Offshore Inn for International Real Estate, Overseas Jobs, Asset Protection, Expatriate Resources and Overseas Retirement
It is a peculiar irony. A year ago, the the UK’s Inland Revenue began a crackdown on offshore savings. Banks operating out of the Channel Islands and the Isle of Man had to hand over details of British customers, and depositors who confessed were rewarded with an amnesty. Thousands did and many must have given up on offshore savings. Inadvertently, the taxman’s crackdown must have saved some depositors from the collapse of the offshore subsidaries of Icelandic banks.
Thousands were not so lucky and could now lose most of their savings …
Consider if you will be a sole proprietorship, partnership or corporation.
‘You’re so lucky, being able to work abroad.’ I’ve forgotten how many times I’ve heard that statement.
If you have assets, you are most likely a target. When your assets are visible, you are the bullseye.
Do you need a job? Just got a question? Pop it in here and you’ll get an answer from our Inn Team.
Tip the scales in your favour, protect your home and family with asset protection programmes for partnerships, corporations and individuals.
Pensions have never enjoyed so much time in the spotlight. Regulatory overhauls, demands from campaign groups and proposals from the new Coalition Government have combined to ensure that the sector has often made headlines. A vision for reforming the state pensions system was unveiled in June by Iain Duncan Smith, the Secretary of State for Work and Pensions, who said everyone needed to take responsibility for achieving the income in retirement to which they aspire.
One year ago the official unemployment rate was 9.7%. Today it is 9.6%.
One year ago U-6 unemployment was 16.8%. Today U-6 is 16.7%
click on chart for sharper image
For more details on the jobs report, please see Jobs Decrease by 54,000, Rise by 60,000 Excluding Census; Unemployment Rises Slightly to 9.6%; A Look Beneath the Surface
For all the trillions of dollars in stimulus and additional trillions of dollars in bank bailouts and trillions of dollars of expansion of the Fed’s balance sheet, this is all we have to show for it.
Moreover, the economy is clearly slowing already by many economic reports including new home sales, existing home sales, the regional Fed manufacturing surveys, sentiment measures, and consumer spending trends. The only major discrepancy is ISM.
This week, none of that matters. However, I would like to point out that bear market rallies end, not on bad news, but on good news. It will be interesting to see how much more good news there is, and the market’s reaction to it.
Mike “Mish” Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List
The Israeli and Palestinian leaders launched new Mideast talks with seriousness and without theatrics but face a looming deadline on settlements and a tight timeline for success, says CFR’s Robert Danin.
This morning the BLS reported a decrease of 64,000 jobs. However, that reflects a decrease of 114,000 temporary census workers.
Excluding the census effect, government lost 7,000 jobs. Were the trend to continue, this would be a good thing because Firing Public Union Workers Creates Real Jobs.
Unfortunately, politicians and Keynesian clown economists will not see it that way. Indeed there is a $26 billion bill giving money to the states to keep bureaucrats employed. This is unfortunate because we need to shed government jobs.
Birth-Death Model
Hidden beneath the surface the BLS Black Box - Birth Death Model added 115,000 jobs, a number likely to be revised lower in coming years. Please note you cannot directly subtract the number from the total because of the way the BLS computes its overall number.
Participation Rate Effects
The civilian labor force participation rate (64.7 percent) and the employment-population ratio (58.5 percent) were essentially unchanged from last month’s report. However, these measures have declined by 0.5 percentage points and 0.3 points, respectively, since April.
The drop in participation rate this year is the only reason the unemployment rate is not over 10%. The drop in participation rates is not that surprising because some of the long-term unemployed stopped looking jobs, or opted for retirement.
Nonetheless, I still do not think the top in the unemployment rate is in and expect it may rise substantially later this year as the recovery heads into a coma and states are forced to cut back workers unless Congress does substantially more to support states.
Employment and Recessions
Calculated Risk has a great chart showing the effects of census hiring as well as the extremely weak hiring in this recovery.
click on chart for sharper image
The dotted lines tell the real story about how pathetic a jobs recovery this has been. Bear in mind it has taken $trillions in stimulus to produce this.
June, July Revisions
The change in total nonfarm payroll employment for June was revised from -221,000 to -175,000, and the change for July was revised from -131,000 to -54,000.
Those revisions look good but it is important to note where the revisions comes from. The loss of government jobs in June was revised from -252,000 to -236,000 and July from -202 to -161,000.
Major Discrepancies
The BLS jobs report for August does not match ADP payroll estimates. Moreover, neither the BLS jobs report nor the ADP jobs report is consistent with the hot ISM number reported Wednesday. Both the BLS (details below) and ADP have a decline in manufacturing employment while ISM had a rise.
Please see Rosenberg says “ISM Flunks Sniff Test “; Cashin calls ISM “an Outlier”; ADP, Other Data Does Not Confirm for more details that suggest the ISM number is nonsense.
Part-Time Employment
The number of involuntary part-time workers increased by 331,000 over the month to 8.9 million. In January, the number of employees working “part-time for economic reasons” was 8.6 million.
Now for this month’s report ….
July 2010 Report
Please consider the Bureau of Labor Statistics (BLS) July 2010 Employment Report.
Nonfarm payroll employment changed little (-54,000) in August, and the unemployment rate was about unchanged at 9.6 percent, the U.S. Bureau of Labor Statistics reported today. Government employment fell, as 114,000 temporary workers hired for the decennial census completed their work. Private-sector payroll employment continued to trend up modestly (+67,000).
Unemployment Rate - Seasonally Adjusted
Nonfarm Payroll Employment - Seasonally Adjusted 
Since September 2009, temporary help services employment has risen by 362,000.
Establishment Data
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Highlights
Note: some of the above categories overlap as shown in the preceding chart, so do not attempt to total them up.
Index of Aggregate Weekly Hours
Production and non-supervisory work hours rose .1 to 33.5 hours (from a revised lower hours total of 33.4 hours). Average hourly earnings rose $.03 at $19.08.
Birth Death Model Revisions 2009
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Birth Death Model Revisions 2010
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Birth/Death Model Revisions
The BLS Birth/Death Model methodology is so screwed up and there have been so many revisions and up it is pointless to further comment other than to repeat a few general statements.
Please note that one cannot subtract or add birth death revisions to the reported totals and get a meaningful answer. One set of numbers is seasonally adjusted the other is not. In the black box the BLS combines the two coming out with a total. The Birth Death numbers influence the overall totals but the math is not as simple as it appears and the effect is nowhere near as big as it might logically appear at first glance.
BLS Black Box
For those unfamiliar with the birth/death model, monthly jobs adjustments are made by the BLS based on economic assumptions about the birth and death of businesses (not individuals).
Birth/Death assumptions are supposedly made according to estimates of where the BLS thinks we are in the economic cycle. Theory is one thing. Practice is clearly another.
Household Data
The number of unemployed persons (14.9 million) and the unemployment rate (9.6 percent) were little changed in August. From May through August, the jobless rate remained in the range of 9.5 to 9.7 percent.The number of long-term unemployed (those jobless for 27 weeks and over) declined by 323,000 over the month to 6.2 million. In August, 42.0 percent of unemployed persons had been jobless for 27 weeks or more.
In August, the civilian labor force participation rate (64.7 percent) and the employment-population ratio (58.5 percent) were essentially unchanged.
The number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers) increased by 331,000 over the month to 8.9 million. These individuals were working part time because their hours had been cut back or because they were unable to find a fulltime job.
[Mish Note: In January the number was 8.3 million]
Persons Not in the Labor Force
About 2.4 million persons were marginally attached to the labor force in August, little changed from a year earlier. (The data are not seasonally adjusted.) These individuals were not in the labor force, wanted and were available for work, and had looked for a job sometime in the prior 12 months. They were not counted as unemployed because they had not searched for work in the 4 weeks preceding the
survey.
Table A-8 Part Time Status
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The key take-away is there are 8,860,00 workers whose hours may rise before those companies start hiring more workers.
Table A-15
Table A-15 is where one can find a better approximation of what the unemployment rate really is.
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Grim Statistics
The official unemployment rate is 9.6%. However, if you start counting all the people that want a job but gave up, all the people with part-time jobs that want a full-time job, all the people who dropped off the unemployment rolls because their unemployment benefits ran out, etc., you get a closer picture of what the unemployment rate is. That number is in the last row labeled U-6.
It reflects how unemployment feels to the average Joe on the street. U-6 is 16.7%, up .2 from last month.
Looking ahead, there is no driver for jobs. Moreover, states are in forced cutback mode on account of shrinking revenues and unfunded pension obligations. Shrinking government jobs and benefits at the state and local level is a much needed adjustment. Those cutbacks will weigh on employment and consumer spending for quite some time.
Expect to see structurally high unemployment for years to come.
Keep in mind that huge cuts in public sector jobs and benefits at the city, county, and state level are on the way. These are badly needed adjustments. However, economists will not see it that way, nor will the politicians.
Recap
The private sector hiring increase of 67,000 is very weak for a recovery. That number is not enough to keep the unemployment rate steady. However, the unemployment rate comes from the Household Survey (a phone survey), not from actual payroll data.
Mike “Mish” Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List
One might think that a salary of $111,000 negotiating contracts for teachers was more than ample pay, especially when teachers themselves have been forced to make contract concessions. Yet, One would be wrong. Greedy negotiators walked off the job even though 80% of the workers make over $111,000 a year.
The Columbus Dispatch reports Teachers union has labor trouble of its own
Ohio’s largest teachers union is having labor problems of its own.Labor-relations consultants, who help local teachers unions negotiate contracts with school districts, and other employees of the Ohio Education Association walked off the job this morning.
Most of the 110 striking workers - all members of the OEA’s Professional Staff Union - earn more than $100,000 a year, according to reports filed with the U.S. Department of Labor. For instance, labor-relations consultants - who make up about 80 percent of the striking workers - were paid an average salary of $111,350 in 2009.
That is about $10,000 more than the average Ohio school-district superintendent made last school year, and more than double what the average teacher made, according to the state statistics.
The appropriate response from the Teacher’s unions would be to fire the negotiators, thereby saving $12 million dollars a year.
Anyone making over $100,000 and goes on strike in this environment deserves to lose their job, their home, and their lifestyle.
Salem Oregon At Double-Dip Risk
Please consider Analysts: Salem at risk for double-dip recession
According to the economists, Salem is one of 22 U.S. cities at risk for a double-dip recession. There are 76,000 state employees in Oregon and 21,500 of them work in Salem. That’s almost a third of the entire state government workforce in the capital city.At Saigon Restaurant, which caters to state employees, business started getting bad about a year ago. The owners say business has dropped off by 70 percent. In fact, they say they are no longer able to pay their bills.
“Very, very worried right now,” said owner Hien Tran.
There were few patrons at the restaurant during the noon lunch hour Tuesday. Things are so bad for the owners of Saigon they have lost their home and have been forced to live with their son.
They don’t have to go far to realize they are not alone. The Quiznos next door shut down six months ago.
Nickeled to Death by Bus Union
Oregon Live reports Trimet and taxpayers: Bus riders’ dismay grows one nickel at a time
It’s only a nickel. The latest fare increase from TriMet won’t bankrupt anyone, not even the job seekers, college students and low-wage workers who make up a big portion of the Portland metro transit agency’s ridership.But frustration grows a nickel at a time. One more fare increase, another canceled bus route, a longer wait at the stop between buses — it all adds up. The disquiet builds until, seemingly without warning, a nickel becomes a last straw.
TriMet is at that point now, as it raises fares and angles for more tax money before getting its labor costs under control. The transit agency shouldn’t be surprised by Wednesday’s rally against the new fare hikes and service cuts — and it certainly shouldn’t be shocked if voters reject the transit agency’s bond measure this fall.
TriMet wants voters to approve a $125 million bond measure in November to replace old buses and improve bus stops.
TriMet’s health care costs for transit operators continue to spiral unchecked. Out of 171 transit agencies surveyed last year, TriMet boasted the fourth highest insurance premiums in the country. Transit operators pay none of their $2,200 monthly premium, no deductible and token copays. Benefits for dependents and former workers are plush and far beyond the norm, even for public employees.
Abolish Tri-Met
It is time to send Tri-Met packing.
The correct response is to put the bus contract out to bid and take the lowest offer. It is absurd for bus drivers to have $2,200 per month health care costs at public expense. Bear in mind that pension costs are on top of that.
It’s no wonder Oregon is falling apart.
Schwarzenegger Targets Pensions
The Sacramento Bee reports Schwarzenegger targets pensions in budget press conference
Gov. Arnold Schwarzenegger left little doubt today that cutting state employee pensions remains one of his top priorities in budget negotiations. He is demanding that lawmakers roll back pension guarantees for future state hires as a condition to signing the budget.“The question we have to ask ourselves is, is it pensions or is it parks?” he said today in a budget press conference. “Is it pensions or higher education? Is it pensions or child care? And the list goes on and on, because that’s where the money comes from. Those are the areas where we are taking this money because of the pensions.”
“They are giving it to pensions, to the public employee unions,” he said, apparently referring to Democrats. “They are taking the money away from those poor people. They are taking away the money from higher education. They are taking away the money from parks, from all of those things, so we have to make those cuts.”
While I welcome this stance from Schwarzenegger, it is a stance 3 years late in coming.
California Budget Impasse in Third Month
Bloomberg reports California Republicans Block Budget Plan Proposed by Democrats
Republicans in the California Legislature blocked passage of a budget sought by Democrats who want to close a $19.1 billion deficit with higher taxes and less spending cuts than preferred by Governor Arnold Schwarzenegger.The budget bill failed on a 50-25 Assembly vote today. It needed a two-thirds majority to pass. The Democrats’ centerpiece proposals are higher income taxes, a lower sales tax, a new levy on oil production, an increase in vehicle-registration fees and a suspension of corporate tax breaks. Those changes all require separate bills that weren’t voted on today.
Controller John Chiang, a Democrat, has said he may need to issue IOUs to pay bills for the second straight year if the impasse goes deep into September.
Assembly Democrats earlier rejected a competing budget plan proposed by Schwarzenegger and Republicans that sought to eliminate the state’s main welfare program for families.
Budget passage by legislative supermajority votes is written into the state constitution. While Democrats have majorities in both chambers, they are short of the two-thirds level by two votes in the Senate and five in the Assembly.
Republicans should hold out, forever if necessary.
Whitman Leads Brown in California Governor Race
Bloomberg reports Union-Led Group Halts Ads Attacking Whitman in California Race
A union-funded group that spent almost $9 million on negative advertising targeting Meg Whitman, the Republican running for governor in California, has suspended its campaign, designed to help Democrat Jerry Brown.The ads were halted because Brown, the state attorney general, has kept competitive with Whitman, a billionaire who has dug into her personal fortune to finance her campaign, according to members of the group.
One ad accused Whitman of raising fees and creating “huge losses from failed mergers” while chief executive officer of EBay Inc.
“It’s rock-solid proof that there is seamless coordination between what is essentially the same political organization: Jerry Brown and the government unions that control him,” Andrea Rivera, a Whitman campaign spokeswoman, said by e-mail.
Whitman is supported by 48 percent of likely voters in the November election, an 8 percentage-point lead over Brown, according to a survey by Rasmussen Reports released on Aug. 26. A poll released July 7 by Field Research Corp. showed the two candidates in a “virtual tie.”
“On a return-on-investment basis, she hasn’t done well,” said Lou Paulson, president of the California Professional Firefighters and one of the leaders of the Working Families group.
Indications
The dropped union funded ads are indicative of one or more things.
All You Need To Know
The way to access how to vote in any election is to look at the candidate endorsed by labor and vote the other way.
No matter how much one likes or dislikes Meg Whitman, she is going to do a far better job than socialist Jerry Brown whose primary interests are to pander to public unions and raise your taxes.
Mush for Brains
If you intend to vote for Brown, you or your family are members of a public union, you are on welfare, you work for the state, or you have mush for brains.
Mike “Mish” Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List
The liabilities faced by defined benefit pension schemes soared to a record high during August as market conditions continued to deteriorate, according to Aon Consulting.
A preview of world events in the coming week from CFR.org.
When futures ramped into the close on Tuesday, with heavier volume, I had an inkling the ISM number would be hot Wednesday morning. Indeed, that was the case.
However, a hot manufacturing ISM makes little sense (not that any economic numbers have to make sense except perhaps in the long haul).
One thing that struck me right off the bat was how the monthly ADP jobs report does not confirm the ISM number. Nor do the regional Fed reports that I have been following, especially the Philly Fed report as noted in 58 out of 58 Economists Overoptimistic on Philly Fed Manufacturing Estimate; Median Forecast +7 Actual Result -7.7, a “Veritable Disaster”.
August ADP Employment Reports Shows Contraction in Manufacturing Jobs
Inquiring minds are reading the ADP August 2010 National Employment Report for clues on strength of hiring trends.
Private-sector employment decreased by 10,000 from July to August on a seasonally adjusted basis, according to the latest ADP National Employment Report® released today. The estimated change of employment from June to July was revised down slightly, from the previously reported increase of 42,000 to an increase of 37,000.The decline in private employment in August confirms a pause in the recovery, already evident in other economic data. The deceleration in employment was evident in the major sectors and by size of business. This month’s decline in employment followed six monthly increases from February through July. Over those six months, the average monthly gain in employment was 37,000 with no evidence of acceleration.
August’s ADP Report estimates nonfarm private employment in the service-providing sector rose by 30,000, the seventh consecutive monthly gain. This increase was not enough to offset an employment decline in the goods-producing sector of 40,000. Employment in the manufacturing sector decreased 6,000, the second consecutive monthly decline.
Large businesses, defined as those with 500 or more workers, saw employment remain essentially flat while employment among medium-size businesses, defined as those with between 50 and 499 workers, decreased by 5,000. Employment among small-size businesses, defined as those with fewer than 50 workers, decreased by 6,000. In August, construction employment dropped 33,000. Construction employment has declined for over three years and the total decline in construction jobs since the peak in January 2007 is 2,275,000. Employment in the financial services sector dropped 5,000. Financial Services employment has declined for over 3 years.
ISM Smell Test
Rosenberg blasted the ISM report in Breakfast with Dave.
STRANGE ISM NUMBER … DOESN’T PASS “SNIFF TEST”Here’s why:
1.Most of the regional reports were very poor in August. Either they are collectively all wrong or the ISM is.
2. The share of respondents saying they experienced “growth” was 61%, the exact same as a year ago when ISM was sitting at 52.8.
3. The ISM gain was led by employment (58.6 to 60.4 — best since December 1983) in the same month that ADP manufacturing fell 6,000 (second decline in a row — it was -11k in July when ISM employment was 58.6, so clearly the latter is proving to be, at least for now, an unreliable labour market barometer). Production also ticked up to 59.9 from 57.0 and inventories rose to 51.4 from 50.2. These are all coincident indicators, as an aside (but an important aside).
Strange ISM number, it doesn’t pass the sniff test and here is one reason: most of the regional reports were very poor in August… either they’re wrong or the ISM is4. According to the ISM, 76% of the manufacturers surveyed said that in August, their customer inventory levels were either “too high” or “about right”. At the turn of the year, just ahead of the big inventory swing that bolstered the GDP data, this metric was sitting at 60%. As a result, it would be folly to assume that the inventory and production categories will contribute to further ISM increases in the near- and intermediate-term. Norbert Ore, who presides over the ISM survey, had this to say about inventories: “If the inventory build isn’t voluntary then we have a huge issue on our hands.”
5. Meanwhile, the more forward-looking components dropped, though were hardly a disaster. But orders slipped for the third month in a row, to 53.1 from 53.5 in July, 58.5 in June and 65.7 in both April and May. That is still a sharp squeeze in the growth rate of capital goods-related order books. At 53.1, ISM orders index is down to levels last seen in June 2009 (but when they were rising in “green shooty” fashion).
6. Backlogs were down as well, to 51.5 from 54.5 in July, 57.0 in June and 59.5 in May (and peaked in February at 61.0). At 51.5, order backlogs stand at their low-water mark of the year.
7. Supplier deliveries (measure of production bottlenecks) eased for the fifth month in a row — to 56.6 from 58.3 in July and well off the March peak of 64.9.
8. Looking at five decades worth of data, the share of the time in which we see orders, backlogs and vendor deliveries all decline in tandem, and the headline ISM index rise, is the grand total of 1%. No wonder equities rallies so much — we just witnessed a 1-in-100 event! Bring your camera.
9. Export orders dipped to 55.5 from 56.5 — the lowest they have been since last December. If the overseas economy is rocking and rolling, then why on earth would this component be declining? Not only that, but it looks as though, yet again, a good part of the inventory boost we still seem to be getting is being filled by imports — that sub-index jumped four points in August and does not bode well for the trade deficit, which subtracted 3.4 percentage points from headline GDP growth in Q2.
MORE ON THE DATA
It would be something if the ISM was being fuelled by broad based increases and occurring alongside a decent path in domestic spending. But the ISM gains were narrowly based and the inventories are continuing to be built up even as domestic demand is slowing down. And it is spending that drives production, not the other way around. The fact that fewer respondents are saying inventories are at low or desirable levels is going to set us up for some pretty hefty production and ISM reversals through the fall.
Art Cashin says “ISM is an Outlier”
For more from Art Cashin, please see 26 of Last 88 Trading Days have been 90% Days (Either Up or Down); 7 More Lean Years in Stock Market?
Let’s assume for a moment the ISM number is correct. If so, manufacturers are ramping up production just as the economy is dramatically slowing by nearly every other measure.
I smell huge inventory problems coming up in the 4th quarter. In the meantime, let’s party over a ramp in production with no buyers.
Mike “Mish” Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List
New tensions in the South China Sea are a growing test to China’s relations with the United States and China’s Southeast Asian neighbors, writes CFR’s Joshua Kurlantzick.
The Nelson Rockefeller Institute reports State Tax Revenues Are Slowly Rebounding. However, as always, the devil is in the details. Let’s take a look.
Preliminary tax collection data for the April-June quarter of 2010 show improvement in overall state tax collections as well as for personal income tax and sales tax revenue. However, revenue collections remain significantly below peak levels and are still weak in a number of states.The Rockefeller Institute’s compilation of data from 47 early reporting states shows collections from major tax sources increased by 2.2 percent in nominal terms compared to the second quarter of 2009, but was 17.2 percent below the same period two years ago.
State Tax Collections
Gains were widespread, with 30 states showing an increase in revenues compared to a year earlier. After adjusting for inflation, tax revenues increased by 1.4 percent in the second quarter of 2010 compared to the same quarter of 2009.
In terms of dollars, California reported the largest increase in personal income tax collections in the second quarter of 2010, where revenue collections rose by $1.6 billion or 11.5 percent. Such increase is mostly attributable to legislated changes. Without California, personal income tax collections for the second quarter of 2010 show a 1.1 percent decline nationally in the April-June quarter, compared to the same period of 2009.
Sales tax collections increased by 5.9 percent in the second quarter of 2010 compared to the same quarter of 2009, but were still 5.4 percent lower than two years ago. With 42 of 45 sales-tax states reporting so far, only seven states reported declines in sales tax collections compared with the same quarter last year.
Among the corporate income tax states, 19 of 43 early reporting states reported declines for the second quarter compared to the same quarter of the previous year, while 24 showed gains. Fourteen states reported double-digit declines, while seventeen states reported double-digit growth in corporate income tax collections in the second quarter of 2010. The large variation among states’ corporate income tax revenues is due to volatility in corporate profits and in the timing of tax payments.
Among individual states, California reported the largest decline in corporate income tax collections in the second quarter of 2010, where revenue collections declined by $2.7 billion or 42.3 percent. California’s corporate income tax collections were strong in the April-June quarter of 2009 due to legislation that required taxpayers to pay 30 percent of annual estimated payments in each of their two first prepayments (April and June for calendar year corporations) versus the prior requirement of 25 percent. Without California, corporate income tax collections for the second quarter of 2010 show a 1.9 percent decline nationally in the April-June quarter, compared to the same period of 2009.
The Outlook
The state tax revenue picture in the first two quarters of the calendar year 2010 represented significant improvement from the collapse of the preceding quarters. Still, in most states, the overall trend for fiscal 2010 was very much in the negative. Now that most states have closed the books for fiscal year 2010, preliminary figures show that 34 of 44 states for which complete fiscal 2010 data are available saw declines in overall tax collections for the year. Collections from the two major tax sources — personal income and sales — were also negative for the fiscal year. With revenues still below prerecession levels and question marks surrounding the national economy, states face continued uncertainty at best — with continuing budget challenges a sure bet.
Improvement Mirage
Please see article for more charts, data, and analysis.
The “improvement” in personal income taxes was a mirage caused by California speeding up collection of personal income taxes. California required payment of estimated taxes before money was even earned! Ignoring California, income tax collections actually declined from a year ago.
Much of the improvement in sales taxes is a result of tax hikes, not increased sales. Those effects will soon wear off in year-over-year comparisons (assuming of course there is not another round of sales tax hikes, by no means a good bet).
In simple terms that dramatic rebound shown in the first chart merely means things have stabilized but only vs. the rock bottom depressed level of second quarter of 2009.
Gallup Polls and sales data from MasterCard Advisors paints the same grim picture. Please see Gallup Poll Shows Consumer Spending Pullback, Consumer Confidence Levels Below Depressed 2009 Levels ; Back-to-School Sales Bust Says WSJ for details.
States remain in a world of hurt and the economy is slowing once again. I expect GDP contraction in the third quarter.
Thus, states are going to have to address the problem of public union wages and pension benefits whether they like it or not.
Mike “Mish” Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List
Max Boot says a strategy that focuses on defeating the Taliban and reducing the corruption that allows them to thrive can produce victory in Afghanistan.
Spending is up a tad from depressed 2009 levels but still way below 2008 levels. Looking ahead year-over-year comparisons will be much more difficult and weak sales will continue to impact state budgets.
A recent Gallup Poll shows U.S. Consumers Pulling Back on Spending in August
Americans’ self-reported spending in stores, restaurants, gas stations, and online averaged $61 per day during the week ending Aug. 29. So far, August and back-to-school 2010 spending trends appear no better than those of August 2009.
Self-Reported Spending Suggests “New Normal” Continues
Gallup’s consumer spending measure averaged $68 per day in July and $67 in June — up $6 on average from prior-year comparables, and at the upper end of the 2009 “new normal” monthly spending range of $59 to $67. The July results seem consistent with Monday’s report of a 0.4% increase in personal spending in July 2010.
At this point, consumer spending in August is running below that of June and July, falling back to roughly the $65-per-day average of August 2009. This is consistent with perceptions of a continued weakening of the U.S. economy and tepid back-to-school sales.
Economic Consumer Confidence Drops Below Depressed 2009 Levels
In spite of other survey that show a slight uptick in consumer confidence (with emphasis on slight) a Gallup Poll shows U.S. Economic Confidence Down in Recent Weeks
After improving slightly earlier this month, Gallup’s Economic Confidence Index declined over the past two weeks to its current -33, matching the average for all of July.
“Poor” Ratings of Economy Are Near 2010 High
Forty-eight percent of Americans rated current economic conditions as “poor” during the week ending Aug. 22 — approaching the highest levels of the year. This is marginally worse than the early August reading, is in line with the full July average of 47%, and is marginally worse than at this time in 2009.
Expectations Deteriorate
During recent weeks, slightly more consumers told Gallup they think economic conditions are “getting worse” than thought that was the case earlier this month. These expectations for the economy basically match the average for all of July and are worse than those consumers held at this time a year ago.
What Consumers Say
What consumers say and what they do may be two different things. However, in this case, actual sales data from Mastercard Advisers seems to confirm this lack of confidence.
Back-to-School Sales Bust
Please consider Back-to-School Shopping Bust Heralds Holiday Woes
In an ominous sign for the holiday shopping season, American consumers behaved like skinflints in August, focusing on bare necessities and budget-priced deals as they made back-to-school purchases.Shoppers spent slightly more last month than they had the year before, according to MasterCard Advisors, which crunches data from credit cards, checks and cash payments to form sales estimates. But in nearly every category, the sales numbers were far short of 2008 levels, indicating the economic recovery remains sluggish.
Indeed, an index of consumer confidence released Tuesday by the Conference Board, a private research group, rose just 2.5 points in August, to 53.5.
And a Gallup Poll of consumers’ self-reported spending in August showed that consumers estimated they spent $65 a day, less than in June and July and roughly the same as in August 2009. The estimates, released Tuesday, included restaurant and gasoline purchases as well as items like clothing.
Total clothing sales rose 2.6% in August from a year earlier, MasterCard said, but they were buoyed by an 8.4% jump in children’s wear. Sales of men’s clothing fell 1.9% and women’s clothing fell 2.7%, suggesting that parents were forgoing purchases for themselves. Clothes sales were still off 2.3% compared with two years ago.
The story was similar in electronics, where sales rose a modest 2.3% from the year before but were down 9.9% from two years ago.
Luxury retailing saw a 1% sales drop in August and remained 13.8% below the same month in 2008, according to the MasterCard figures, which are set to be released Wednesday.
The back-to-school shopping season is second in importance only to the holidays for American retailers and often serves as a harbinger. If so, retail experts predict increased price competition this Christmas.
I see no reason for consumer spending or consumer confidence to rise in a meaningful way, anytime soon.
Moreover, those Gallup economic confidence numbers, as they sit now, are indicative of a Democratic blowup in the Autumn elections. Thus, I expect Republicans will win the house and pickup seats in the Senate in the November midterm elections.
Finally, those weak sales numbers, even if they stabilize will continue to pressure states in desperate need to get tax revenue back up to 2007 levels. It’s not going to happen and states will be forced into additional huge cutbacks in public union wages, employment, pension benefits, or all three.
Mike “Mish” Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List
Mid-range South African property prices continued to rise on a year-on-year basis in July, increasing by 7.6 per cent, according to figures from the Absa House Price Index.
However, the rate of growth was at a slower pace than in previous months, suggesting that prices may be reaching their peak after a 7.7 per cent rise in June.
Year-on-year growth in value for large properties also rose by 4.7 per cent, following growth of 5.5 per cent in June.
According to the bank, house price growth in South Africa is likely to slow in the later months of the year as interest rates are expected to stay static.
"Year-on-year house price growth is forecast to slow down further in the months towards year-end, largely driven by the base effect of a recovery in property prices in the second half of 2009. Real house price growth in the rest of the year will be determined by nominal price trends as well as the course of consumer price inflation," it stated.
In June, data from the Lew Geffen Sotheby’s International Realty website highlighted that British and European property investors’ interest in South Africa remains strong, with traffic from UK residents to the site increasing 23 per cent.
Brits retiring abroad are increasingly looking to try a new way of life rather than moving straight to an expat community, which could benefit investors with property overseas.
Research by NatWest International Personal Banking found that moving abroad is still a popular choice with retirees, with western European nations such as Spain and France and long-haul destinations such as Australia and the US remaining firm favourites.
According to the study, 92 per cent of retirees living abroad do not live in an established expatriate community, while over half (56 per cent) of those that do live in such an area did not consider it to be a determining factor when choosing where to set up home.
Dave Isley, head of NatWest International Personal Banking, said: "Looking at retirees who decide to move abroad, it is enlightening that 92 per cent of expats chose not to retire to a designated expat community. This seems to emphasise the notion that expats have retained a sense of adventure, they really do want to start afresh and experience life as a local rather than settle with other expats."
Recent research by Aon Consulting highlighted that over half of Brits hope to retire abroad.
Property in Scotland is cheaper than the rest of the UK, according to ESPC.
David Marshall, a business analyst at the firm, said that the average house price in Scotland is generally lower than in other parts of the UK, and has been for years.
"Scotland has always been comparatively affordable compared to the rest of the UK, but that isn’t uniform across the board. There are areas where average house prices in Scotland are much higher than the UK average," he added.
Mr Marshall’s comments follow data from Lloyds TSB Scotland’s latest Scottish House Price Monitor, which highlighted that the nation’s housing market’s recovery from the recession has currently paused.
On an annual underlying basis, house prices in Scotland have increased 0.8 per cent, however, in the three months to July 31st 2010, the quarterly price index for the average domestic property in Scotland fell 2.9 per cent on the previous quarter.
The average price of a Scottish property now stands at £159,217.
This piece from FT analyzes how the Pakistan floods have caused setbacks in Pakistan’s economy and domestic and foreign policy.
In the gap between Washington’s and Jerusalem’s views of Iran lies the question: who, if anyone, will stop Iran before it goes nuclear, and how? As Washington and Jerusalem study each other intensely, here’s an inside look at the strategic calculations on both sides–and at how, if things remain on the current course, an Israeli air strike will unfold.
Washington has for decades relied on limited military force to achieve political objectives abroad. In a new book, CFR’s Micah Zenko argues these tactics, while politically popular, rarely achieve their aims.
I am traveling this morning will look at ISM and other data this afternoon. Meanwhile here a a few quick hits on propriety trading, bizarre charts of robo trader patterns, walking away from boats, Blogger fees in Philadelphia, birth rate demographics, and other potpourri.
JPMorgan to Shut Proprietary Trading Unit over Volcker Rule
Bloomberg Reports JPMorgan Said to Shut Proprietary Trading to Meet Volcker Rule
JPMorgan Chase & Co., the second- largest U.S. lender by assets, told traders who bet on commodities for the firm’s account that their unit will be closed as the company begins to shut down all its proprietary trading, according to a person briefed on the matter.The bank eventually will end all proprietary trading to comply with new curbs on investment banks, said the person, who asked not to be identified because JPMorgan’s decision isn’t public. The New York-based bank will shut proprietary trading in fixed-income and equities later, the person said.
Closing the prop trading desk for commodities affects fewer than 20 traders, including one in the U.S. and the rest in the U.K., the person said.
This is a baby step in the right direction.
Developer Sells Zero of 141 Luxury Condos
The Press Enterprise reports Lack of sales spurs developer to lease
After two months of marketing his 141 luxury condos with not one sale, Mark Rubin said he has given up wooing buyers to the Raincross Promenade project in downtown Riverside that cost him $40 million to build.Prospective buyers kept trying to beat down his prices, even after he shaved $30,000 off the initial list prices ranging from $240,000 for a one-bedroom, one-bath condominium to $475,000 for a two bedroom, 2 ½-bath townhouse. “There were no sales,” Rubin said. “Everyone wants a bargain. They read about foreclosures and think they can buy for distress prices.”
Rubin paid cash for the property and is now looking to lease units.
Walking Away From Boats
The USA Today reports Abandoned boats litter waters in tough economy
States across the USA are taking steps to deal with an armada of derelict boats abandoned by their owners in a tough economy:In Massachusetts,Democratic Gov. Deval Patrick signed a bill this month that gave local governments the power to seize abandoned vessels. The problem was growing faster than the state’s ability to deal with it, says Michael Nichols, legal counsel to Democratic state Rep. Antonio Cabral, who introduced the bill.
“The recession was affecting people’s ability to keep and maintain a boat,” Nichols says. “To have abandoned vessels taking up valuable space in the marinas and harbors was a problem.”
Fines for abandoning boats in state waters vary. In Massachusetts, it’s $10,000. In South Carolina: $475.
In the San Francisco Bay Area, as many boats were reported abandoned by the Coast Guard in the first quarter of 2009 as in all of 2008, says Deb Self, executive director of San Francisco Baykeeper, an environmental group. The number of eyesores, many of them leaking fuel and chemicals, continued to grow this year, from 64 in February to 76 this month, even after 12 boats were hauled away, Self says.
Twelve states, including Kansas, Missouri and Tennessee, have passed laws on abandoned boats in the past five years, according to the National Conference of State Legislatures. Most streamline the process of taking title and disposing of boats when owners cannot be found.
If you are going to walk away from your boat, do it in South Carolina, not Massachusetts which has a $10,000 fine. Better yet, donate the thing or haul it to the dump.
Birth Rate Drops Second Year
Physorg reports Recession may have pushed US birth rate to new low
The U.S. birth rate has dropped for the second year in a row, and experts think the wrenching recession led many people to put off having children. The 2009 birth rate also set a record: lowest in a century.Births fell 2.7 percent last year even as the population grew, numbers released Friday by the National Center for Health Statistics show. “It’s a good-sized decline for one year. Every month is showing a decline from the year before,” said Stephanie Ventura, the demographer who oversaw the report.
The birth rate, which takes into account changes in the population, fell to 13.5 births for every 1,000 people last year. That’s down from 14.3 in 2007 and way down from 30 in 1909, when it was common for people to have big families.
“It doesn’t matter how you look at it - fertility has declined,” Ventura said.
The situation is a striking turnabout from 2007, when more babies were born in the United States than any other year in the nation’s history. The recession began that fall, dragging stocks, jobs and births down.
The US looks more Japanese every month.
Philadelphia Imposes $300 Blogger License Fee
The Washington Examiner reports Philly requiring bloggers to pay $300 for a business license
Between her blog and infrequent contributions to ehow.com, over the last few years she says she’s made about $50. To [Marilyn] Bess, her website is a hobby. To the city of Philadelphia, it’s a potential moneymaker, and the city wants its cut.In May, the city sent Bess a letter demanding that she pay $300, the price of a business privilege license.
“The real kick in the pants is that I don’t even have a full-time job, so for the city to tell me to pony up $300 for a business privilege license, pay wage tax, business privilege tax, net profits tax on a handful of money is outrageous,” Bess says.
When Bess pressed her case to officials with the city’s now-closed tax amnesty program, she says, “I was told to hire an accountant.”
To say that these kinds of draconian measures are detrimental to the public discourse would be an understatement.
The Broad Street Hockey Blog comments on City of Philadelphia Charging Bloggers
City Hall wants your money. A lot of it.We don’t get into politics on this blog often. In fact, I don’t believe we ever have. This, however, is an issue that could directly impact this blog and, honestly, any one of you.
When I started blogging two years ago, I wouldn’t have been able to afford a $300 fee. Yet at the same time, I needed to keep ads on my pre-SBN site to earn enough to cover the server costs and the domain registration. None of the money went into my pocket. It wasn’t a lot of money and the small ads were enough to cover costs, but without them, I wouldn’t have been able to run the site.
By enforcing this law on bloggers who make little-to-no-money off of their sites, the City of Philadelphia is robbing its citizens of the opportunity to create. It’s robbing them — and the city itself, really — at a change to innovate.
Philadelphia is amazingly desperate. Any city that would take this action is clearly in deep trouble.
401K withdrawals spike
CNN Money reports 401(k) Withdrawals Spike
Hardship withdrawals from 401(k) retirement saving plans rose to the highest level in 10 years during the second quarter, Fidelity Investments said on Friday, in the latest sign of a dismal economy.Fidelity reported that, as of the second quarter, 2.2% of all 401(k) participants had made a hardship withdrawal at some point over the preceding 12 months. That’s up from 2% in the prior year, and was the highest level in 10 years.
At the same time, the percentage of 401(k) participants that had an outstanding loan from their account rose to a record high of 22% in the second quarter. The average loan amount was $8,650 at the end of the quarter.
Borrowing against IRAs to meet unsustainable lifestyles or to pay mortgages on underwater homes are both horrendous ideas.
Market Data Firm Spots the Tracks of Bizarre Robot Traders
The Atlantic says Market Data Firm Spots the Tracks of Bizarre Robot Traders
Mysterious and possibly nefarious trading algorithms are operating every minute of every day in the nation’s stock exchanges.
What they do doesn’t show up in Google Finance, let alone in the pages of the Wall Street Journal. No one really knows how they operate or why. But over the past few weeks, Nanex, a data services firm has dragged some of the odder algorithm specimens into the light.
No matter why the bots end up executing these behaviors, the Nanex charts offer a window onto a kind of market behavior that’s fascinating and oddly beautiful. And we may never have seen them, if not for the mildly obsessive behavior of one dedicated nerd.
“Who looks at millisecond charts?” Donovan said. “You’d never see those patterns in any other fashion. The SEC and CFTC certainly weren’t.”
Here are a few more bots at work with explanations of what’s going on.
Here we see a “flag repeater” being executed on the BATS Exchange, the third-largest equity market after the NYSE and NASDAQ. 15,000 quote requests were made in 11 seconds in a repeating pattern. Each iteration upped the quote a penny until $9.36, and then the algorithm went down the same way, a penny at a time.
This chart shows a different kind of strategy. It represents 56,000 quotes in one second all at the same price (the top chart) but with the size of the order increasing by one (i.e. 100 shares) all the way up to 40,000.
There are several other interesting patterns in the article, some with explanations of what they mean. Does anyone think this serves an legitimate purpose? If so what purpose?
Mike “Mish” Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List
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