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Tuesday, March 12, 2013

Sorry, Just Don't Have Time

To blog. I'm kind of short on sleep, too. 

NFIB shows some improvement this morning, but it's still worse than 2008 and this is hardly reassuring. The problem is earnings, and the need to improve compensation without being able to raise prices to recoup higher costs. 

However, given the NACM's "holding pace" trend, we can hope for a slowly improving economy for a couple of months more. The YoYs are down, but the improvement in negative factors shows that businesses are running tightly and mostly compensating.

Around April/May, things can get very dicey. There's a bunch of feckless economic reporting about consumers continuing to spend, but really spending at this point is more dependent for the lower range on tax refunds. That's what they spend right now. By July we should see most the effect.

The almost "on-hold" pace of Other Deposits in banks indicates that we have a problem. I'll wait for one more month before trying to figure this in, because tax refunds this year should have been deferred on average, so there can be some seasonal adjustment effects. But the FICA tax increase effect is due to gather momentum at least through the first six months of the year, and commenters mostly don't seem to realize that. The way this works is that consumers will spend as normal until they start coming up short at the end of the month in paying bills, and then they pull back.

A riproaring stock market may support higher-end spending, but that has less effect on employment. Asking around, groceries and lower-end retail chains seemed mostly despondent over February. Services are being impacted by the situation. Manufacturing hopefully will continue to uptick.

Rail freight shows a clear trend of improvement. January started very slow, but things (esp. intermodal) are picking up now. We have gotten back to marginal YoY gains on motor vehicles and parts, so industrial production for February and March should be better. 

Manufacturer's shipments, orders and inventories shows some weakness, specifically in motor vehicles unfilled orders, which are down 7% YoY.  But that is for January, and I hope to see some improvement through March at least. Also for January, the Wholesale Trade report shows a rebound in inventories. We'll see how that develops. 

Petroleum gains continue apace. If gas prices were to abate later in the year, it would help the picture a lot.

I don't think the sequester will have much of an effect. We do, however, need a continuing spending authorization and we have to raise the debt limit again, so there are some potential wild cards there. It's not going to look too good when they get done.

When people don't have money just give it to them...

From Marketwatch:

"Hourly pay for American workers rose 2.6% in the fourth quarter, but adjusted for inflation, earnings only increased 0.4%. What’s worse, inflation-adjusted hourly wages fell 0.6% for the full year, following a revised 0.6% decline in 2011. Only the three-year period of 1993-1995 was worse for American workers."


Real median weekly earnings were $337 in 2003 and they were $334 in 2012. Real wages are 3% lower than they were in 2009...


Subprime borrowers took 43.2 percent of all new car loans. Car buyers borrowed, on average, $26,691 for a new vehicle in the fourth quarter of last year with a record of 65 months to repay.


Making money on those subprime borrowers...

"Sales of subprime auto asset-backed securities have increased year-to-date to nearly $4-billion (U.S.), almost double the volume during the same period of 2012, according to Deutsche Bank data. Subprime auto sales now account for 34 per cent of all auto ABS issuance, surpassing levels last seen in 2007."

"U.S. auto makers, including General Motors and Ford Motor, estimate that demand for cars and trucks will stay resilient in 2013. That, in turn, can help boost sales of total auto subprime ABS to as high as $25-billion, up from $18-billion in 2012, according to Deutsche Bank."


Making for a comfortable life on the backs of college student loans...

An absolute disgrace...

After looking through the actual NFIB breakdown, I'm pretty sure Obamacare is playing a role in those numbers.

This weekend I was looking for information on the exchanges, trying to get a handle on what my insurance costs will be next year. I couldn't do it. I don't think it's possible.

The problem I ran into is that the subsidies received through the exchanges are based on the previous two years of income. However, if your income increases during 2014, you will be required to refund a portion of the subsidies to the IRS. So you don't know until the end of the year how much you're going to be billed for the year's insurance. To make matters worse, the subsidies are not a smooth function. You get a certain amount of subsidy from, say, $50K to $60K, and another amount of subsidy if you make $60001. So the subsidy repayment can be quite large for very small changes in income. It's impossible to plan.

If you were designing a law for the purpose of putting small business owners in hock to the IRS, this is pretty much how you'd do it.
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By the way, I found out where the cool kids are moving to:

John Paulson eyes tax move to Puerto Rico

No cap gains tax is a pretty strong inducement, given the right circumstances.


I'm in a lot of small, independent neighborhood grocery stores. The owners are telling me that their business is seriously down from last year.

Big box, yellow-tag logo retail: store are being seriously understocked, especially in the low-end electronics. The "value" laptop aisles are very bare: there should be 12 models, and there's only 5 or 6 at times.
What about that "great" jobs report!

We're trading hundreds of thousands of full timers for twice as many part timers -- it's all good! :-(
Jim - uh huh. When the subprime thing buckles, so do auto sales.

Also, when we finally run out the leases and those cycle back into the market, used car values are going to start coming down, and that's what will finally undercut the market.

At the end of last year lenders were still piling into the auto loan market, so there's some left on this trend. It should be interesting when it caps out.
Gordon - pointing to the difficulties ahead. A shortage of cash for all too many. I agree on light stocking in stores. It's been slowly growing since last year.
TJ - We're pulling more than 3.5 million people out of the labor pool each year between disability and SS awards. Unemployment rates shouldn't rise, but the emp/pop ratio hadn't moved YoY. Still at 58.6%.

YoY, the participation rate fell from 63.9% to 63.5%.

We have gained total jobs, but of course Obamacare restrictions are going to raise the part-time total.

We're still suffering from the Great Excess Correction, aka the modern Panic.
The wave is coming ashore but we still feel the undertow.
Treading water may be the best we can do right now.

I totally agree, Spork. There is undertow. There will continue to be undertow for years to come.

But as long as we DO tread water, we're heading in the right direction, because the underlying conditions are improving.

I just think we need to get out of the boom-bust cycle, and stay out. We've been in it since the dot.com fad of the 90s, and each bust hurts worse than the last.

Booms like that may be great for people who have tons of money to play with, but they make ordinary people poorer, and that's the opposite of what our goal should be.
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