The shocking headline of Westpac reads -23k jobs in Dec (with full-time jobs -32k). It is expecting the figure to rebounce in January with +15K in a range between +5k to +40k. The unemployment rate has risen from 5.8% to 6.0%. It is the highest unemployment rate since 2003.
Australia’s unemployment rate climbed to the highest in more than 10 years in January, increasing the likelihood interest rates will remain at a record low for an extended period. The Aussie dollar declined. The jobless rate rose to 6 percent from 5.8 percent, the statistics bureau said in Sydney today. That compares with the median estimate for unemployment to increase to 5.9 percent in a Bloomberg News survey of 26 economists. The number of people employed fell by 3,700. International carmakers Toyota Motor Corp., General Motors Co. and Ford Motor Co. have announced the shuttering of plants and shedding of jobs in Australia
Post by stockpicker on Feb 13, 2014 10:42:22 GMT 7
Another Chinese Shadow banking defaulted. This one only USD 47 mil issued by CCB. The last one that defaulted was bigger issued by ICBC.
a High yield investment product backed by a loan to a debt-ridden coal company failed to repay investors when it matured last Friday, state media reported on Wednesday, in the latest sign of financial stress in China's shadow bank sector.
Post by stockpicker on Feb 13, 2014 10:49:03 GMT 7
This one cautioned about the resistance of S&P500 at 1820 and 1830. Cannot cross would lead to darker days ahead.
Is the correction over, or is it just beginning? We can look for clues in the chart of the S&P 500. The index is currently approaching significant resistance at the 1820-1830 level. A breakout from here would point to “green flags,” while failure to launch would probably lead to darker days ahead
Since the start of the last recession, there has been a steady, notable decline in the labor force participation rate among 25 to 54 year olds.
Earlier this week, I noticed Janet Yellen, the new Chair of the Board of Governors of the Federal Reserve System, repeat something that makes the rounds as an excuse for the declining labor force participation rate. It happened on February 11 during the Q&A portion of her "Semiannual Monetary Policy Report to the Congress."
In recent years, the decline in the labor force participation rate, shown in the chart below, has received much attention as something that indicates the labor market is not as healthy as many believe.
On Tuesday, Janet Yellen had this to say regarding the labor force participation rate decline (emphasis added):
"A significant part of the decline in labor force participation is structural and not cyclical.
Baby boomers are moving into older ages where there is a dramatic drop off in labor force participation and (with) an aging population we should expect to see a decline in labor force participation..."
She further stated (again, emphasis added):
"There is no doubt in my mind that an important portion of this labor force participation decline is structural."
Cyclical Unemployment Definition:
Cyclical unemployment is when workers lose their jobs during downturns in the business cycle. It generally happens when the economy contracts, as measured by Gross Domestic Product (GDP). If the economy contracts for two quarters or more, then the economy is in a recession.
Cyclical unemployment is usually the cause of high unemployment, when rates quickly grow to 8% or even 10% of the labor force. It's known as cyclical because, when the economy re-enters the expansion phase of the business cycle, the unemployed will get rehired. Cyclical unemployment is temporary -- although it could last anywhere from 18 months (the typical time frame of a recession) to ten years (during a depression).
This article reminded me what Warren Buffett stated on Gold:
Gold, however, has 2 Significant Shortcomings, neither of much use nor procreative
What motivates most gold purchasers is their belief that the ranks of the fearful will grow.
Over the past 15 years, both Internet stocks and houses have demonstrated the extraordinary excesses that can be created by combining an initially sensible thesis with well-publicized rising prices. In these bubbles, an army of originally skeptical investors succumbed to the “proof” delivered by the market, and the pool of buyers – for a time – expanded sufficiently to keep the bandwagon rolling.
But bubbles blown large enough INEVITABLY POP. And then the old proverb is confirmed once again: “WHAT THE WISE MAN does in the Beginning, the FOOL does in the END.”
Many pundits who dismiss trickle down economics also support the Fed's multiple QE's and its stated goal to create a "wealth effect". This I find ironic since the Fed's manufactured wealth effect was meant to boost the economy by trickling down.
In The Washington Post , Ben Bernanke wrote on November 4, 2010: "the Federal Reserve has a particular obligation to help promote increased employment and sustain price stability."
If you thought the Fed had only two mandates, think again. Since 1987, the Federal Reserve Bank has unilaterally added "managing asset prices" to its responsibilities of managing inflation and unemployment levels. Bernanke also explains why this is important:
"higher stock prices will boost consumer wealth and help increase confidence, which can also spur spending".
It is fair to say that this scenario did not work out as he had planned. Asset prices did go up and rich people with assets may feel better - much better - today. However, spending continues to be subdued because asset inflation does not translate into income. Household incomes today stand 6.4% below they were at the beginning of the recession, even 4.7% below where they were at the end of the recession when asset prices started to climb*.
Let's think this through. Suppose we give a number of people tulips (not everyone in America owns assets).
Then, we push tulip prices up. Tulip owners feel good. Some will sell their tulips, cash the money and buy a nice car.
But now the guy who sold feels bad because tulip prices keep going up and he is missing out. He buys tulips again. Others, who have been on the sidelines now want to join the party. Tulip prices go higher as a result, and so forth.
The BIG Money goes to Speculation, not to consumption. We all know the story and how it ends.
Here is why such analogy is not as far fetched as you may think. Paper wealth due to asset inflation is ephemeral.
Real wealth is created by generating return on investment.
Tulips are bad investments because they don't yield any income. The return on an investment in tulip is zero. That is also the problem with Bernanke's complete neglect of return on investment. His orchestrated universal asset inflation did not eliminate returns on investment all together, but it greatly diminished them.
Bernanke's QE experiment tried to put the cart in front of the horse and it did not work.
Asset inflation actually reduces returns on investment.
*** Companies' profits margins, which are at historic highs, are calculated on sales. Yet earnings yields for an investor today are above historic averages, hence the high PEs. If one "normalizes" earnings by assuming more average profit margins, the PE ratios look very overpriced.
Last Edit: Feb 15, 2014 23:54:44 GMT 7 by candy188