|
REMINDER: All investment, economics, and finance related material now appears at the new IaconoResearch.com. For the time being at least, this has become a personal blog covering a variety of mostly unrelated topics.
This one seems to have been making the rounds in recent days – Merle Hazzard sings about the possibility of a double-dip recession for the U.S. economy.
It may come as news to a good portion of the nation’s long-term unemployed that, as Merle says, “we head right up and head back down again” – maybe he was referring to the banks…
The Commerce Department reported that retail sales rose for the first time in three months, however, the gains were less than expected as confidence in the economic recovery continued to wane and consumers were wary of spending amid a weak labor market.
A surge of 2.3 percent in gasoline station sales and a 1.6 percent boost in auto sales paced the advance. Overall retail sales rose 0.4 percent in July after an upwardly revised decline of 0.3 percent in June but, excluding autos, sales gained just 0.2 percent. Excluding both autos and gasoline, sales fell 0.1 percent, a clear sign that consumers have tightened their belts.
Clothing sales fell 0.7 percent while two categories closely linked to the nation’s troubled housing market – home furnishings and building materials – both declined 0.3 percent.
For months now, Robert Shiller, Yale University Economics Professor and co-creator of the Case-Shiller Home Price Index, has been calling for a double-dip for home prices. Now he’s doubled up on that forecast, citing 50-50 or better odds of a double-dip recession for the U.S. economy as detailed in this report at Marketwatch.
The U.S. economy has a “significant likelihood” of entering a double-dip recession if the government doesn’t step in to help the unemployed, economist Robert Shiller told MarketWatch News Break on Wednesday.
The Yale University professor and author of the best-selling book “Irrational Exuberance” pinned the probability of a double-dip recession at more than a 50-50.
Shiller pointed to the nation’s stubbornly-high unemployment as a root cause of lingering economic woes. And with the Federal Reserve running out of bullets to fight a second recession, he urged Congress to join the battle and focus on putting people back to work.
“Beyond the Fed, I’d like to see the government take a renewed stimulus package focused on creating jobs [and] on activities that involve a lot of people,” Shiller said.
…
“The Fed’s latest statement shows they’re on this, but I’m not so sure Congress is on this,” said Shiller. “There is significant likelihood of [a second recession] if the government doesn’t do something. I’m worried [unemployment] is not going to self-correct.”
It will certainly be an interesting period ahead in the run-up to the November elections, now less than three months away. Recall that the entire nation appeared to be in limbo in late-2008 while markets tanked and economic indicators took a decided turn for the worse before and after the huddled masses went to the polls.
Amid some level of fiscal restraint in Washington, the federal government is beginning to look like the California state government as they increasingly use sleight of hand to find new money to spend, in this case, ironically, to help the states. With food stamp recipients now at a record high of over 40 million, cutting spending in this area a few years out is seen as the best way to free up funds today to send to the states for Medicaid expenses and to save a hundred thousand or more teachers’ jobs. The details are in this story at Politico.
SNAP, the federal food stamp program, is getting snapped up by Democrats these days, hungry for savings to placate deficit hawks and clear the way for legislation.
In a matter of hours Thursday, the Senate approved state fiscal aid and child nutrition bills that help pay for themselves by cutting more than $14 billion from food stamps. The savings come from rolling back a benefit increase approved in the giant economic recovery act last year, but with each bill, the cutoff date has gotten closer and closer, alarming anti-poverty groups.
…
Cash-strapped governors are promised $16.1 billion to help pay Medicaid bills next year, and $10 billion will be distributed to state and local school boards to address the more immediate threat of teacher layoffs.
…
In the case of the school aid, the Education Department estimates that as many as 145,000 teaching positions could be saved with the added funds — a major reason for the House to return now from its recess.
The next thing you know, Washington will decide to pay all federal employees on November 1st instead of in October so as to shift 1/12th of their payroll expenses into the next fiscal year as California did not long ago.
Short-term solutions to structural problems don’t seem to work very well in the long run…
From this item late in the day yesterday at the Wall Street Journal blog The Source come a few thoughts from uber-bear Albert Edwards that seem quite prescient after the disappointing U.S. labor report just a couple hours ago and the reaction by equity markets.
Albert Edwards, Societe Generale’s very smart strategist, whose presentations can fill large rooms, has just averred again that unprecedented monetary and fiscal stimulus has produced an unprecedented weak recovery. As even that fades, “investors will soon have a once in a lifetime opportunity to invest in equities at bargain basement valuations,” he says.
“We have consistently articulated the view that the severity of the current situation will only be appreciated when this current cycle ends in failure and that is not too far away. That will be the time that equities will plunge to new lows. And that, not March 2009, will provide the buying opportunity of a generation to hedge against the Great Inflation,” Edwards’ latest research has it.
The odds have swung in Edwards’ favor since the April highs for stocks and, should the rally that began in July falter in August, that leaves September dead ahead, a month that has not been kind to equity markets during even-numbered years over the last decade.
I’ve inquired at enough private golf courses over the last few years to appreciate the difficulty now being experienced by these clubs. What’s remarkable to me is not that initiation fees are being slashed from $35,000 to $5,000, but that anyone was paying $35,000 to begin with. As a nation, we were certainly spending like drunken sailors a few years back when money was, almost literally, growing on trees in homeowners’ backyards. USA Today provides this update on the plight of the American country club.
For $6,000 a year, Tom Bennett enjoyed the privileges of being a member of an exclusive, private golf course in northeast New Jersey. He golfed pristine grounds and reveled in socializing with other duffers.
But last year, Bennett ended his six-year membership at the private Stanton Ridge Golf and Country Club in Whitehouse Station, N.J.
“Cost was part of it, but service had fallen and upkeep was suffering because membership was down, a death spiral if you will,” says Bennett, 48, who runs a financial-management consulting firm in California but still owns a house at the club.
“The recession (hurt) membership, and that affected the social aspect,” Bennett says. “With fewer people and dues, the club didn’t do as good a job taking care of non-golf parts of the course.” As Tiger Woods, Phil Mickelson and other members of golf’s royalty prepare to tee off at the PGA Championship — the fourth, and final, major championship of 2010 — in Wisconsin next week, the business of golf faces an economic outlook that is sinking like a downhill putt.
From what I’ve seen, clubs are slashing initiation fees but haven’t lowered monthly dues much from where they were just a couple of years ago. While not privy to how a country club manages its finances or what goes through the mind of someone thinking about joining one today, it would seem that the $400 or so a month nut (plus incidentals) is as difficult to crack as a one-time fee in the tens of thousands of dollars.
By Tim Iacono, Since 2005
![[Most Recent USD from www.kitco.com]](http://www.weblinks247.com/indexes/idx24_usd_en_2.gif)
Recent Comments