Green Shoots, Not So Green

Not to start the day off with bad news… But I just saw a flash on the TV that said, “foreclosures jumped 32% last month”… More Blood in the Streets, eh? That just happens to be the title of my presentation today… Blood in the Street: Bargain time or just a cease-fire? Hey! I don’t make these things up…

OK… Another day here in Sin City… This city is packed with people, everywhere we go, it’s simply amazing… There’s been no sign of a recession here… Of course, if you got out of the casinos, and shows, you would see some of the greatest devastation anywhere in the housing market here… So… It’s not all “seashells and balloons” in Vegas. I guess with the economy so rotten, people are hoping to strike it rich in the casinos, though… Hmmm, have they not figured out that these ginormous buildings are here to make money?

The currencies lost ground yesterday, most of the day, and then overnight too. Not major ground, but ground that had been previously won versus the dollar – not something a dollar bear wants to see. There’s more rot on the economy’s vine this morning, with retail sales and all that euphoria that was in the markets last week dissipating quickly… So, let’s go to the tape on retail sales…

Retail sales for April were down again (the BHI was wrong! YIKES). The 0.4% fall in April added to the 0.9% fall in March (revised to -1.1% today) tells me that after signs of consumers picking up spending again in the fist two months of the year, this is turning out to be an absolutely dreadful quarter for retail sales… Oh, and let’s go back to the GDP print of about two weeks ago. There was hope in the GDP figure that “consumption” may pull the economy out of the recession, for consumption was up 2.2%… But with these retail sales figures so far in the second quarter, you can kiss that hope good-bye!

This is the kind of stuff I was all worried about the other day in the Pfennig… Recessions are like that… You get a pop, but it has no legs, and then leads the economy right back to the depths of the recession… This is why I wanted to get the currencies back on the fundamentals of having different pricing mechanisms and low correlations to stocks… The diversification fundamentals that have been forgotten in the past six months…

And… Here’s a good one for you… OK… Who said this… “Even though we have been having some fairly strong gains in home prices, it is our conclusion that it is UNLIKELY that we are confronting a housing bubble.”

Give up? It was a quote in the 2002 Fannie Mae Annual Report… By our esteemed (NOT!) former Fed Chairman Big Al Greenspan! This guy’s track record of forecasting going all the way back to his days as a consultant before he was brought on at the Fed, is absolutely horrible! Now… Why do I bring this up now? Well… Yesterday, Big Al Greenspan decided to give us a forecast that allowed stocks to recover on the day… What did he say this time? Greenspan said in an interview that “Housing May Have Bottomed and be a the verge of a recovery.”

Oh boy, now that’s something to hang your hat on, eh? I shake my head in total disgust… This man was at the root of the whole problem, and people still listen to him?

OK… Enough on that exercise… I could write for days about all the things he has done… But, better yet… Go to Amazon and buy Bill Fleckenstein’s book on the Fed and Greenspan…

My friend, John Mauldin, wrote a great piece last Friday for his weekly newsletter regarding all the talk about green shoots… The green shoots were the thoughts that data prints were getting better (so they thought) and that the economy was getting better. John pointed out that he didn’t believe the green shoots were for real, and said they probably were more like dandelions… I totally agree… Both he and I took the Jobs Jamboree data that was considered a green shoot, and tore it apart to expose it as the fraud it was… No green shoot here!

Here’s another one… Import prices in the U.S. rose by 1.6%… That’s HUGE, folks! I saw something that said that in the last 100 prints of this data there have been only 12 larger prints! YIKES… Here’s the skinny… Recall, that I’ve told you that China’s stimulus was working and that they would be the first country to come out of the economic doldrums… Well, with their stimulus working, that means commodity prices will be rising, and if commodity prices rise, that means inflation will rise… No green shoot here!

OK, enough of that! Did you see where the Obama administration has begun serious talks about how it can change compensation practices across the financial-services industry, including at companies that did not receive federal bailout money?

See? I told you that if you give the government a foot in the door they will begin to push their way completely through the door… And with banks, that’s exactly what’s happening… Isn’t that sad? The government wants to dictate how banks pay their employees, even if they didn’t accept TARP money! How do you like being put on the train to socialism? And you can’t get off?

I had better stop there; I might say something that would get me into trouble!

Well… There was another thing that showed up yesterday that could mean very bad things for the United States and their ability to attract financing… The Financial Times ran a story regarding the U.S.’s Triple-A rating… Let’s see what The FT had to say…

“Long before the current financial crisis, nearly two years ago, a little-noticed cloud darkened the horizon for the US government. It was ignored. But now that shadow, in the form of a warning from a top credit rating agency that the nation risked losing its triple A rating if it did not start putting its finances in order, is coming back to haunt us.

“That warning from Moody’s focused on the exploding healthcare and Social Security costs that threaten to engulf the federal government in debt over coming decades. The facts show we’re in even worse shape now, and there are signs that confidence in America’s ability to control its finances is eroding.”

Hmmm… That’s scary, folks… And… To add to that, an attendee came up to me yesterday after my first presentation, and said, “Chuck, great talk, but you didn’t mention the debt that the U.S. will have to deal with in the future.” Yes, he’s right… I don’t do that very often because I don’t want people going outside and throwing up, or even worse things. What I’m talking about here is the debt that the United States will be under when all the Baby Boomers are drawing Social Security and Medicare. If you are not aware of these figures, and how bad they will become… Go to Amazon and buy the I.O.U.S.A. book by Addison Wiggin and Kate Incontrera…

OK… Time to go to the Big Finish, I’ve got to go through my presentation once more before I head down to the show.