Quote Of The Day: Unemployment Claims

Despite the improving trend of initial unemployment claims (still at very high levels), little attention has been paid to the escalating number of people who are exhausting their benefit and falling into the Emergency Compensation category. Although the government is likely to indefinitely extend these Emergency benefits, recipients aren't likely to be buying plasma TVs, new homes, cars, iPhones (just kidding - they'll still buy their iPhone), name-brand canned goods, teeth whitener, etc.


From ZeroHedge:

The number you won't hear mentioned anywhere in the Mainstream Media: 327,729. That is how many people shifted to Emergency Unemployment Compensation programs in the last week alone, hitting an all time record high of 4.2 million! So as everyone is focused on the benign picture of initial claims in the last week which was "only" 474,000, the number of people rolling off continuing benefits has exploded and is now a stunning 592,579 only in the last two week.

link to full post

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The Market Rubbernecker is affiliated with Aspera Financial, LLC, a registered investment advisor. Please read the disclaimer on the home page of the Market Rubbernecker site.

Quote Of The Day: David Stockton

I found today's QOTD in the latest copy of my undergraduate alumni magazine. The magazine ran an article on alumnus David Stockton who is the director of the Federal Reserve's Division of Research and Statistics. Before getting to the key quote, let's look at the article's description of David's responsibilities.

..Stockton oversees one of the world's largest economic research teams -- approximately 290 economists, financial analysts, computer scientists, research assistants and other personnel. Stockton and his staff sort through and interpret information streaming from the country's financial markets each day. One of Stockton's primary responsibilities is presenting periodic economic forecasts to the Federal Open Market Committee (FOMC) on job losses, housing wealth and business spending.

You won't find many people with greater access to economic and financial data than Stockton. The article quotes Bernanke as saying that "David's wise counsel, keen insight and deep knowledge of the economy have proved invaluable to me and the other members of the FOMC through the years, but most especially during the recent time of financial turmoil."

Now to the QOTD from Mr. Stockton:

What economists don't know about how the economy operates dwarfs what we do know. Our research program is intended to chip away at the margins of our ignorance.

I had a mixed reaction when I read this. On the one hand, it's very refreshing to have one of our leading economists so clearly state how little the Fed really knows about how the economy works. On the other hand, it's very disturbing to have one of our leading economists essentially admit that the Fed has no sound basis for its monetary policy.

If economists and the Fed don't really understand how the economy operates, how can they possible presume to know where short-term interest rates should be set?

The Fed's track record this past decade is abysmal. Artificially low rates helped fuel the internet bubble and the housing/credit bubble. Now, the Fed is again keeping rates absurdly low and is again fueling the next crisis. All of this is being done within "the margins of our ignorance."

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The Market Rubbernecker is affiliated with Aspera Financial, LLC, a registered investment advisor. Please read the disclaimer on the home page of the Market Rubbernecker site.

Quote Of The Day: Qin Xiao and Chinese Bubbles

This quote comes from a Financial Times story entitled, "Top China banker warns on asset bubbles." What I most appreciate is that I can't imagine a top U.S. banker saying this. From the article:

China needs an “urgent” tightening of monetary policy to prevent the huge stimulus measures introduced this year from inflating stock and property bubbles, one of the country’s leading bankers has warned.

Qin Xiao – chairman of China Merchants Bank, the country’s sixth-biggest – says in Thursday’s Financial Times that the government should not be afraid of a “moderate slowdown” in the economy.

“Monetary policy must not neglect asset-price movements,” he writes. “Therefore it is urgent that China shifts from a loose monetary policy stance to a neutral one.”

Of course, this doesn't mean that the authorities will be immediately changing policy (though they should). However, if they continue their loose monetary policy, their stock and real estate bubbles will get out of hand. The higher they run, the harder they'll fall. It'll be interesting to see how the authorities walk the fine line between encouraging employment growth and asset bubbles and intentionally (and responsibly) slowing economic activity. Regardless, the fact that a private sector leader can so freely, frankly, and intelligently speak his mind is refreshing, even if it's coming from half-way around the world.


Disclosure: We recently sold our China equity exposure.

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The Market Rubbernecker is affiliated with Aspera Financial, LLC, a registered investment advisor. Please read the disclaimer on the home page of the Market Rubbernecker site.

Quote Of The Day: Elephant Cheeks

This speaks for itself.

Many people attempt to be analysts or economists, yet they speak without having real experience, and they fail to see that they are really nothing more than a fly on the ass of a big elephant. They do not realize they are even sitting on an elephant and worse still, they do not understand what is an elephant.

Martin Armstrong

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The Market Rubbernecker is affiliated with Aspera Financial, LLC, a registered investment advisor. Please read the disclaimer on the home page of the Market Rubbernecker site.

Quote Of The Day: Frankly Stupid

Courtesy of Calculated Risk:


“I don’t think it’s a bad thing that the bad loans occurred. It was an effort to keep prices from falling too fast. That’s a policy.”

Barney Frank, chairman of the House Financial Services Committee on recent FHA lending.


I wonder if, as the words came out of his mouth, Mr. Frank thought, "I can't believe I'm saying this." So, bad loans are fine so long as they're made in an attempt to manipulate the market for the benefit of the U.S. taxpayer...who will be saddled with repaying those debts once they blow up. Apparently, we shouldn't concern ourselves with the wisdom of government action so long as they mean well.

Here are some other policies.

• Barney Frank, Congress, and the FHA do not know the "right" level for home prices, so they should stop trying to manipulate the housing market.
  
• Do unto others before they wise up and vote you out of office.
• Don't rob Peter to loan the money to Paul for a new home. Paul is broke. He needs to move back in with Mom and rebuild his savings.
• Speak softly and...actually just stop speaking.

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The Market Rubbernecker is affiliated with Aspera Financial, LLC, a registered investment advisor. Please read the disclaimer on the home page of the Market Rubbernecker site.

Quote Of The Day: German Car Industry

Every frat boy (U.S. government) loves a kegger (cash for clunkers), but the resulting hangover (fewer future sales) is another story. Cash for clunkers has come and gone. As expected, auto sales jumped. I personally finally benefited from the government's recent generosity (your tax dollars) and traded in my dear old '96 Ford F-150 for more of a family car. Would I have bought a new car without the incentive? Yes.

All of these government incentive programs are simply shifting sales/demand forward and arbitrarily rewarding some consumers at the expense of others, often for decisions they would have made anyways. They are clearly boondoggles and a waste of taxpayer money, and we're likely to see more of them since "free" money is a difficult drug to kick. We're not even close to a real recovery given that we haven't even completed Step 1 - admitting we have a problem.

The following comes from the latest piece by Evans-Pritchard:

The risk for Germany is that the economy tips into a double-dip recession as emergency stimulus subsides. Its cash-for-clunkers scheme expired earlier this month after a rush of sales over the summer. The Centre for Automotive Research says sales will fall by a million next year in "the largest downturn ever suffered by the German car industry".

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The Market Rubbernecker is affiliated with Aspera Financial, LLC, a registered investment advisor. Please read the disclaimer on the home page of the Market Rubbernecker site.

Quote Of The Day: Robert Reich

This isn't new news, but it still makes the blood boil.

Goldman won't repay taxpayers the $13 billion it never would have collected from AIG had we not kept AIG alive. (In one of the most blatant conflicts of interest in all of American history, Goldman CEO Lloyd Blankfein attended the closed-door meeting last fall where then Treasury Secretary Hank Paulson, who was formerly Goldman's CEO, and Tim Geithner, then at the New York Fed, made the decision to bail out AIG.) Meanwhile, Goldman is still depending on $28 billion in outstanding debt issued cheaply with the backing of the Federal Deposit Insurance Corporation. Which means you and I are still indirectly funding Goldman's high-risk operations.

The rewriting of history is well under way. The near global financial collapse really wasn't that bad. It all could have been prevented if only Lehman had been bailed out. Bernanke saved the world. The banks didn't really need taxpayer dollars. Goldman employees are still geniuses...

The seeds are once again being sown.

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The Market Rubbernecker is affiliated with Aspera Financial, LLC, a registered investment advisor. Please read the disclaimer on the home page of the Market Rubbernecker site.

Quote Of The Day: Jim Rogers

From a Financial Times piece:

The idea that a problem of too much debt and too much consumption can be solved by more gigantic debt and consumption is ludicrous. Would that governments stop interfering with fundamental principles and let the market clean out mistakes! Marx is singing in his grave there in London as the US government now controls the auto, mortgage, insurance, banking, et al industries and he has not fired a shot. Letting Lehman fail was perhaps the only thing governments have done right during this whole drama.

Unfortunately, too few people share this view. In fact, one of the key lessons learned by our experts seems to be that Lehman should have been bailed out. We've missed a wonderful opportunity to get this country back on a solid economic footing. Instead, we're simply laying the foundation for the next crisis as government debt takes the place of private sector debt.

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The Market Rubbernecker is affiliated with Aspera Financial, LLC, a registered investment advisor. Please read the disclaimer on the home page of the Market Rubbernecker site.

Quote Of The Day: Paul Tudor Jones

Though our ranks are thinning, it seems I still have some company. The following is from Tudor's recent client letter. Paul resides squarely in the "non-idiot" camp.

“Impressive counter-trend rallies are a feature, not an oddity, of secular bear markets. We are not inclined to aggressively chase the market here. Many doubts remain about the sustainability of this recovery, most prominently the weakness of household income growth.

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The Market Rubbernecker is affiliated with Aspera Financial, LLC, a registered investment advisor. Please read the disclaimer on the home page of the Market Rubbernecker site.

Quote Of The Day: Human Learning

I found this quote from Douglas Adams to be rather appropriate given our policy response to this balance sheet recession and the re-emergence of bubble dynamics.

"Human beings, who are almost unique in having the ability to learn from the experience of others, are also remarkable for their apparent disinclination to do so."

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The Market Rubbernecker is affiliated with Aspera Financial, LLC, a registered investment advisor. Please read the disclaimer on the home page of the Market Rubbernecker site.

Quote Of The Day: Hot Waitress Indicator

Well, it seems at least as reliable as anything coming from the government. From Hugo Lindgren in a New York magazine article:

"The indicator I prefer is the Hot Waitress Index: The hotter the waitresses, the weaker the economy. In flush times, there is a robust market for hotness. Selling everything from condos to premium vodka is enhanced by proximity to pretty young people (of both sexes) who get paid for providing this service. That leaves more-punishing work, like waiting tables, to those with less striking genetic gifts. But not anymore."

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The Market Rubbernecker is affiliated with Aspera Financial, LLC, a registered investment advisor. Please read the disclaimer on the home page of the Market Rubbernecker site.

Quote Of The Day: Hedge Funds

Good line from Niels Jensen in defense of hedge funds:

"If you prohibit private investors from investing in hedge funds which on average use 1.5-2 times leverage but permit the same investors to invest in banks which use 25 times leverage and which are for all intents and purposes bankrupt, then you either don’t understand the world of finance or you don’t want to understand."

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The Market Rubbernecker is affiliated with Aspera Financial, LLC, a registered investment advisor. Please read the disclaimer on the home page of the Market Rubbernecker site.

Quote Of The Day: California IOUs

From Dr. Housing Bubble post:

"We are going to give people monopoly money so they can go and deposit their funds into a bank that is broke so it can then lend it out to people with no money! This is the solution to the $26.3 billion shortfall."

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The Market Rubbernecker is affiliated with Aspera Financial, LLC, a registered investment advisor. Please read the disclaimer on the home page of the Market Rubbernecker site.