Free summary from John Williams at shadowstats.com. He has the real stats.
- Watch Out for the Dollar
– October Annual Inflation: 1.0% (CPI-U), 0.8% (CPI-W), 8.5% (ShadowStats)
– Retail Sales Gain Was Statistically Insignificant; Recession Signal Remained Intact
– Official Real Earnings Declined in October
– Existing Home Sales Declined for the Month; Annual Growth Slowed Markedly
Groovygirl looks at the spread between the real inflation rate, right now running around 8.5%, and the rates you can earn at the bank. Those are currently running better than recent months around 2%. Whoo-hoo! This gives a good idea about how far behind real people are falling. Someone living off of investments alone would have a hard time finding a consistant 8.5% return after taxes. (Maybe real estate cash flow) If you compare a business/company’s annual gain and the real inflation stats, it will give you a quick look to see if they are falling behind too. Business annual reports are more complicated, but it directs you to which businesses to investigate further. You can do this with tax revenue for states, counties, and cities, etc. If they are not bringing in at least 8.5% more, then they have to cut somewhere at some point.
Easy money and credit have hidden these truths since the dollar began to really fall in 2001. Once liquidity evaporates for good, it is all over. We have experienced liquidity evaporating twice in the last decade and numerous examples from other countries in the last 5 years. We know what happens. It should not be a surprise when it happens again and you have no excuse not to be prepared.
Chart of the Day is an updated inflation-adjusted DOW chart. We keep hitting that resistance level. Click here.
Groovygirl knows that everyone is excited about the stock market and “new highs”, but this chart of the day shows:
- A clear winter cycle since around 2000 or the dot.com bust
- A firm resistance level at around $15,000 (inflation-adjusted)
- After taxes, you may have not made back your losses, even if you entered the market perfectly timed. Taxes are very important to consider in these times.
- There were major swings in the stock market during the Great Depression as well. This is not unusual.
- We are really in the middle of the long-term trading channel. We could go up, we could go down…..
The recent drops in this winter cycle were driven by bubbles popping and terrorist events. (dot.com pop, 9-11, and housing bubble pop) During a winter cycle, the market is very sensitive to outside forces. Confidence is easily and quickly lost and then regained. This is why buy and hold is not a good long-term strategy during a winter cycle. Groovygirl is not saying that you can’t make money during a winter cycle, it just isn’t the best time for a buy and hold pattern.
John estimates employment numbers since the government is shutdown.
- Estimated Headline U.3 Unemployment Rates: 7.3% in September, 7.6% in October, versus August Actual of 7.3%
- Estimated Headline Payroll Changes, or Jobs Gains/Losses: 181,000 Gain in September, 430,000 Loss in October, versus August Gain of 169,000
- Consumer Credit and Sentiment Show Deteriorating Consumer Liquidity Circumstances
From shadowstats.com, you pay for the detail, but here is the punch line:
- August Labor Conditions Showed a Deteriorating Economy
- Instead of Being Matched Happily with Rising Employment, Falling Unemployment Reflected a Shrinking Labor Force with Declining Employment
- Payroll Boost of 169,000 was 95,000 Net of Revisions
- August Unemployment: 7.3% (U.3), 13.7% (U.6), 23.3% (ShadowStats)
- Annual M3 Growth Slowed Markedly in August
Click here for Martin Armstrong’s latest blog post entitled Defining Hyperinflation: The Coming New Currency dated August 11, 2013.
Very important post. There is major disagreement in economics about the true definition of hyperinflation. Martin spells out his definition of hyperinflation and why he thinks we will not get to that point. in the US Dollar.
Martin does advocate that before hyperinflation, we will have an international 2-tier system. A virtual reserve and international trading e-currency and a national “dollar” currency. From Martin’s post:
Some define hyperinflation as merely the cumulative inflation rate over three years approaching or exceeding 100% with an annual rate above 25%. The reason I do not agree with that definition is because many countries have had brief periods of inflation at that level, survived, and even the currency lives for another day. The USA experienced about 20%+ going into 1980.
gg says: Groovygirl still wonders where all the global dollars will go. Can they really all be absorbed by the new e-currency? She thinks some must flow back to the national dollar currency. It is still possible of a dislocation after (or a panic before?) the e-currency international set up. GG is not confident that they can fore-see all consequences.
There is also the issue of the widening gap between wages and living expenses (and of course, higher taxes). Baby boomers are and will be on fixed incomes. Any, any uptick in monthly and annual expenses whether inflation or additional taxes or individual medical expenses, and it sure looks like hyperinflation to individual on the ground.
I don’t know about you, but gg remembers the 70′s inflation. It was no picnic. Baby boomers will be in a completely different place in their economic and income-producing life if that should happen again. I do not think they will be that forgiving at the voting booth.
You pay for the detail, but here is the punch line:
- July Jobs Gain and Unemployment Decline Were Not Meaningful
- Payroll Boost of 162,000 was 136,000 Net of Revisions
- July Unemployment: 7.4% (U.3), 14.0% (U.6), 23.3% (ShadowStats)
- Construction Spending Remained Stagnant
- Annual M3 Growth Picked Up Slightly
You pay for the detail, well worth the money, but here is the punch line:
- Slowing Growth with Rising Inflation
- Real Retail Sales and Real Earnings Contracted in June
- Annualized Quarterly Production Growth Slowed to 0.59% from 4.23%
- June Year-to-Year Inflation: 1.8% (CPI-U), 1.8% (CPI-W), 9.4% (ShadowStats)