Stepping up the spending
surveillance By The Mogambo
Guru
Alarm bells started ringing in the
Mogambo Secret Bunker Of Paranoia (MSBOP) when the
news came out from Bloomberg that "US consumer
borrowing rose in January as Americans spent twice
as much on their credit cards as they did a month
earlier".
Naturally, I immediately wonder
if this was a subtle code for "your wife is
spending you into the poorhouse, you Stupid
Mogambo Chump (SMC)", which made me wonder what in
the hell the wife has been up to, and I suddenly
see that I need to seriously step up my
surveillance programs on the family and neighbors
because somebody is obviously up to something, or
why else would they be sending me this coded
message?
But I was relieved and shocked
when, a little later on, Bloomberg say that
although people spent twice as much, by borrowing
twice as much as they did the month before, the
situation is made more horrific when you learn
that "After adjusting for inflation,
spendingcontent above
stalled
for a second month in January"! Yikes! Nobody
bought more! It just cost more!
Stalled
spending to the economy is like stalling your car
on the railroad tracks; it doesn't bode well that
you and your spouse spend the time arguing and
yelling at each other to stop spending or get out
of the car to push the damned car off the tracks,
and can't she see that I am wearing my nice pants
while she is just wearing that ugly skirt I hate
so much, so who cares if it gets ruined? And so
nobody does anything and then a train comes along.
In fact, for those who like actual
percentages instead of flaming train wrecks, then
"Total borrowing increased at a 3.3% annual rate
in January after rising at a 1.8% pace during
December." And yet inflation-adjusted borrowing
was down, even though it increased in dollars!
We're freaking doomed!
Bloomberg has never
endorsed my "We're freaking doomed!" forecast and
merely says that this inflation stuff is
"increasing concern that the economy is headed for
a recession", which makes me laugh, because we are
obviously IN a recession, and that is why the
statistics are so bad!
I am starting to
get suspicious and paranoid that they never
actually tell us how much money we are talking
about, so I surmise that it is bad news and that I
ought to start looking for a way out of here to
escape the panic that is sure to erupt when I
start running and screaming, "Let me out of here!
We're doomed! We're all freaking doomed!"
My fears were justified when Bloomberg
reported that the Fed said "Consumer credit
increased by US$6.9 billion to $2.52 trillion. In
December, credit gained $3.7 billion, less than a
previously reported increase of $4.5 billion."
Spent $6.9 billion more, but bought less? Again I
say, "We're freaking doomed!"
And the
worse news is that these people are going to have
fewer jobs with which to make the money, with
which to pay the credit card bills, because the
Labor Department said the US lost jobs in
February, taking All Non-Farm Payrolls down to
137.99 million from last month's revised 138.05
million.
Bloomberg.com says, "Payrolls
fell by 63,000, the most in five years, after a
revised decline of 22,000 in January." There were,
I am horrified to say, 38,000 new government jobs
for which the now-shrunken pool of 115 million
non-government jobs must now also pay.
Actually, things are worse, as there are
now perversely fewer people being counted as
actually being in the workforce, and last month
the Birth/Death Model (which estimates how many
jobs created or destroyed by business starts and
failures that have not been counted yet) last
month assumed that every industry in America added
jobs last month, to the tune of 135,000 new jobs
in February! Hahahaha! And yet, employment
declined! Hahaha!
Suddenly, I feel a rant
coming on, and dashing into the nearest restroom,
I don the famous golden uniform, heavy with
symbolism, of The Brave, Brave Mogambo (TBBM),
complete with snazzy cape and tiara. Springing
back into the room ("boing!"), I shout, "We're
freaking doomed! Prices are going up because the
government let the Fed create too much money and
credit, and now they intend to remedy that
disaster by creating more money and credit!
Hahahaha! We are, in case you forgot my initial
remark, Earthlings, you're freaking doomed! Now,
up on your feet, all of you, and follow me in a
popular uprising, and we will descend on
Washington DC, take over the government in the
name of Glaggnar, emperor of this sector of the
galaxy, and install The Mogambo as benevolent
despot to rule with an iron fist and capricious
whim! Sounds great, right? Let's go! Hup! Hup!"
The place got eerily silent, and I could
see by the way they were looking at me with that
stunned look on their faces that they were not in
the mood to participate in a revolution where I
end up as top dog, no matter how justified by the
horror of the economic situation.
So I sat
down in a funk, whereupon my tiara slipped over to
one side, and now it is all comically kimbo, and
I'll bet everyone is looking at me and laughing at
me behind my back, and then when I accost them
about it later, they act all innocent, and say
things like, "What in the hell are you talking
about?" and "Who in the hell are you?"
Suddenly, I notice that Mish Shedlock of
globaleconomicanalysis.blogspot.com has come into
the room, and I can see what appears to be a mix
of both pity and revulsion on his face. Sure
enough, you can hear it in his voice when he
summed it all up as, "no matter how you look at
it, this was an extremely weak jobs report, and
that is even weaker when one goes digging through
the details. It was indeed an unmitigated
disaster."
"Unmitigated disaster", like
the on-going disasters of my disastrous marriage,
my pathetic failures at fatherhood, my ruined
career and, most tragically, my golf game, only
without people accusing me of cheating or throwing
various crockery at me.
So, in light of
this, I mull over the phrase "unmitigated
disaster" in employment, and I naturally think to
myself, "If people are being fired, then there is
a reason for that, and that means that stocks
could be overpriced!"
So I run over to
Addison Wiggin at Agora Financial's 5-Minute
Forecast to see that he writes, "For the year, the
Dow is now down 9% ... the S&P 500 is off 11%
... and the NASDAQ is creeping toward 16%."
Then I run to take a look at the chart of
the S&P500 index, and I note with alarm that
with the index at 1293, everybody who bought the
stocks of this index since the third quarter of
2006 has lost money! Hahaha! Nice investing,
dudes!
Even more troublesome, the earnings
of the S&P500 are in an obvious, sudden,
precipitous, four-month downtrend, and at $71 are
as low as they were in the middle of 2006! Hahaha!
Nice growth, dudes; after subtracting the effects
of price inflation on that $71 of earnings, you
are actually going backwards!! Hahaha!
And
stocks are already grossly, grossly overpriced, as
I can easily prove by noting that the
price-to-earnings multiple of the Dow Jones
Industrial index was an astounding 50 last week!
50! The S&P500 had a P/E of 18, for crying out
loud! These, then, are the kinds of elevated stock
prices that always come at the END of a long bull
market, and they never, ever, NEVER occur at the
beginnings of one, where the P/E is always a lot
closer to 4 or 5! At least, so far in history,
anyway! Hahahaha!
So stocks are
overpriced, bonds are overpriced, houses are
overpriced, and government is overpriced and
oversized, at the same time as previous inflations
in the money supply are showing up as inflation in
consumer prices, at the same time as consumers are
over-burdened with debt, at the same time as they
are losing their jobs, at the same time as
(courtesy of JMR Ed S) the juxtaposed
Bloomberg.com headlines announce "Producer Prices
in US Increase More Than Forecast, US Consumer
Confidence Declines to Five-Year Low, Goldman,
Lehman May Not Have Dodged Credit Crisis," at the
same time as J M R Mikael K sends headlines from
InformationClearingHouse.com that "Oil hits new
peak at $102 a barrel as commodities boom. Dollar
sinks to low ($1.50) against euro. Manufacturing
data fuel US recession fears. US Economy:
Confidence Falls, Producer Prices Rise. US
new-home sales for January fall 2.8%. US Home
Foreclosures Jump 90% as Mortgages Reset. US
mortgage finance firm Fannie Mae posts $2.1 bln
loss. Key home price index shows record decline.
Bush: US in 'slowdown' not recession."
And
you are not buying gold and silver in light of
that? Hahahaha! One day soon you will realize why
I am laughing at you, and you will be very angry!
Financially ruined and angry! Hahaha!
Richard Daughty
is general partner and COO for Smith Consultant
Group, serving the financial and medical
communities, and the editor of The Mogambo Guru
economic newsletter - an avocational exercise to
heap disrespect on those who desperately deserve
it.
Republished with permission from
The Daily
Reckoning .
Copyright 2008, The Daily Reckoning.
Head
Office: Unit B, 16/F, Li Dong Building, No. 9 Li Yuen Street East,
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