I've (Real Retail Sales) Fallen And Cannot Get Up

The real up trend in retail sales broke in 2007. For lack of a better description, they have fallen and cannot get up since 1999. This trend, reflective of waning demand, deteriorating credit creation, and currency devaluation, cannot be repaired by stimulus or QE.

S&P Retail Index (Retail) to Gold Ratio:


Headline: Survey Says: Holiday Spending Beats Expectations

It was more like Black Weekend, according to a National Retail Federation survey conducted by BIGresearch. Instead of a one-day shopping spree the Friday after Thanksgiving, 212 million shoppers visited stores and websites on Black Friday weekend, up from 195 million last year. More good news: The average shopper spent $365.34, up from last year's $343.31. Total spending was estimated at $45 billion.

Source: smallbusiness.aol.com

Nobel-winning author laments effects of Internet

The Internet, the medium, neither advances nor slows an individual, a society or culture. It is the ability to challenge information within the media, transpose it into knowledge, the drives the world.

Has this ability diminished in the age of the Internet? The 'banalization' of society as characterized by Llosa is more likely a perception based on speed, frequency and quantity in which information is transmitted.

The knowledge (from masters within their craft) that shapes technology, society, and culture still exists. Perhaps their collective 'voices' are harder to hear over the "noise" of information provide by the Internet.

Jesse Livermoore said it best,

A man must believe in himself and his judgment if he expect to make a living at this game. That is why I don't believe in tips. If I by stocks on Smith's tip I must sell those stocks on Smith's tip. I am depending on him. Suppose Smith is away on holiday when the selling time comes around? No, sir, nobody can make big money on what someone else tell him to do.

An individual that seeks information rather than discovery of knowledge will struggle to profitable. Taken in the whole, this lack of profitability will influence the direction of the society and culture.

Nobel literature laureate Mario Vargas Llosa on Monday lashed out against today's fast-paced information society, saying it limits peoples' depth of thinking and is a major problem for culture.

The Peruvian author blamed the entertainment industry for creating what he calls a culture of "banalization, frivolization and superficiality."

Source: finance.yahoo.com

You Won't Make A Dime Chasing the Headlines

Following the lead of QE to infinity, so it will be.

Headline: EU rescue fund should be increased: Belgian finance minister

The European Union's permanent rescue fund should be larger than the money available currently and the increase could be made before 2013, Belgian Finance Minister Didier Reynders said on Saturday.

Source: reuters.com

Headlines “explanations” while often quite entertaining are basically useless. You won’t make a dime chasing the headlines. Follow the money for the real news.

The short Euro "play" is progressing nicely.

Euro and the Commercial Traders COT Futures and Options Stochastic Weighted Average of Net Long As A % of Open Interest:


It's termination, which again will surprise most, will be foreshadowed in the U.S. dollar market.

U.S. Dollar Index and the Commercial Traders COT Futures and Options Stochastic Weighted Average of Net Long As A % of Open Interest


Gold and silver will be flying when the money flows in the dollar turn. Not much else to add.

Bernanke on 60 Minutes: Doesn't rule out QE3

Speculation about Q3 is already underway. QE to infinity, interpreted as whatever it takes, begins to reveal itself in full view to the public

NEW YORK (CNNMoney.com) -- Federal Reserve Chairman Ben Bernanke this Sunday will make his second appearance on 60 Minutes, defending the central bank's controversial $600 billion bond buying program.

And he doesn't rule out the possibility that more could be on the way.

He explains why the Fed announced its intention to buy $600 billion in Treasury securities, defending against charges the move will lead to inflation and not ruling out the purchase of more," CBS said Friday.

Source: money.cnn.com

The Weimar Experience Can't Happen Here, Right?

The headlines tend to suggest that the Fed's $9 trillion bailout has been motivated by the restoration of the employment picture. This is not so. The bailout has been motivated by social consequences related to the cascading defaults within OTC derivative markets. Make no mistake; this is the motivating factor behind Fed policies. But what are the risks to quantitative easing (QE) to infinity?

An understanding or life during periods of aggressive currency devaluation comes from either present or past experience. It is the past experiences that if studied objectively allow people to prepare, survive, and profit. A difficult to find, and out of print book entitled The Penniless Billionaires (1980), reviews some of history's worst hyperinflations.

An excerpt published on coinflation.com provides a past life experience from an individual living within the Weimar Republic. We often cite and discuss the Weimar experience as a model for hyperinflation, but rarely provide faces or "stories" of life within to extricate us from denial.

One of the better anecdotes from the book is below, and it introduces the chapter on the Weimar hyperinflation (from page 170):


CHAPTER FIVE
The German Hyperinflation, 1922-1923

In the autumn of 1923, Lott Hendlich, a German widow in her fifties, returned to her native Frankfurt after an absence of more than four years in Switzerland. In 1919 she had gone to spend a few pleasant weeks in a Swiss village where her relatives lived. But almost immediately, Frau Hendlich broke her hip in a fall. During her long convalescence her chronic cough became worse, and the doctor attending her advised her that she was suffering from advanced tuberculosis. The months and years of her illness dragged on interminably even though her relatives were genuinely solicitous (they insisted on defraying all her expenses, including the fees of her doctor). At last, in September 1923, she was "cured" and considered well enough to return home. Her much longed-for homecoming soon became a nightmare.

In the stack of accumulated mail she found three letters from her bank; they delineated her ruin. The first–written in mid-1920 by a minor bank officer who had befriended her–advised her "to invest most of the funds in your rather substantial bank account" (amounting to over 600,000 marks, or the equivalent of more than $70,000 at the exchange rate prevailing in 1919). "It is my judgment," the writer continued, "that the purchasing power of the mark will decline, and I suggest you try to guard against this through some suitable investment which we can discuss when you come into the bank."

The next letter, dated in September 1922, and signed by another officer said, "It is no longer profitable for us to service such a small account as yours. Will you kindly withdraw your funds at the earliest opportunity?"

The third letter, dated several weeks before her return from Switzerland, announced, "Not having heard from you since our last communication, we have closed out your account. Since we no longer have on hand any small-denomination bank notes, we herein enclose a note for one million marks."

With gathering panic Frau Hendlich looked at the envelope that had contained the letter and the million-mark note. She noticed that affixed to it there was a canceled postage stamp of one million marks. Her bank account–which four years before seemed large enough to provide her with a serene existence to the end of her days–had been utterly consumed by inflation and could no longer pay for an ordinary postage stamp.

Headline: Who Needs Jobs When Wall Street Has the Fed?

Pay no attention to those 15.1 million unemployed people-Wall Street instead is more focused on the man behind the Fed curtain and what he'll be doing to fire up the equity markets.

Friday's significantly disappointing jobs report, which under normal circumstances would have sparked a significant selloff in the stock market, instead was greeted only with more expectations that Federal Reserve Chairman Ben Bernanke will continue aggressive monetary easing policies.

Source: finance.yahoo.com

Employment Report - Disinformation at its Finest

A brief exchange this morning, I found myself characterizing the employment report as disinformation at it's finest. It’s not so much that spinsters were pressing hard to massage today’s headline number into something it's not but rather how data has been progressively “managed” to convey the right message. Anyone that crunches government data knows what I mean.

John Williams, the man behind shadowstats.com and what Jim's calls a must have service, reveals how techniques such as ignoring discouraged workers and the use of the birth/death model to selectively ‘nudge’ the employment series over time. Part two of five part commentary series discusses the implications of some of these techniques.

Today’s employment data boils down into two important observations.

First, the job creation during the economic expansion has been unable to match the labor force demand on an annual basis. That is, the jobs creation has lagged the labor force expansion. This in part explains why the unemployment rate, significantly understated due statistical techniques, continues to rise despite the positive headline number. The under performance of job creation relative to labor is revealed by subzero reading in the job creation histogram below.

Job Creation Histogram (JCH): Net Nonfarm Payrolls Added/(Lost) less Civilian Labor Force Added/(Lost), 12 Month Average:


Second, the birth/model, which calculation frequency will be modified starting January 2011*, continues to dominate job creation in 2010. Like 2004, 2010 represents another liquidity injection phase – quantitative easing part 2. Over 1.9 million jobs were created from January to November 2004. The birth/death model (estimating algorithm) accounted for nearly 40% of these jobs. By comparison, only 950 thousand jobs have been created over the same period in 2010. Here’s the disturbing part, over 50% of those jobs were estimated by the birth/death model. Not only is job creation weaker but also more heavily dependent on statistical techniques to create them. This is not a good sign.

Birth/Death Model (BDM) Contribution to Nonfarm Net Payrolls (NFP) Added/(Lost):


-------

* Upcoming Changes to Establishment Survey Data

Effective with the release of January 2011 data on February 4, 2011, the
establishment survey will begin estimating net business birth/death ad-
justment factors on a quarterly basis, replacing the current practice of
estimating the factors annually. This will allow the establishment sur-
vey to incorporate information from the Quarterly Census of Employment
and Wages into the birth/death adjustment factors as soon as it becomes

Headline: U.S. Payroll Gains Trail Forecasts; Unemployment Rises

Employers added fewer jobs than forecast in November and the unemployment rate rose to 9.8 percent, pointing to economic weakness that’s likely to keep the Federal Reserve pumping money into the financial system.

Payrolls increased 39,000, less than the most pessimistic projection of economists surveyed by Bloomberg News, after a revised 172,000 increase the prior month, Labor Department figures showed today in Washington. The jobless rate rose to a seven-month high, while hours worked and earnings stagnated.

Source: bloomberg.com

HK gold market hit by sophisticated scam

Buyer beware as the price of gold continues to climb.

Industry executives say the scam – while not massive and hitting only the retail sector – uncloaks the increasingly elaborate gold swindles perpetrated by criminals in Asia as bullion prices soar to record highs of $1,400 a troy ounce.

“It’s a very good fake,” said Haywood Cheung, president of the Chinese Gold & Silver Exchange Society, Hong Kong’s century-old gold exchange, highlighting how criminals are developing new techniques to commit an age-old fraud.

Source: ft.com