The Mess That Greenspan Made - Part 32

Wednesday Morning Links

Reaction to new highs: cheers and fears – USA Today
Factories burnt in Vietnam anti-China protest – BBC
Anger Grows in Vietnam Over Dispute With China – NY Times
Ukraine Strives to Fix Crisis as Ambush Shows War Closer – Bloomberg
Focus on BoE, highlights contrast with dovish ECB – Reuters
Fannie, Freddie won’t reduce loan limits, regulator says – LA Times
Recession-Baby Millennials Scarred by Downturn Spurn Stocks – Bloomberg
U.S. household debt jumps for third straight quarter: survey – Reuters
Student Debt Holders Retreating From Housing Market, NY Fed Says – Bloomberg
Investors May Have Gained Early Word on Fed Policy, Study Finds – Bloomberg
Wall St. has always been corrupt or about to be corrupted – The Burning Platform
Piketty and the Zeitgeist – Project Syndicate

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Asia shares rise on new S&P high, Europe meanders – AP
Traders eye data this week for whiffs of inflation – CNBC
The Case for an Extended Bull Market in Stocks – Barron’s
European stocks step back from multiyear highs – MarketWatch
Investor Survey Explains Why Investors Remain “Side Lined” – Zero Hedge
Like So 2000: Wall Street Pumps Crashed Internet Stocks – Testosterone Pit
Treasuries Rise Before Producer Prices Amid ECB Stimulus Bets – Bloomberg
Gold up on lower dollar, stocks; platinum, palladium add to gains – Reuters
Nobody Is Bothering to Buy Gold and UBS Says That Is Its Biggest Positive – The Street
Gold Smuggling in India Spikes 446% in Last 12 Months – Scrap Monster
London silver ‘fix’ to be scrapped from August – Mineweb

Why Austerity Does Not Work –
What Is Social Insurance? Take Two – Baseline Scenario
The Death of QE’s Promise and Premise – Alhambra Partners
Food Stamps and Failed Economic Policies – House of Debt
UK jobs growth rises at fastest rate in 43 years – Telegraph
Banks told to act more quickly on home loans – China Daily
‘Debt denial’ over mortgage repayment problems – BBC
Southern California housing market slowly heating up – LA Daily News
Where can the middle class actually afford to buy a home? – Fortune
Ben Bernanke lunch auctions for $70,500 – CNN/Money
The Dwindling Fed – NY Sun


Jobless and Obese

This Washington Post story looks at the relationship between unemployment and obesity as a subset of the population in parts of the country (mostly low-skilled workers) make things even more difficult for themselves by showing up to job interviews with added girth.

Recent studies and surveys have shown a distinct relationship between unemployment and obesity, particularly for lower-skilled workers who struggle to find work — a search made more challenging by their weight.

In Hagerstown, where blue-collar jobs have gone overseas or to cheaper parts of the country, 8.4 percent are unemployed — well above Maryland’s 5.9 percent rate. Last month, Gallup identified the area as the third-heaviest place in the United States, with almost 37 percent of its residents obese. Local studies put the number even higher.

This is a fascinating subject on many levels.

First, obesity rates vary widely (no pun intended) within the U.S. based on demographics and cultural norms that seem pretty hard to reverse (note that there’s a “least obese” chart with the WaPo article and most areas are either in the West or the Northeast).

Also, obesity amongst the poor (or, unemployed in this case) is something fairly new in history as hundreds of years ago it used to be just kings and royal families who were obese and this was considered to be sign of wealth. Poor and fat is pretty common today.

Moreover, the food industry and awful government dietary guidelines are only making the problem worse in the U.S. as it costs a little more to eat better, assuming you knew how (which most people don’t). Those out of work and packing on the pounds are likely doing so, in part, because they’re cutting back on spending and buying high calorie/low cost food that the U.S. food industry excels at producing.

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Late last week, I chatted with Cory Fleck of the Korelin Economics Report and, instead of the usual subject of precious metals, we talked about a few unrelated topics that have a lot in common with each other, namely, the remarkable rise in Canada home prices over the years that has been accompanied by surging personal debt and financial literacy around the world.

The .mp3 file is again available here at the blog – just click on the image to the right – or you can go directly to this page over at KER.

It really has been a remarkable transformation for our neighbors to the north as property buying from overseas, a banking system that is fundamentally different from the one we have in the U.S., and an extended boom in the natural resource sector have combined to help keep home prices aloft. When factoring in an increasing appetite for personal debt, this has resulted in what seems to be an unstoppable housing market, though it’s important to remember that nothing keeps going up forever.

The chart below from this earlier item tells the story better than words can.

We also talk about a similarly disturbing trend, this one on financial literacy around the world from this earlier item and we both lamented the fact that financial literacy data for Canada was not available so that it might be viewed in context with the charts above.

[To access commentary that Tim only shares with subscribers, join Iacono Research.]
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U.S. Retail Sales in April Disappoint

The Commerce Department reported(.pdf) that retail sales rose far less than expected last month, up just 0.1 percent in April after big upwardly revised gains during the prior two months and a sharp slowdown over the winter.

The consensus of analysts was for a gain of 0.4 percent in the headline figure, but the miss was even worse when excluding automobiles and gasoline as expectations were higher but sales were even lower, flat and down 0.1 percent, respectively.

Sales rose for 8 of the 13 major categories, but big declines in a few groups offset nearly all of the modest gains elsewhere. Sales at both miscellaneous stores and electronics & appliance stores tumbled 2.3 percent while sales at non-store retailers and restaurants & bars both fell 0.9 percent to pace the declining categories.

Clothing store sales rose 1.2 percent, gasoline station receipts were 0.8 percent higher, and automobile sales were up 0.7 percent to lead the rising categories.

If not for the huge upward revision to prior months – the March increase was adjusted up from 1.2 percent to 1.5 percent for the biggest gain in four years and February’s 0.7 percent gain rose to 0.9 percent – this report would have been even worse.

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