Recession News - It will be late and mild

Well, this month brings something similar to good news. The numbers I have been seeing for the past several weeks are saying the recession is likely to wait several more months and is likely to be milder than I expected.  Here in the U.S., that is. The recession seems to be right on schedule in Europe and already started in Japan.

Of course if you bet heavily on us going into recession, this might be bad news.  I never bet heavily on any particular direction, and thus never lose a lot.  Never make a lot either. (Bit of my humor there.)

All though the past year or so, I saw copper losing ground, which is an indicator that manufacturing was weaker than everyone thought.  And then oil prices began to drop.  That is always a sign that a recession is beginning. And it is.  Just not here. The Department of Labor's statistics said this month that the U.S. added 170,000 manufacturing jobs in the past year.  While that is not spectacular, it is substantial.

What appears to be happening is some of the manufacturing that used to be overseas is now happening here in the U.S.  And what about that drop in oil prices? Well despite the Obama administration attempts to block oil production anywhere they could, oil and gas exploration and extraction has increased everywhere that the Fed's don't have jurisdiction.

Now, when the rest of the world goes into recession, it will have an effect on us.  But the effect will not be as bad as we once feared. On the other hand, things will not get better at any appreciable rate for as far into the future as I can forecast.

It may be noted that I don't have any links this month.  Just ran out of energy.
Will try to do better in the next few weeks.

The next recession may be starting now

Well, it looks as if the next downturn may be already beginning. There has been a perceptible slowdown in worldwide manufacturing and that is translating itself into visible numbers.  Gas, oil and copper prices falling. And employment numbers weakening (or down, depending on which numbers you look at).

Since December 2012, private industries paying up to about $14.50 an hour have added, on net, 972,000 nonsupervisory jobs with an average workweek of a mere 17.7 hours, an IBD analysis finds.

That doesn't mean new employees are being hired for such few hours. Rather, it reflects a combination of reduced hours in existing jobs and short workweeks for newly created jobs.

Overall, in these low-wage industries which employ 30 million rank-and-file workers, the average workweek shrank to 27.3 hours per week in July, an IBD analysis shows. That's the shortest workweek on record, except for this past February, when mid-month blizzards wreaked havoc during the Bureau of Labor Statistics survey week.

The conventional wisdom among economists is that there's been no apparent shift to part-time work and that ObamaCare's employer mandate hasn't led to shorter workweeks.

But shorter hours clocked by nonmanagers in low-wage industries are being obscured because the rest of the workforce is now clocking a longer average workweek than even before the recession started.

For low-wage industry workers, on the other hand, the recovery in the workweek from a then-record low 27.5 hours in mid-2009 began to reverse in the latter half of 2012, and it's been pretty much all downhill since then.

Evidence points to ObamaCare as an important factor in the shrinking workweek.

Read More At Investor's Business Daily: http://news.investors.com/economy/090514-716193-worst-job-stat-keeps-getting-worse.htm#ixzz3D8npd64y
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 I am a bit disappointed we didn't get that year of prosperity I forecast last year, but it looks as though we may be in for a rough time in the next few years.

There are some good tidbits.  Or maybe "not so bad" tidbits.  With prices down, if you do have a job, there is no time like the present to be stocking up on things you will need to ride out the next few years.  Of course, if you are one of the millions who have fallen victim to Obama's policies and are now out of work, you will be struggling just to survive in the not too distant future.

July Economics Report - looking bad

The first part of this months report showed quite a few things looking pretty upbeat.  Enough so, that one could wonder why I think the upswing will run out of steam before there is a true recovery.

But the jobs market analysis is pretty horrible.  The guy I trust to do the analysis talks like it is catastrophic, but I chock it up to being just one more month with good looking numbers on the surface and some pretty dismal numbers underneath.

First, the headline number the government always tries to push, 288,000 new jobs, isn't too bad.  In fact anything over 200,000 jobs should be progress.  But the manufacturing jobs, where the wealth is created, was only about 15,0000, and we need 20,000 plus jobs there every month.  We haven't gotten sufficient growth in manufacturing jobs in any of the past several months.

But what is worse is the number of part time jobs vs the number of full time.  The number of full time jobs actually went down this month. By more than 288,000. So, what has happened, by and large, is that a lot of people who used to work a full time job, are now working two part time jobs.

I do recommend Mish Shedlock's blog on Global Economic Trend Analysis for learning and tracking economic news around the world.  I don't recommend learning about war from him.  First, I don't think he understands war.  I suspect he just cannot get his arms around the idea that someone will kill you for having an opinion different that their own.  Second, while he seems to have a fairly realistic opinion of how brutal and under handed our own government can be, he seems to not understand just how much more brutal and dishonest other governments tend to be. Third, his opinions on the war in Ukraine are being formed by someone with an agenda to make Russia look good and Ukraine and The West look bad.

All in all, he is a genius about economics, but about war- not so much.

July Economics Report - looking good

Well, the markets are still rising.  The underlying economy got better too, though not enough to account for the markets, which were overpriced, and became more so this month.  People do, but should not, confuse a rising market with an improving economy.

The U.S. manufacturing sector turned in good numbers last week.  We seem to have gotten some real, though slight, growth over the past year. This growth is in parallel to the world wide growth in manufacturing.  These are good things. (Remember, it was around this time last year that I said I expected an 18 month growth cycle.  The length of the growth cycle seems to be slightly slower than expected, but should still run until the end of the year, and maybe a few months beyond.)

The jobs report is out a day early this month, due to the 4th of July weekend.  Not bad, considering it was several weeks late around this time last year, as the Obama administration threw a tantrum because we reminded them that the Administration works for us, and not us for him.

I don't have the analysis of the monthly payroll report yet, 
so I will have a follow up to this report, probably tomorrow 
(I don't take holidays the same way everyone else does).

Meanwhile, on the global stage, copper has been slowly rising, again pointing to an upsurge in world manufacturing. Add to this the June Global Grain Report from FoodSecurity.org showing the world grain reserves are higher than they have been in years, and it paints a pretty good picture of a world where things are getting better. (Don't get too deceived)

The U.S. Treasury bond market, however, doesn't paint such a good picture.  T-Bills are still pulling less than 1% interest for anything up to something over three (almost four) years, an indication that true recovery is still at least three years away. The unfortunate  flip-side to this number is devastatingly paradoxical.  The 18 month growth cycle I mentioned at the beginning of this article shows there will be NO true recovery.

Despite the Obama Administration attempting to roadblock crude oil production on several fronts, production of crude, and stuff made from it, has increased to the point where we are now net exporters.  This means that, in spite of all the talk about instability in the Middle East, the risk of interruption in the U.S. supplies is only the risk of damage to our own infrastructure.  This means we have risk from destruction of refineries or pipelines but not from an interruption in supplies from the Middle East. The natural gas sector has not done as well, although I am not sure why.

Our allies are not so fortunate.  Disruption in shipping through the Persian Gulf or disruptions in many other places put their supply at risk.  Much of Europe is hostage to supplies from Russia.  Especially Southern Europe, and the Balkans (small countries in Eastern Europe). The Ukraine and nearby countries are almost certain to suffer gas and oil shortages this coming winter.  And that doesn't mean it will just be cold in their homes.  Gas is necessary for industry, manufacturing, transportation, and other commerce.  Those things grinding to a halt this winter will slow the world economy, although only by a small percentage. 

I hope to be posting a follow up to this either late today or tomorrow.

Monthly Economic Post, Part 3

Payroll numbers are out, and again, I am letting Mish Shedlock do the heavy lifting.  His report is not as detailed as some of the ones he has done in the past, but then, this month is not that noteworthy. Employment numbers are up, but not quite enough to keep up with population growth.  Manufacturing, likewise, is up, but not enough to keep up with population growth.  Another stagnant month in the actual economy.

The market have risen for another month, as they have for the past dozen months.  Not to be confused with the economy, the markets are rising because people invest, and they invest because they think the markets will rise.  This will continue until enough of those betting on the markets need to use that money for something else, and then there will be a race to the bottom.

Monthly Economic Outlook Pt. 2

It appears there is real growth in the Manufacturing Sector, as the ISM is above my benchmark of 52.5, which is where I consider real growth to start.

While this growth doesn't seem to be adequate to account for the market bubble, it may be more in line with my expectations that 2014 would be a year of good economic growth. This may be the growth I predicted in August of last year, and again in December of last year. 

My feelings on this are "well, it's about time." The malaise we experienced from Feb until now had me concerned we might just remain stagnant for an extended period, possibly running into years.

Of course, in a way, that would have been a good thing, as the good economy of the next few months (I don't know how many) will inevitably be followed by the economy turning downwards again, and another recession. 

The Employment situation from Bureau of Labor Statistics is supposed to come out later this morning, and it will complete the current picture.

UPDATE: It appears the "stupid money" I predicted would surge into the markets may have already begun.  'Mish' Shedlock has an article on his blog showing a surge in risky investments that may be larger than the surges that preceded the bubble collapses of 2000 and 2007. 

Monthly Economic Outlook, Part 1

There hasn't been a whole lot to report in economics for the last two months.  Mostly just a stagnant malaise in the economy, and a steady climb (bull market) in the markets that does not reflect the true underlying economic conditions. There has been, in the past few weeks, a slight increase in the price of copper, which means manufacturing is making something of a comeback.  It will need to get above $3.33 per pound, though, to reflect a healthy manufacturing base.

I noticed a slight change in the bond market the past couple of days, and it may be that some of the more conservative investors are moving their money out of the stock market into long term (10 years) Treasury Bonds. 

This would be in keeping with the thoughts I heard from a couple of analysts that we are in pretty far along in a Bull Market.  Now, if common people begin to think the stock market is a place they can make money, we may soon see what is known as stupid money flowing into it.  This is money that is put into stocks in a way that is completely disconnected from any reality of what those stocks are worth. (The very definition of a market bubble.) They unwittingly play a game called the "greater fool rule" where as long as there is someone who will pay more for the stock tomorrow or next week, the stocks will continue to rise.

At this point, all of the traditional investors will leave stocks for bonds or money market accounts, and people with a (sometimes unconscious) survivalist mentality will begin to buy into silver, platinum, gold and palladium.  Of course, most of these people (at least in the US and Europe) will buy their metals on paper, since that is more convenient. A side effect of this is that more metal might be traded than actually exists in the world, so prices might climb fairly steeply.  

Around this time last year, I expected the market to go into the major bubble building phase in the last half of this year.  But at the time, I didn't know the government statisticians were playing around with the methods they use to generate their numbers.  That is why I didn't see the stagnant malaise we were in during the last few months of 2013. Of course, that screwed up my timetable pretty dramatically, but the underlying ideas are still sound. I am still trying to judge when the market will go into bubble overdrive, and then burst.  Of course, no one knows this for certain.  Anyone who can reliably predict when the bubble will burst would soon be rich.

But I can guess when it will get dangerously unstable.  Currently, I would look for the S&P to pass 2200 and for the bubble to continue to build past the end of the year. But I have to repeat that this is just a guess.  The only thing certain is that there will be a bubble, and it will burst.  Safe bets are that it will be a stock bubble (some analysts say we are already in one), and that just as it bursts gold and silver will rise (but I don't know if it will rise by 30%, or 130%). 

For your reading pleasure:

Anyone who is thinking clearly knows the economic system fostered by central banks is totally and completely out of control.

Repetitive rounds of QE, competitive currency debasement, interest rates at zero, and sponsorship of the internet bubble followed by the housing bubble, followed by the current stock market bubble is proof enough.

So, what I am about to report is really nothing but common sense, except for the fact that it comes from an unusual place, where one does not normally hear such discussions.

Jürgen Stark, former vice president of the Bundesbank, and also former chief economist of the ECB (unofficial title) says "The System is Out of Control". Via translation from Libre Mercado:

[read what Stark says at the link] 

Ukraine, China, and Obamacare Drag us Down

The Ukraine

The markets reacted quite negatively to the invasion of Crimea (in the southernmost tip of Ukraine) by Russian forces.  But they returned to normal about 3 days later, when Putin made promises that he wouldn't be using any military forces in the Ukraine. 

It looks, on the surface, like the sudden alarm throughout the rest of the world has caused him to reconsider, and he is back pedaling. After all, the impact on Russian markets has been pretty dramatic, and Putin has been making overtures like he is backing down, even claiming the troops in Crimea aren't Russian at all.

Putin, speaking at a news conference at his residence outside Moscow on Tuesday, denied that the troops guarding Ukrainian military installations across Crimea were regular Russian troops, claiming that they were "local self-defense forces." Many of the uniforms on those troops lack identifying insignia, but their vehicles and uniforms appear to be Russian. Putin shrugged the accusation off, saying "The post-Soviet space is full of such uniforms."

Make no mistake Putin, former KGB isn't backing down.  He is playing a global chess game with us, and likely has figured his next three moves every step of the way.

China and Copper

China has been changing their statistics and forecasts about as often as the weather changes.  Recently, they noted some "softness" in their manufacturing sector that they are seeking to "fine tune." Hogwash. Manufacturing in China has been slowing for some time, and absolutely must slow more before recovery can begin.  In the past couple of years, the Chinese economy has been hollowing out, with bad loans, and building that have been built that no one is occupying.

One noticeable effect of the manufacturing slowdown has been the price of copper, which has been slowly losing ground for the past couple of years, especially in light of the cost of energy.  Since European manufacturing has been flat, and US manufacturing has risen slightly, the only explanation must be a slowdown elsewhere.  Elsewhere in this case has been India and China.

Obamacare and the mid term elections

Obama has been backpedaling on his Unaffordable Care Atrocity for some time now, and with the mid term elections approaching, expect more backpedaling and 'nuancing' (lying).  Already this program has put hundreds of thousands out of full time employment and cause cuts in hours to hundreds of thousands more. It has caused the loss of medical insurance to millions, and increases in rates to almost everyone else. The administration's PR machine keeps trotting out fictitious numbers of people who have signed up for healthcare, but when checked the numbers don't match anything that can be confirmed by any means.  They seem to be made up out of whole cloth.

Remember though, these are all pretty much ancillary news items. The really important numbers (private employment and manufacturing payroll) will be out on Friday.

Economic Future in Question

Some changes in the underlying numbers have called into question, the upturn in the economic situation I predicted last fall.  One of the more troubling aspects is a round of "adjustments" made to the basic calculations I use to determine the underlying health of our economy. 

Another  problem I recently became aware of, is the expanding number of people carrying two jobs in the statistics.  I was unaware both that the monthly payroll report I follow was tracking them twice, and unaware of just how many of these people there are, especially how many more of them there are since Obamacare caused so many to lose their full time jobs.

I have discovered a new blog, "Global Economic Analysis" by 'Mish' Shedlock, that does a lot of straight talk about the world economy.  He holds an  underlying philosophy of economics very similar to mine, but since he does analysis full time, instead of a few hours a month, he sees a lot of stuff I don't. 

Here is his article on the Labor Statistics, and the double reporting of jobs.

The third table shows the volatile nature of the data, especially the household survey. It's the second table that is the important one. Take special note of the bottom two lines in the second table.

Until this past year, the establishment survey and household survey moved tightly. In the last 12 months, the payroll survey averaged a gain of 191,000 jobs a month while the household survey averaged less than half of that at 92,000 jobs per month.
Read more at http://globaleconomicanalysis.blogspot.com/2013/12/enormous-discrepancy-between-jobs-and.html#dP5AxjiU7CwtPyPD.99

 The third table shows the volatile nature of the data, especially the household survey. It's the second table that is the important one. Take special note of the bottom two lines in the second table.
Until this past year, the establishment survey and household survey moved tightly. In the last 12 months, the payroll survey averaged a gain of 191,000 jobs a month while the household survey averaged less than half of that at 92,000 jobs per month.

The third table shows the volatile nature of the data, especially the household survey. It's the second table that is the important one. Take special note of the bottom two lines in the second table.

Until this past year, the establishment survey and household survey moved tightly. In the last 12 months, the payroll survey averaged a gain of 191,000 jobs a month while the household survey averaged less than half of that at 92,000 jobs per month.
Read more at http://globaleconomicanalysis.blogspot.com/2013/12/enormous-discrepancy-between-jobs-and.html#dP5AxjiU7CwtPyPD.99

The higher number 191,000 jobs a month would mean the underlying economy is doing just enough to keep us above water, but the lower number shows we were clearly sinking in 2013.

This is not the only statistic to be affected by the way it is calculated. GDP calculations changed last year, and the effect is likely to be a 3% difference in the numbers, with no difference in the economy.
More about that, found at "Inc,"a financial investor newspage.

I am still trying to process how this will all play out this year and next, but I know it won't be as cut and dry as I first thought it would be.  (Are things of the future ever so clear that we simply know what to do?)

One point of good news, Mish Shedlock sees the US economy as far more resilient than I usually do (although he has been about as astonished as I am that Europe has held together in the face of numbers that clearly do not work).  He also sees a future without the very high inflation spiral that most of us see. He sees rather, that things will grind down to a near halt, with Peter impoverished so that robbing him will still not be able to pay Paul. (Me, I am not so convinced)

Red Light LED - a Prepper's Friend

A current requirement of any headlight I buy (and I buy quite a few, both for me and for some of my friends) is that they have a red light LED setting. The reasons for this are pretty simple, and I will present three or four, depending on how you count them. 

The first red light doesn't kill night vision.  This is the real reason the military has provided red lenses on their flashlights for more years than I can remember. (I will expose a myth later) The red light, while not ideal for seeing things, is adequate for identifying location and shape of objects, which is the primary purpose of using a light. 

Red LED's are more efficient.  Simply stated, red LED's, to produce the same amount of light, require only about half (maybe less) of the power of white LED's. This is because the white LED's use produce one color of light, and use that light to excite phosphorous to create the rest of the spectrum. 

Combined, the above effects allow for for less than one fourth of the battery drain, and your batteries can be drained further.  The ultimate result is a usable battery life nearly eight times what you would get with white light. This will give you a great deal of leverage to reduce the number of AAA and even AA batteries you need to keep on hand. Even better if you have one of the few LED lanterns that have a red LED setting and use D batteries (D batteries provide a lot more energy for your dollar).

Last but not least.

The last advantage I will cover is red light doesn't attract mosquitoes.  Mosquitoes, and most other insects are attracted to blue light (think: bug zapper).  White light contains blue light, so mosquitoes are attracted to it. The yellow porch lights don't give off much blue light, so bugs pretty much ignore them (as an aside, I once painted a CFL half yellow and half red, and the result was a little light that gave nearly normal color vision but didn't attract insects and didn't blind people)

Now, on to the myth.

As with anything the Army does, some mythology grows up around it. What red light doesn't do is make you unseen by others. Think about it. Towers have red lights on them so they can be seen by aircraft.  In fact red light can be seen a long ways away.  Blue light is harder to see at a long distance, but in fact, any light can be seen much further than the average person would expect. And I don't recommend blue light because of it's attraction to mosquitoes.