CEOs Darken Outlook, Slash Hiring and Cap-Ex Plans – But No Problem, Stock Buybacks Soar

The word ‘gloomier’ inconveniently showed up in a Reuters headline that described how the CEOs of the Business Roundtable – one of the thermometers into the brains of corporate America – felt about sales, employment, and capital expenditures. Yet, ‘gloomier’ or not, these CEOs run companies that spend near record amounts, not on productive uses such as capital expenditures or hiring more people to push revenues to the next level, but on buying back their own shares.
The Business Roundtable is an association of CEOs of the largest corporations in the US that account for ‘more than a third of the total value of the US stock market,’ according to its website. On its agenda: lower corporate taxes (tax credits!), more immigration of cheap labor, and trade – the big trade agreements currently being negotiated in all secrecy [my take from late last year, though resistance has grown since…. Coming Soon: Corporate Tools To Hollow Out National Sovereignty].
Or, as it says so eloquently, ‘working to promote sound public policy and a thriving US economy.’

This post was published at Wolf Street on September 17, 2014.

The 314-Member Club – With $81 Billion in their IRAs

Yesterday the Senate Finance Committee convened a hearing to chew on one humdinger of a new report from the Government Accountability Office (GAO). The GAO report found that 314 taxpayers have squirreled away at least $25 million in their Individual Retirement Account (IRA) for an aggregate of $81 billion for all 314 taxpayers. That puts the average account within the $81 billion at an astonishing $258 million.
The GAO used 2011 data, the most current available to them from the IRS, and noted that since some of the tax returns were for joint filers, the term ‘taxpayer’ may mean an individual or a couple. Still, even two IRA accounts tallying up to $258 million is off the charts.

This post was published at Wall Street On Parade on September 17, 2014.

What The “Porsche Indicator” Tells Us About The Greek “Recovery”

As the “Big Mac Index” is to global purchase price parity levels of inflation, so when it comes to the state of the “recovery” if not for everyone, then certainly for the 0.1%, there is no better metric than the “Porsche Indicator.” Recall: “Porsche Reports Record Sales in 2013; 21 Percent Increase Over 2012” which certainly didn’t come on the back of yet another year of declines in real incomes for the middle class (spoiler alert: it came on the back of some $10 trillion in liquidty injections by the world’s central banks).

This post was published at Zero Hedge on 09/17/2014.

The Blatant Lie That The Deficit Is Declining

The Federal Government now claims the deficit is declining. That claim is a blatant lie. The magnitude of the lie is so great as to suggest the desperation that government officials must have with respect to the economic future of the country.
We are now into the sixth year of a declared economic recovery. That is a pathetic joke. No recovery takes more than a few quarters and during this ‘take-off’ the economy grows at very high rates. That has not happened, PERIOD! Nor is it about to happen.
The size of government lies may be a reasonable barometer of the degree of danger facing the economy and the country’s citizens. As the end nears, the lies must grow bigger in order to continue the confidence game that things are normal. Surely no one with an ounce of sense any longer trusts the numbers coming from Washington.
The latest ‘feel-good’ lie is truly a whopper. Government claims the Federal deficit has been reduced to $589 billion dollars for the first 11 months of this year. Wow! That sounds great! We must be making great progress on cutting spending or raising revenues or managing the debt. Sadly, that number is a bold-faced, blatant lie which any government official referencing it should be called out on. That person either lacks integrity or common sense.

This post was published at Economic Noise on SEPTEMBER 17, 2014.

The Taylor Rule Won’t Save Us

Various criticisms have been raised against the Fed, not only from the side favoring the abolition of central banking, but also from the side of those who argue that the Federal Reserve is indispensable for stability. One of those arguments came from respected economist John Taylor, who is the author of the often mentioned ‘Taylor Rule’ on how to conduct monetary policy, with two House Republicans recently proposing to impose this ‘rule’ on the Fed .
Like Taylor, politicians who advocate for such a rule blame huge credit expansion for the Great Recession. Unfortunately such policymakers are usually not convinced by the Austrian arguments in favor of abolition of the Federal Reserve. Instead they are convinced by John Taylor’s statistical demonstrations. According to Taylor, the Fed set the interest rates too low in the beginning of this century, which led to an unsustainable real estate boom. He adds nonetheless: if only the central bank followed his rule of proper interest rate levels, then monetary policy would work very well.
For Taylor, the Federal Funds rate in recent years should have looked something like this:

This post was published at Ludwig von Mises Institute on Wednesday, September 17, 2014.

Corporate America Suddenly Darkens Outlook, Slashes Hiring and Cap-Ex Plans, But Gooses Stock Buybacks

The word ‘gloomier’ inconveniently showed up in a Reuters headline that described how the CEOs of the Business Roundtable – one of the thermometers into the brains of corporate America – felt about sales, employment, and capital expenditures. Yet, ‘gloomier’ or not, these CEOs run companies that spend near record amounts, not on productive uses such as capital expenditures or hiring more people to push revenues to the next level, but on buying back their own shares.
The Business Roundtable is an association of CEOs of the largest corporations in the US that account for ‘more than a third of the total value of the US stock market,’ according to its website. On its agenda: lower corporate taxes (tax credits!), more immigration of cheap labor, and trade – the big trade agreements currently being negotiated in all secrecy [my take from late last year, though resistance has grown since…. Coming Soon: Corporate Tools To Hollow Out National Sovereignty].
Or, as it says so eloquently, ‘working to promote sound public policy and a thriving US economy.’
But the BRT results didn’t speak of a thriving US economy. ‘CEO plans for investment, hiring and sales over the next six months decreased, with employment plans declining the most,’ the survey stated. And it wasn’t pretty:
The least bad was the sales index, which dropped 4.5 points to 116.4, with 20% of the CEOs expecting sales to stagnate and with 7% expecting sales declines.

This post was published at Wolf Street by Wolf Richter ‘ September 17, 2014.

U.S. National Debt Surges $1 Trillion In Just 12 Months … Meanwhile FOMC ‘Tweaks’ Wording

The U. S. financial position continues to deteriorate badly and in the last 12 months has increased by over $1 trillion dollars.
Nick Laird of Sharelynx has just reproduced his fascinating and timely chart showing the US debt limit, the actual US debt and the gold price all in one chart. From 2000 until around the first quarter of 2013, there was a very strong and close correlation between the growth of the US national debt and the rise in the US dollar gold price.
After Q1 2013 this correlation broke down according to the chart, wherein the US national debt continued to skyrocket and the US dollar gold price fell significantly. The end of Q1 2013 coincides with the smash down of the gold price in April 2013, which actually created a huge increase in demand for physical gold all across the world.
Looking at the huge divergence in the graph after mid 2013 between the continued growth in the US national debt and the drop and subsequent tight trading range for gold between $1200 and $1400, one can only conclude that gold is somehow being prevented from its previous job of accurately reflecting an explosive US national debt picture.

This post was published at Gold Core on 17 September 2014.

Soros Issues Major Warning; U.K. Sees Large Outflows

This Thursday, the 18th of September, Scotland goes to the polls to decide whether it wants to stay in a Union with the rest of Great Britain or go down the road of independence. At the moment the election is too close to call with sentiment equally divided between either camp. If the Scottish people do opt for going it alone it will send shock waves throughout Europe. Such a result, many believe, will feed the secession fever spreading across Euroland and lead to continued Euro weakness.
Recently, Gorge Soros penned an Op-Ed piece in the FT voicing his horror at what was occurring. In the main he outlined that the break-up of the British Union could lead to the destabilization of the European Union as a whole just when it needs to be to be strong and united to deal with Russian aggression (emphasis added):
‘This is the worst possible time for Britain to consider leaving the EU – or for Scotland to break with Britain.
The E. U. is an unfinished project of European states that have sacrificed part of their sovereignty to form an ever-closer union based on shared values and ideals. Those shared values are under attack on multiple fronts. Russia’s undeclared war against Ukraine is perhaps the most immediate example but it is by no means the only one. Resurgent nationalism and illiberal democracy are on the rise within Europe, at its borders and around the globe.
Since world war two the European powers, along with the U. S., have been the main supporters of the prevailing international order. Yet, in recent years, overwhelmed by the euro crisis, Europe has turned inward, diminishing its ability to play a forceful role in international affairs…

This post was published at FinancialSense on 09/16/2014.

The Depression, World War II, And What They Really Mean

Nearly a century after the fact, the Great Depression remains THE object lesson for virtually every branch of economics. To monetarists the fact that the US money supply fell by nearly a third in the 1930s illustrates the need for a central bank to maintain steady money growth. To Keynesians the Depression’s depth and duration proved that capitalist systems are inherently unstable and need a big, powerful government to manage them. World War II, in this framework, saved the US economy from permanent 25% unemployment.
To Austrians, meanwhile, the Depression demonstrated that 1) the best way to prevent a bust is to avoid the preceding boom, which is another way of saying that the size and composition of the national balance sheet is the key to everything, and 2) the best way to get through a bust is to let market forces liquidate the bad debt as quickly as possible.
A September 14 DollarCollapse column took the Austrians’ side in the debate and illustrated the point with the following chart, which depicts the massive deleveraging of the 1930s.

This post was published at DollarCollapse on September 16, 2014.

Homebuilder Sentiment Soars To 9 Year High (Mortgage Apps 14-Year Low)

Despite lagging mortgage applications and home sales, homebuilder sentiment surged for the 4th month in a row to 59 (against expectations of 56) to its highest since November 2005. Prospective Buyer Traffic (hope) soared to 47. The South region rose dramatically as Midwest fell. The disconnect between hard data in the housing market and soft survey guesses by the homebuilders grows ever wider…
First this…

This post was published at Zero Hedge on 09/17/2014.

Not All That It Seems

It’s a slow day in the neighborhood as the world awaits the Janet Yellen’s post-FOMC meeting press conference. It is almost like the old ‘Batman’ series with Adam West when they would get to the end of the show and leave you with a ‘cliffhanger:’
‘It’s a questionably unquestionable situation… Are the markets prepared for a shocking answer… Will Janet Yellen announce the final end to QE? Or electrify the bulls with more accommodation? Can Yellen’s eloquent elocution energize the markets…or will she magnetize the bears? Tune in next time Fed fans… Same Fed time… Same Fed channel’ While we wait in breathless anticipation for the next clue, I do find it interesting there is a rising belief that things have returned to some level of normalcy. As I noted yesterday, the bullish mantra is alive and well, and analysts have all turned their eyes skyward with price targets reaching as high as 2800 for the S&P 500 as noted by Jeffrey Saut at Raymond James:
‘Since 1989 the S&P 500’s earnings have grown by 6.15% annually. Extrapolating that into 2020 implies earnings of $183.36 (see chart on the next page). Using the historical median P/E ratio of 15.5x yields a price target of 2842 in 2020.’

This post was published at StreetTalkLive on Tuesday, 16 September 2014.

Hilsenrath Backs Away From His “Considerable Time” Prediction

Yesterday’s exuberant equity market reaction has been largely defined by the mainstream media as driven by WSJ Hilsenrath’s ‘confirmation’ that Yellen will keep the uber-dovish phrase “considerable time” in the FOMC statement today. So, we wonder, why did the Fed-whisperer, after markets had closed last night, issue a quasi-retraction of his prediction explaining that instead of some prohetical “I just know” statement, it was a “best guess,” as he concluded, “will the Fed take these steps? Only the people in the room know that. The rest of us will see Wednesday afternoon.” It appears the sell-side disagrees with him on the language…
Via WSJ,
In a webcast Tuesday, I explained why I thought the Federal Reserve would stick with, but qualify, an important phrase in its policy statement Wednesday which assures near-zero interest rates for a ‘considerable time.’ This was simply my best analysis of where I think the Fed is going based on what we have been reporting and what officials have said in the past. …
Here’s my analysis: Janet Yellen is a methodical individual and the Fed, in normal times, is a slow-moving institution. It takes time for debates to play out. Ms. Yellen is seeking consensus, as we reported earlier this week. The considerable time debate doesn’t feel ripened or fully aired. When Ms. Yellen has used the phrase in recent months she has qualified it, but not suggested changing it. Meantime the Fed has other business on its plate. The exit plan has been in the works for months, as has the plan to end bond buying. Changing the ‘considerable time’ guidance now, while also announcing an exit plan, could be viewed by market participants as a surprising move toward raising rates.

This post was published at Zero Hedge on 09/17/2014.

The Silver Sentiment Cycle – Turnaround Coming?

Silver Prices: 1972 – 1979
‘ Silver moved upward from about $1.40 in 1971, rallied to about $6.40 in March 1974, and fell to about $4.30 in August 1977. ‘The March 1974 peak took about 3 years and ended about 4.55 times its starting point. ‘The August 1977 low took another 3.5 years and fell about 33% from the peak price.

This post was published at SRSrocco Report on September 16, 2014.

Why the Dollar May Remain Strong For Longer Than We Think

For those understandably disgusted by the reckless expansion of the US money supply over the past six years, it’s vitally important to remember that the road to our monetary endgame is not a straight line, nor necessarily intuitive.
I have long been a dollar bull, not for any over-arching reasons based on inflation, deflation, rising geopolitical multi-polarity or any of the other issues that touch on the dollar’s valuation vis- -vis other currencies. My analysis focuses on a few basics: the dollar’s status as the global reserve currency, Triffin’s Paradox (a.k.a. Triffin’s Dilemma) and global capital flows into the dollar and dollar-denominated assets such as U. S. Treasury bonds.
Reserve Currencies vs. Trading Currencies When we say the U. S. dollar is the global reserve currency, what does that mean? There is often some confusion about the difference between a trading currencyand a reserve currency. Let’s use an example to explain the difference.
Country A trades $10 billion of goods and services with Country B, which does $10.01 billion of trade with Country A. The two nations agree to a trade pact that enables the two nations to trade currencies directly, that is, without converting the payments for trade into a third currency such as the dollar.

This post was published at Charles Hugh Smith on TUESDAY, SEPTEMBER 16, 2014.

SCOTLAND’S INDEPENDENCE WOULD IGNITE SECESSIONIST MOVEMENTS WORLDWIDE

Secessionist movements have gained in popularity in recent years as the global economic crisis persists and as people awaken to the fact they are owned by people often thousands of miles away. Making headlines most recently is a movement in Scotland seeking independence from London and the United Kingdom (UK). Whatever way Scots vote on Thursday, the seeds have been sown for a Scotland that will, in the future, become increasingly independent (at least mentally).
Whether Scotland votes yes or no Thursday is still an unknown. The race is reportedly in a dead heat. The media is arguing across the spectrum that independence for Scotland would bring turmoil to the region as if the UK has navigated the economic crisis unharmed.
The media wants to drive home this following point: A yes vote will render Scotland a powerless state with crushing debt and no financial infrastructure, because all of that infrastructure will head south. The European Union will shun Scotland as will NATO and the US. Paul Krugman added to the fear: ‘Be afraid, be very afraid” the amateur economist wrote. The Scots have a bit of anxiety, but the fear factor is overplayed.
Nonetheless, the Scottish are investing in physical gold. Purchases of gold rose by 42% over the past two weeks, according to BullionVault.com. CoinInvest also saw a “significant upturn” in UK trading.

This post was published at Dollar Vigilante on September 16th, 2014.

Poor Americans carry a record level of debt leverage: Subprime economics and leveraging the poor into a treadmill of continual poverty.

Poor Americans carry deeper debt levels than they did during the depths of the Great Recession. To boost auto sales, many dealers have decided to offer subprime loans to prospective clients that have very little financial means. Many for-profit colleges have a business model that virtually solicits and lures in poor Americans into their debt saddling paper mills. So it is probably no surprise that poor Americans are now carrying the heaviest debt loads in history. The argument is interesting from some of these financial institutions and similar to what was being delivered during the subprime housing days. These ‘generous’ lenders are making loans where no one else is. Of course the caveat is they are gambling with other people’s money. In the case of student debt, the American people will foot the bill for any implosion that happens and in the mean time salaries for executives at these institutions are extremely high. The model of financing based on too big to fail is all too familiar. The financial system has mastered the art of being a viper and extracting all wealth possible before things go bust. Poor Americans are in worse shape today than during the Great Recession.
The poor are massively in debt
Our system has replaced access to debt with wealth. The days of prudently saving and paying for college or actually buying a car outright seem like a distant memory. When many universities charge $40,000 or $50,000 per year in tuition how is the typical US household making $50,000 per year going to pay for their kids to go to school? They can’t. And that is why we have a massive student loan bubble with $1.2 trillion in outstanding debt and the CBO is projecting another $1 trillion over the next decade.
While American households overall have deleveraged since the Great Recession hit, poorer households have not:

This post was published at MyBudget360 on September 16, 2014.

Bond Yields Slide As Core CPI Weakest In Over 4 Years

Following yesterday’s stagnant PPI, today’s CPI is a shocker. Core CPI rose a mere 0.01% MoM – its weakest gain since Jan 2010. The ‘weakness’ was driven by energy (-2.6%), airline fares (-4.7%), clothing (-0.2%), and used car prices (-0.3%) tumbling. The headline CPI dropped 0.2% MoM (against a 0.0% expectation) – its biggest drop since March 2013. The 1.7% YoY gain (missing expectations) is the weakest rise since March 2014.
Core CPI slowest since 2010…

This post was published at Zero Hedge on 09/17/2014.

What Is Next For The Price Of Silver: Collapse or Rally?

Facts and figures from the silver market SENTIMENT: Sentiment for gold (and silver) is very weak – as low as it was at the bottom in June 2013. This suggests both gold and silver are again at or near a bottom.
GOLD TO SILVER RATIO: The ratio is currently about 66 – near the high end of the slowly declining range for the past 27 years. See the graph and note that a high ratio indicates silver is too inexpensive in relation to gold. All of the ratio peaks (February 1991, March 1995, March – May 2003, October 2008, and July 2013) occurred at significant silver lows.

This post was published at GoldSilverWorlds on September 17, 2014.