Tuesday, October 29, 2013

Gambling, Hookers & Rack Index Predicts Consumer Spending Patterns With Incredible Accuracy

Gambling, Hookers & Rack Index Predicts Consumer Spending Patterns With Incredible Accuracy

Everyone has their little indulgences. For some, it's their morning Starbucks fix or a $2000 handbag. For others, it's hookers, rack and blackjack. 
brothel prostitute hooker singapore
A sex worker talks to a man outside a hotel in the Geylang red light district in Singapore, February 8, 2013

And it's the latter that are most representative of consumer spending in the most countries economy's, according to Andrew Zatlin of South Bay Research. Zatlin's one-man research consultancy based out of California, whose highly accurate, data-driven methods of forecasting jobs numbers have earned the title of 'The Moneyball of Economics' by the Wall Street Journal. 
One of South Bay's products is the Vice Index, which according to Zatlin has an almost 90% statistical correlation with personal consumer spending and leads it by 4 months. The index measures spending on gambling and escorts, which, according to Zatlin, is a highly sensitive barometer for the 'wealth effect', or how rich we're feeling at any given time. 
Zatlin's data for the index goes back 15 years and South Bay has been calculating the index for the last 2 years. 
vice and pce 2
And this year, the index has shown a steady downward trend. 
"We were seeing it even before the government shutdown, and it's continued to trend downward recently," said Zatlin to Business Insider, "In Q1 of this year, we saw prices of escorts rose 15% at the high end but not at the middle or low end, which proved that the top 1% was doing fine, but not everyone else. This was contrary to the media's narrative of a "booming" economy."  
Zatlin would not disclose his sources and methodology for computing escort services pricing.
"During events like the furlough and Sandy you had escorts saying that their phones had stopped ringing. Now I'm not saying that government workers are clients for prostitutes, but when you have 800,000 people out of a job, that affects spending."
vice and pce
According to Zatlin, spending on these vices is part of the "underground economy", which makes up anywhere between 10-15% of the economy in the United States and even higher in countries like Australia and is, understandably, unaccounted for in official statistics. But this data, if you can find it, is extraordinarily representative of consumer spending.
"This part of the economy is based purely on market forces," he noted. "It's all cash-driven and there are almost no barriers to entry. Most importantly, it's purely conspicuous consumption. People spend on vices when they feel like there's a hole burning in their pockets. If you're going to Atlantic City, you're going to hope to win, but you're probably prepared to lose. It's literally throwing money away."
Because of this, vices are the first thing people stop spending on when times are bad, which makes it a good way to measure the "wealth effect", or how secure people are feeling about their wealth.  
Spending on luxury goods is a similar 'canary in the coal-mine' indicator, and also a good measure of conspicuous consumption. However, Zatlin believes vice spending is more demographically and socio-economically representative. Only the 1% can buy a yacht, but spending on escorts can range from the very high end to "low-end", and can provide a geographically and socio-economically diverse set of data points. 
More importantly, Zatlin believes the Vice Index has more relevance than many others that were formulated decades ago. 
"Everyone smirks when they hear about this, but the regular indices are all using data points that are old, and in many cases, not representative of today's economy." 
 Wow. I thought it was kind of out there when this guy said you could tell how the economy is doing by looking at uniform sales. The internet teaches me so much. http://blog.tdsbusiness.com/tips-advice/increase-your-business-iq-8-links-to-informative-sites/

Thursday, October 24, 2013

Wall Street Analyst Crams 700 Years Of Data Into 12 Charts 'You Can't Ignore'

"The starting point of any financial analysis must surely be a consideration of the economic cycle: not just where we stand within the current cycle, but more importantly, where that cycle fits within broader economic history," writes Paul Jackson in his final note to clients in his role as an equity strategist at Société Générale.
The note — titled "Swan song: 12 pictures you can't ignore" — builds on the bank's recent call for clients to rotate out of U.S. stocks and into European stocks. The SocGen asset allocation team predicts the S&P 500 will fall by around 15% when the Federal Reserve winds down its quantitative easing program, then go nowhere for years.
"For now, equity valuations in Europe are attractive and with a bit of economic growth the next few years could be quite rewarding," says Jackson. "The immediate risks are that growth does not materialise in Europe or that the eurozone project unravels. For the longer term I worry more about latent inflation risks and central banks getting behind the curve. As bond markets react to that policy error, the folly of forcing banks, insurance companies and pension funds to hold so many bonds will become apparent. But that is for another day."

1. Current inflation trends are boringly normal.

inflation since 1290
Reuters, Ecowin, SG Cross Asset Research/Equity Strategy
"Inflation may feel low compared to the history through which most of us have lived, but in a broader context it is boringly normal," says Jackson. "Maybe without recent extra-ordinary policy settings, we would now be experiencing deflation, but we will never really know."

2. Inflation has little effect on stock market valuation.

inflation vs equity valuations
Reuters Ecowin, SG Cross Asset Research/Equity Strategy
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"Not only is the current level of inflation boringly normal, the valuation of the U.S. equity market, though elevated, is hardly exorbitant (to be fair, the only times it has been above the current level was during 1928/29 and over the last 20 years)," says Jackson. "With the sort of inflation regime experienced over the last 15 years, history suggests just about any valuation level is possible."

3. History suggests low returns ahead for U.S. stocks.

Shiller P/E
Reuters Ecowin, SG Cross Asset Research/Equity Strategy
"The Shiller P/E may not be at an extreme, but history suggests the current level is associated with low single-digit future returns," says Jackson.

4. U.S. companies may be in for disappointment.

profit margins
Reuters Ecowin, SG Cross Asset Research/Equity Strategy
"We could try to justify stretched valuations by the improved economic outlook and the consequent positive news for profits," says Jackson. "However...[the chart] shows that profits usually sink over the coming five years when starting from such a strong level. This makes sense given that competitive pressures will rise when profits are strong (new capital is committed) and that labour will claim a bigger share of the pie when the economy is doing well (and unemployment falls)."

5. Europe's economy has room to improve.

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eurozone operating surplus to gdp
Reuters Ecowin, SG Cross Asset Research/Equity Strategy
"Europe would appear to be at a disadvantage compared to the U.S. when it comes to profitability," says Jackson. "However, that is only natural given the state of the European economic cycle and a glass-half-full interpretation would look forward to higher profits once the European cycle strengthens."

6. A better European economy means better European profits.

european profits
MSCI, Datastream, SG Cross Asset Research/Equity Strategy
"[This chart] suggests European profits may be about to enter a new upswing, as the economy starts to grow again (profits rarely expand without economic growth, but that once output grows there is a geared effect on income)," says Jackson. "The acceleration in U.S. profits that occurred in 2009/10 may be about to occur in Europe (in a muted fashion)."

7. European stocks look attractive.

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european dividend yield
MSCI, Datastream, SG Cross Asset Research/Equity Strategy
"A number of things can be said on the basis of this chart," says Jackson. "First, the correlation between the two data series is pretty good –– the cyclically-adjusted dividend yield appears to have predictive power when it comes to future returns; second, the higher the yield the better the future returns and, third, the current yield has historically been associated with future five-year returns of around 12%, which is about twice the norm."

8. Many metrics suggest Europe is undervalued.

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valuation metrics global stocks
MSCI, Datastream, SG Cross Asset Research/Equity Strategy
"It is hard to conclude from the above chart that unconventional central bank policies have caused a bubble in stock markets," says Jackson. "Some indices may be at record highs, but so is my age. It is something that we have to get used to: markets that are nominal in value and that trend up over time will frequently be at record highs; my age hits a record level every day, though with no sign of a healthy correction! It is important to compare equity indices to the underlying profits and dividends that support them and, on that basis, are far from record levels."

9. The real bubble is in the bond market.

historical bond yields
Reuters Ecowin, SG Cross Asset Research/Equity Strategy
"Where central bank policies have caused a bubble is in bond markets –– not surprising as those are the instruments that are bought before the funds end up back with the central bank in the form of excess reserves," says Jackson. "The previous chart shows that bond yields have rarely been this low in the period since 1800. Indeed, the only other time was when the Fed was also manipulating the market during and after WW2."

10. The ECB's balance sheet has been shrinking for a while.

central bank balance sheets
Reuters Ecowin, SG Cross Asset Research/Equity Strategy
"What is really interesting, and little appreciated, is that the decline in the ECB balance sheet started in July 2012, even before Draghi’’s 'anything it takes”' speech, has now brought the balance sheet back in line with where it would have been had the pre-financial crisis trend continued (see trend line)," says Jackson.

11. The euro is getting a boost from ECB inaction.

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fed/ecb relative balance sheets
Reuters Ecowin, SG Cross Asset Research/Equity Strategy
"[The decline in the ECB balance sheet] is no doubt why the euro has confounded the bears (including us) – the chart below suggests the mystery is rather why it is not even stronger," says Jackson.

12. The question is what happens when the Fed pulls back.

Reuters Ecowin, SG Cross Asset Research/Equity Strategy
"How much good has this done? During the 1930s and 1940s, each jump in monetary base growth was followed three to four years later by an uptick in inflation and the upward drift in inflation in the 1960s and 1970s was preceded by acceleration in the monetary base," says Jackson. "This time around, the effect on inflation appears to have been negligible (so far). An alternative interpretation is that without these policy actions deflation would have resulted. If that is the case, the fact that policy has remained so loose could be stoking up inflation risks."

A Complete History Of American Economic Performance Since 1790 In Two Charts
IMF researchers Vadim Khramov and John Ridings Lee have developed a new macro indicator called the "Economic Performance Index" — a measure that combines data on inflation, unemployment, government deficits, and GDP growth.
"Though structurally simple, the EPI is a powerful macro indicator that clearly measures the performance of the economy’s three primary segments: households, firms, and government," write Khramov and Lee in an IMF working paper. "The EPI comprises variables that influence all three sectors simultaneously: the inflation rate as a measure of the economy’s monetary stance; the unemployment rate as a measure of the economy’s production stance; the budget deficit as a percentage of total GDP as a measure of the economy’s fiscal stance; and the change in real GDP as a measure of the aggregate performance of the entire economy."
The basic calculation goes something like this: start with a "perfect" score of 100, then subtract the inflation rate, the unemployment rate, the government budget deficit as a percentage of GDP, and add back the real GDP growth rate (it's slightly more complicated than that — check out the paper for details).
The annotated charts below plot the history of the U.S. EPI since 1790.
u.s. epi
us epi

Wednesday, October 9, 2013

What A US Default Would Mean For The Global Economy

A U.S. debt default that lasts for more than a couple of days could potentially cause a financial crash unlike anything that the world has ever seen before.  If the U.S. government purposely wanted to damage the global financial system, the best way that they could do that would be to default on U.S. debt obligations.  A U.S. debt default would cause stocks to crash, would cause bonds to crash, would cause interest rates to soar wildly out of control, would cause a massive credit crunch, and would cause a derivatives panic that would be absolutely unprecedented.  And that would just be for starters.  But don't just take my word for it.  These are the things that top financial experts all over the planet are saying will happen if there is an extended U.S. debt default.
Because they are so close together, the "government shutdown" and the "debt ceiling deadline" are being confused by many Americans.
As I wrote about the other day, the "partial government shutdown" that we are experiencing right now is pretty much a non-event.  Yeah, some national parks are shut down and some federal workers will have their checks delayed, but it is not the end of the world.  In fact, only about 17 percent of the federal government is actually shut down at the moment.  This "shutdown" could continue for many more weeks and it would not affect the global economy too much.
On the other hand, if the debt ceiling deadline (approximately October 17th) passes without an agreement that would be extremely dangerous.
And if the U.S. government is eventually forced to start delaying interest payments on U.S. debt (which could potentially happen as soon as November), that would be absolutely catastrophic.
Once again, just don't take my word for it.  The following are 12 very ominous warnings about what a U.S. debt default would mean for the global economy...
#1 Gerald Epstein, a professor of economics at the University of Massachusetts Amherst: "If the US does default, that will make the Lehman Brothers bankruptcy look like a cakewalk"
#2 Tim Bitsberger, a former Treasury official under President George W. Bush: "If we miss an interest payment, that would blow Lehman out of the water"
#3 Peter Tchir, founder of New York-based TF Market Advisors: "Once the system starts to break down related to settlement and payments, then liquidity disappears, as we saw after Lehman"
#4 Bill Isaac, chairman of Cincinnati-based Fifth Third Bancorp: "We can’t even imagine all the things that might happen, just like Henry Paulson couldn’t imagine all the bad things that might happen if he let Lehman go down"
#5 Jim Grant, founder of Grant’s Interest Rate Observer: "Financial markets are all confidence-based. If that confidence is shaken, you have disaster."
#6 Richard Bove, VP of research at Rafferty Capital Markets: "If they seriously default on the debt, what we're really talking about is a depression"
#7 Chinese vice finance minister Zhu Guangyao: "The U.S. is clearly aware of China's concerns about the financial stalemate [in Washington] and China's request for the US to ensure the safety of Chinese investments."
#8 The U.S. Treasury Department: "A default would be unprecedented and has the potential to be catastrophic: credit markets could freeze, the value of the dollar could plummet, U.S. interest rates could skyrocket, the negative spillovers could reverberate around the world, and there might be a financial crisis and recession that could echo the events of 2008 or worse"
#9 Goldman Sachs: "We estimate that the fiscal pull-back would amount to 9pc of GDP. If this were allowed to occur, it could lead to a rapid downturn in economic activity if not reversed quickly"
#10 Simon Johnson, former chief economist for the IMF: "It would be insane to default, but it’s no longer a zero-percent probability"
#11 Warren Buffett about the potential of a debt default: "It should be like nuclear bombs, basically too horrible to use"
#12 Bloomberg: "Anyone who remembers the collapse of Lehman Brothers Holdings Inc. little more than five years ago knows what a global financial disaster is. A U.S. government default, just weeks away if Congress fails to raise the debt ceiling as it now threatens to do, will be an economic calamity like none the world has ever seen."
A U.S. debt default could be the trigger for the "nightmare scenario" that so many people have been writing about in recent years.  In fact, it could greatly accelerate the timetable for the inevitable economic collapse that is coming.  A recent Yahoo article described some of the things that we would likely see in the event of an extended U.S. debt default...
A default would upend money markets, destroy bond funds, slam the brakes on lending, cause interest rates to spiral, make our banks insolvent, and deal a blow to our foreign trading partners and creditors around the globe; all of which would throw the U.S. and the world into economic disarray.
And of course stocks would crash big time.  Deutsche Bank's David Bianco believes that if the U.S. government starts missing interest payments on U.S. Treasury bonds, we could see the S&P 500 go down to 850 by the end of the year.
There would be almost immediate panic among ordinary Americans as well.  In fact, it is being reported that some banks are already stuffing their ATM machines will extra cash just in case...
With just 10 days left to raise the debt ceiling and congressional Republicans threatening to force the government to default on its obligations, banks are taking some dramatic steps to prepare for the economic chaos that would result should the brinkmanship continue.

The Financial Times reports that one major U.S. bank has started stuffing its automatic teller machines with extra cash in preparation for a possible bank run from panicked depositors. The New York Times reports that another bank is weighing a plan to advance funds to customers who rely on Social Security and other government payments that could stop in the event of a default.
Let's hope that cooler heads will prevail and that a U.S. debt default will be avoided.
Unfortunately, it appears that the Democrats are absolutely determined not to be moved from their current position a single inch.  They have decided to refuse to negotiate and demand that the Republicans give them every single thing that they want.
And who can really blame them for adopting that strategy?  After all, it has certainly worked in the past.  Whenever Democrats have stood united and have refused to give a single inch, the Republicans have always freaked out and caved in eventually.
Will this time be any different?
The funny thing is that once upon a time, Barack Obama was adamantly against any increase in the debt limit.
Americans are extremely frustrated to say the least with Obama et al, as the rest of the world pulls together and moves forward constructively. lets look at the larger picture in the US -in order to get a clear view,this is what it looks like from outside the US (in very basic terms).
American foreign policy is always the same and the only thing that changes when a new president comes to power is the name of a country that gets bombed.for example:oldman Bush bombed Iraq,Clinton bombed Yugoslavia, George W Jr bombed Afghanistan and Iraq,Obama bombed Libya & almost starts WWIII in Syria and today Obama bombing Somalia.
Does anyone really believe that another US president will change imperial policy? until the American public wake the fuck up and take personal responsibility and say: enough is enough!!! nothing is gonna change in the USSA!

The funny thing is that once upon a time, Barack Obama was adamantly against any increase in the debt limit. check this out!

But now Obama says that it is so unreasonable to be opposed to a debt limit increase that any negotiations are out of the question.
So which Obama is right?
If the Democrats will not negotiate, a debt default could still be avoided if the Republicans give in.
And that is what they always do, right?
Perhaps not this time.  Just check out what John Boehner had to say on Sunday...

Tuesday, October 1, 2013

'Putin’s Syria role deserving of Nobel Peace Prize'

"God created us all equal".
 -'Vladamir Putin, Russian President to the US President, on why not to unilaterally bomb a sovereign nation.

President Putin should get the Nobel Peace Prize for his moves to resolve the Syrian crisis, according to a group of Russian activists and political scientists who have indicated that they are officially proposing the president’s nomination.
Alfred Nobel setup the peace prize after inventing TNT. He was disgusted how his invention was being used to kill. So, I certainly think the prize has a valuable background. Unfortunately, awarding it to the US president Obama has turned this into a mockery. People who kill innocent civilians are now apparently peace-lovers. I simply don't get it.
President Putin however should get the Nobel Peace Prize for his courageous efforts in coming up with a solution to the Syrian crisis, Putin's negotiations where genius. This man loves Russia and the Russian people. He will take good care of his people and his country. He is the kind of leader American's dream of. He is a man of his word. He is a genius. Russia, you are lucky to have him for your leader.
Secondly, Awarding the President of the Federation Putin the Nobel prize could be the only thing that brings back any credibility to the award, that's just a fact, i think foreign minister Lavrov needs to be on the hook for a nomination also.

In Russia, Putin wrestle black bear into submission while bare chested.
In USSA, bear skin rug wrestle Obama into submission after 1/2 a beer.

Putin V's Obam.

If aliens landed tomorrow, who would you prefer to be humanity's representative?

Vlad is stepping into this vacuum of political credibility created by the Western "Demon-ocracies" and by god, he's making it work.

"Authored by Vladimir Putin"

Go Vlad! The KGB appears to be winning.

Shut Happens.. USSA Government Shut Down!

Try this experiment.
Ring up your credit card company at the end of this month. Tell them that you can’t seem to reach an agreement about how to allocate your monthly budget.
So in the meantime, you have been forced to shutdown your household... but you hope to be back on track in a few months.
Chances are, they won’t take you seriously. Yet for some reason, this has been dismissed as commonplace and benign in the Land of the Free.
Here’s a list of quotes I’ve heard from the TV and Internet coverage talking heads over the last 24-hours:

“We’re still the richest, Smartest most powerful nation in the world.”

“It doesn’t matter, the bond market is going up, and who cares we don't have to pay it back, lets just walk away.”

“The United States will never default, we are the greatest nation on Earth.”

The hubris and arrogance here is amazing. And it just goes to show that if you just repeat something over and over again, people will believe it... no matter how absurd.
This is the basic premise behind propaganda. Start with an idea. Inundate the population through constant repetition. And soon it becomes the unquestionable truth.
To suggest that the United States is NOT the richest country in the world, or that the government could default, is tantamount to blasphemy.
It doesn’t matter that every objective scrap of evidence points to the inevitable conclusion that the US government is going to have to default on its obligations.
They could default on their obligations to foreign creditors– China, Japan, the Gulf states– and risk a total collapse in the dollar’s ‘value’ internationally...
Or they could default on the Federal Reserve, rendering the central bank insolvent, and risk an epic currency crisis…
Or they could default on domestic financial institutions and risk an even bigger banking crisis…
Or they could simply default on their obligations to citizens by curtailing Social Security and debasing the currency.
The only question is– who gets screwed?
Having this sort of public discussion, however, is considered ludicrous and irrational. The propaganda is so effective that people continue to believe in this fairy tale that America is the Land of the Free and the richest country in the world.
Yet it’s this fairy tale that is ludicrous and irrational. Looking at the data objectively, having a candid discussion, and getting your own affairs together to withstand the inevitable fallout– this is the most rational thing that anyone can do.
However,  the collapsing nation being the USSA also has nukes, the biggest military in history, and a bunch of jarheads who are dying for any excuse to launch a full scale invasion of Whereverstan.
To call it "arrogance" and "hubris", and you wouldn't be wrong except for the even scarier fact that it might not be arrogance: It might be backed up with World War Three. And historically speaking, this is exactly how such clusterfucks start.
Military empires don't go silently into the night unless the lid is kept tightly on them by a greater militaryforce. And in this case, there ain't one. So grab your ankles everyone because this shit could get exponentially uglier than just a "default".
Finally;  Many of us wonder what a government shut down would be like.
I think a lot more people wonder what a government running properly would be like.