job opening, the most since the
  government began keeping such records in 2000. A year ago, the ratio was a little more
  than two-to-one.
  
  

Rail Car Loadings Suffering:

• For the first 26 weeks of 2009, US railroads reported cumulative volume of 6,806,892
  carloads, down 19.2% from 2008.10 An excellent quote included in the June report from
  the Association of American Railroads stated: “Whenever Americans grow something,
  eat something, mine something, make something, turn on a light, or get dressed, freight
  railroads are probably involved somewhere along the line. Unfortunately, right now
  there’s not enough mining, manufacturing and buying going on. So railroads, like most
  other business sectors, are suffering because of it.”
  
• Carloads are down 22.5% from the all time high set in the first 26 weeks of 2006.
  
  http://www.zerohedge.com/sites/default/files/Sprott%20comment%20July%202009.pdf">More... (PDF)

[babylonsister]

1. I don't do .pdfs if I can help it. Who's sounding this alarm? nt

[girl gone mad]

2. Sprott Asset Management, a Canadian investment management firm.

Detailed and accurate research such as this is an essential part of their business.

[babylonsister]

3. Have they ever been wrong? nt

[TheWatcher]

14. No, you don't face REALITY if you can help it.

It doesn't matter what form it comes in.

[girl gone mad]

4. It's strange to me that anyone would unrecommend this.

It's just a collection of economic facts. Ignoring real data doesn't actually make it go away.

[FreakinDJ]

5. I think comparing the current crisis to 1929 is fairly bogus

and I don't care what their business is.

In 1929 the Fed sat idelly by watching the worlds economy wither on the vine. Countries from around the globe have taken measures to ensure in 2008 this is not the case

For the un-teenth time, Unemployment/employment are lagging indicators

But HEY - thanks for the "Doom and Gloom"

[ixion]

6. since when are economic facts 'Doom and Gloom'?

facts are facts, they are neutral.

Just sayin'.

[FreakinDJ]

8. When it is Bull Shit

It like comparing apples to oranges

[ixion]

10. well, not reall that far removed...

although I doubt it will do any good, here goes:

-- both periods followed a hyper-inflated run up in the stock market.

-- both periods involved a real estate bubble.

So, just for starters, there is a valid comparison to be made. However, I've also heard arguments that is could be more similar to the lesser-known depression in the late 1800's.

The difference this time, though, is that our manufacturing base has been decimated. And there is no way in hell a "service economy" is going to pull us out of the ditch.

[FreakinDJ]

13. "manufacturing base has been decimated" on that point we agree

and there will be no recovery unless this is addressed rapidly

However I still do not believe the answers you are seeking can not be found in history. We are breaking New Ground on this one. The 1800s and 1929 had no Federal Reserve, nor SEC, or FTC, or FDIC, or Unemployment Compensation, or Welfare, or Medicare, or Stimulus Funds. Those are ALL Game Changers.

Anyone peddling "Doom or Gloom" at this point has a vested interest in the Economy Failing, and I don't just mean the GOP. They are manipulating you to manipulate the market.

But on a lighter note - THANKS SUCKERS

I've all but regained any loses from 2008 in my portfolio and am in the black once again and GAINING GROUND towards my retirement.

Once again - THANKS YOU STUPID FUCKING FOOLS - YOU'VE BEEN HAD AND I PROFITED HANDSOMELY FROM IT

[girl gone mad]

15. Which fact in this report is in dispute?

It looks fairly cut and dry to me.

I am not short this market since I believe money managers are going to continue chasing easy returns in an attempt to outperform the indices. Past October, things start to look less certain.

[marketcrazy1]

7. ""I think comparing the current crisis to 1929 is fairly bogus""

I think you are right, comparing this depression to 1929 is bogus.. in 1929 Americans did not have anywhere near the debt overhang we are facing in this depression!!....... on the lighter side we also did not have the many support programs we have now, unemployment insurance, FDIC guaranties, food stamps and welfare. ect. ect. ect. so that THIS depression may take longer to really kick in on main street. if the government can get their shit together history will refer to this period as a "mini depression" but if they keep going down the road they are on now things will get ALOT worse and history will record this crisis as the greatest depression.................

[FreakinDJ]

9. Try reading a little History before you run off at the mouth an act the fool

So once the American economy slumped and the flow of American investment credits to Europe dried up, prosperity tended to collapse there as well. The Depression hit hardest those nations that were most deeply indebted to the United States, i.e., Germany and Great Britain. In Germany, unemployment rose sharply beginning in late 1929, and by early 1932 it had reached 6 million workers, or 25 percent of the work force

Almost all nations sought to protect their domestic production by imposing tariffs, raising existing ones, and setting quotas on foreign imports. The effect of these restrictive measures was to greatly reduce the volume of international trade: by 1932 the total value of world trade had fallen by more than half as country after country took measures against the importation of foreign goods.

http://www.english.illinois.edu/maps/depression/about.htm

[bvar22]

11. There is a large group of peope at DU....

...who do NOT want people to have access to FACTS....the anonymous unrecers.
For them, FACTS are the ENEMY.

This post is a prime example.
Also, most posts containing the FACTS about HR 3200.

[bvar22]

12. But Wait!

Health Insurance Industries and Wall Street Banks are posting Record Profits!
The Stock Market is UP.
Isn't THAT "The Economy"?