Thursday, April 19, 2012

Today's links

1--Tax-Oriented Inflows Helping Stock Prices, Trimtabs

Excerpt: Historically stocks go up more in the second half of April then they went down in the first half of the month.

Overall April historically is either the best or second best month for stock prices. If April is the first or second best month for stocks, and if stocks are weak to start the month because of tax selling, then inflows the second half of the month have to be much bigger than the outflows. And where does the second half inflow come from? Tax oriented investments.

What the taxman taketh from the markets the tax man also giveth. If April is the best performing month for stocks than overall more money has to be going into equities than leaving to pay taxes. By today tax day billions of dollars will have flowed into tax oriented accounts. Between now and the end of the month almost all that money will be used to buy stocks, bonds and gold.

That is why I am bullish for the next two weeks. After that, everything else being equal in my opinion I expect the market to do the same this year as it did in 2000, 2010 and 2011, which is to top out by the end of this month or the start of May and then sell off sharply.

2--Sowing Seeds of the Next Major Crisis, WSJ

Excerpt: recent times, that seemingly infinite set of variables has been reduced to one: whether governments and central banks will step in again to help sluggish growth and a patched-up banking system.
The result is a bipolar market: up when the whiff of government intervention is strong, down when it recedes. Last week's roller coaster by the Dow Jones Industrial Average was a case in point.

The blue-chip gauge plunged in the first half of the week as investors felt central banks weren't going to do much in response to bad economic news in the U.S. and a poor sale of government bonds in Spain, only to recover later on dovish comments by Federal Reserve officials.
But the scariest unintended consequence is how investors are reacting to the low-interest-rate world fostered by government intervention.

Financial actors, from pension funds to households, are searching far and wide for "yield," that elusive rate of return that beats the paltry interest paid by Treasurys. Their quest has taken them to some of the least salubrious areas of financial markets: "junk" bonds, strange securitizations, peer-to-peer lending and "structured products."

These moves are entirely rational and none has, by itself, the potential to blow up the financial edifice. But their rising popularity has the collective effect of building up largely undetected and unknown risks within the system.

As Adam Smith's "invisible hand" is replaced by the all-too-visible government purse, this unwitting experiment in state-influenced capital markets may be sowing the seeds of the next crisis.

3--More Structural Change, Changes the Dynamic, The Big Picture

Excerpt: Housing in the New Millennium: A Home Without Equity isJust a Rental With Debt”- Graham Fisher & Co. (June 2001) charts, charts, charts

4--Does Expansionary Monetary Policy Primarily Benefit Finance and Rentiers?, Rortybomb

Excerpt: The stock market is following unemployment claims pretty closely, so it isn’t clear to me that the stock market is broken from its function as a prediction of future economic activity (i.e. in a bubble). I like two MIT economists arguing that we should disconnect stock prices from the real economy, but I think that requires an additional layer of explanation. For instance, if monetary policy was constant and we passed another round of deficit-funded fiscal stimulus to rebuild infrastructure and employ people, I would expect the stock market to increase because the economy would be stronger.

If that’s the case, that there’s two financial sectors and one of them benefits from monetary expansion we have to ask – so what? If monetary policy is working, and bringing us closer to full employment, and some hedge funds and Wall Street traders make some money off of it, why should that impact our commitment to using all levers for full employment?

Monetary policy is not a morality play, and it’s not about rewarding the good people and punishing the bad ones. It’s about stabilizing growth, prices and maximum employment without overheating the system or letting it choke to death from a lack of oxygen.

5--Spain’s Surging Bad Loans Cast New Doubts on Bank Cleanup, Bloomberg

Excerpt: Spain’s surging bad loans are spurring doubt on whether the government can persuade investors that it can clean up the country’s banks without further damaging public finances.

Non-performing loans as a proportion of total lending jumped to 8.16 percent in February, the highest level since 1994, from less than 1 percent in 2007, according to Bank of Spain data published today. The ratio rose from 7.91 percent in January as 3.8 billion euros of loans soured in February, a 110 percent increase from the same month a year ago. That takes the total credit in the economy that the regulator lists as “doubtful” to 143.8 billion euros.

Defaults are rising and credit is shrinking at a record pace as 24 percent unemployment corrodes the quality of loans built up in the country’s credit boom and saps the appetite of banks to make new ones. Doubts about the extent of Spain’s non- performing loans problem is hurting bank stocks and driving up the government’s borrowing costs on investor concern that the expense of propping up ailing lenders may add to the debt burden.

“One of our concerns in Spain is to what extent contingent liabilities could pass to the central government,” said Andrew Bosomworth, Pacific Investment Management Co.’s Munich-based head of portfolio management. Non-performing loans “will have to rise when you take into account the unemployment rate and what’s happening with the economy,” he said.

6--Weidmann says not ECB job to tackle Spain's problems, Reuters

Excerpt: Spain should take a rise in its bond yields as a spur to tackle the root causes of its debt woes, not look to the European Central Bank to help by buying its bonds, European Central Bank policymaker Jens Weidmann told Reuters.

Weidmann, who has led a push by some policymakers from core euro zone countries for the bank to begin planning an exit from its crisis mode, said no ECB policymakers favored using the bank's bond-buying plan to target specific interest rates on sovereign bonds, and ECB board member Benoit Coeure was simply stating a fact by saying last week that the program still existed....

"We shouldn't always proclaim the end of the world if a country's long-term interest rates temporarily go above 6 percent," he said.

"That is also a spur for policymakers in the countries concerned to do their homework and to win back (market) confidence through the pursuit of the reform path."

A rise in Spain's bond yields above 6 percent has raised concerns about a march up to 7 percent, a level beyond which debt-servicing costs are widely deemed unsustainable.

7--IMF Says European Banks May Have to Sell $3.8 Trillion in Assets,  Bloomberg

Excerpt: European banks could be forced to sell as much as $3.8 trillion in assets through 2013 and curb lending if governments fall short of their pledges to stem the sovereign debt crisis or face a shock their firewall can’t contain, the International Monetary Fund said....

So far, deleveraging has occurred predominantly through buttressing capital positions and reducing non-core activities, leaving the impact on the rest of the world manageable,” the IMF said in its Global Financial Stability Report released today. “It is essential to continue to avoid a synchronized, large-scale, and aggressive trimming of balance sheets that could do serious damage to asset prices, credit supply, and economic activity in Europe and beyond.”

The Washington-based IMF sees a resurgence of Europe’s debt turmoil as the biggest threat to global growth even after steps taken by governments and the European Central Bank helped ease tensions in financial markets. The challenge for policy makers is to make sure banks keep lending to companies and individuals even as they boost capital to comply with regulators’ requests.

Banks Studied

Banks in the sample studied by the IMF reduced assets by almost $580 billion in the last quarter of 2011, it said.

8--Republicans to slash food stamps, politico

Excerpt: From food stamps to child tax credits and Social Service block grants, House Republicans began rolling out a new wave of domestic budget cuts Monday but less for debt reduction — and more to sustain future Pentagon spending without relying on new taxes.

Going into November’s election, President Barack Obama’s signature health care and financial market reforms are again favorite targets. And with as many as six House committees involved, the whole budget drill can resemble “Casablanca” with Claude Rains’s Captain Renault ordering his men: “Round up the usual suspects!”

But what’s more explicit in this round is the real shift of resources from the domestic side of the ledger to military spending. Caught in the middle are not just Obama’s ideas but the working poor and long-term unemployed forced for the first time to rely on programs like food stamps in the current recession....

But what’s also driving the latest cuts is a newer narrative, voiced by House Budget Committee Chairman Paul Ryan (R-Wis.), that the social safety net is at risk of becoming a “hammock.” And even as the unemployment rate has begun to fall, conservatives are alarmed that the level of income-related government benefits continues to rise.

9--A Huge Student Loan Scam, Salon

Excerpt: The for-profit educational sector is an industry almost entirely subsidized by the federal government. Around 70-80 percent of for-profit revenues are generated by federal student loans. At the same time, judging by sky-high dropout rates, the for-profit schools do a terrible job of educating students. The Obama administration’s efforts to define a credit hour and require state accreditation were motivated by a very understandable desire: to ensure that taxpayers are getting their money’s worth when federal cash pays for a student’s education. In contrast, Foxx’s legislation is designed to remove that taxpayer protection. So here’s a more accurate title for her bill: “The Protecting the Freedom of For-Profit Schools to Suck off the Government Teat Without Any Accountability Whatsoever Act.”

The for-profit educational sector has been growing extraordinarily rapidly for the past decade: 12 percent of all post-secondary students are now enrolled in for-profit schools, up from 3 percent 10 years ago. But the main beneficiaries of the growth appear to be the shareholders and executives of the largest publicly traded for-profit schools, not the students.

In 2008, for-profit schools registered a a graduation rate of 22 percent. (Public and private non-profits registered 55 percent and 65 percent respectively.)

54 percent of the students who enrolled in 2008-2009 in 14 publicly traded for-profit schools had withdrawn without a degree by 2010.

The biggest player in the for-profit sector, the University of Phoenix, graduated only 9 percent of its B.A. candidates within six years.

The pathetic performance of the for-profit sector in delivering actual degrees becomes all the more alarming when you realize that most of the students who are dropping out paid for their educations with student loans that have to be paid back: According to a report released in the summer of 2010 by Sen. Tom Harkin, D-Iowa, “Emerging Risk?: An Overview of Growth, Spending, Student Debt and Unanswered Questions in For-Profit Higher Education,” in 2009, the five largest for-profit schools reported that government grants and loans accounted for 77.4 percent of their revenue...

10--George Soros: eurozone crisis has entered a 'more lethal phase', The Guardian

Excerpt: Europe's financial crisis has taken 'a turn for the worse' and outlines a series of measures to solve it...

Soros, who is chairman of Soros Fund Management - which in 2011 stopped managing money for outside investors - warned that Europe was facing "a long period of economic stagnation or worse" whether or not the euro endures. He also warned that while countries in Latin America suffered a lost decade after their economic crisis in 1982, the European Union would not survive such an economic malaise.
"The deflationary debt trap threatens to destroy a still incomplete political union," he said in an article published in the Financial Times.

While the European Central Bank's injections of large sums of cheap funding into the financial markets through its long-term financing operation (LTRO) helped to prevent a credit crunch, it failed to solve the underlying problems of the eurozone where the gap between the richer countries such as Germany is widening against the indebted nations such as Greece.

"The crisis has entered what may be a less volatile but more lethal phase," Soros said....
He said that the rules of the eurozone need "radical revision" and suggested that all countries be able to refinance their existing debts at the same rate. He acknowleged that the Bundesbank would not accept his ideas but concluded: "The future of Europe is a political issue. It is beyond the Bundesbank's competence to decide".

11--The American working class and the 2012 presidential election, WSWS

Excerpt: With the effective end of the contest for the Republican Party nomination, the 2012 presidential election shapes up as a contest between the Democratic incumbent, Barack Obama, and the Republican former governor of Massachusetts, Mitt Romney.

Working people are being presented with the choice of two right-wing multimillionaire politicians, one of them, Romney, a former investment banker with a personal fortune of a quarter of a billion dollars, and the other, Obama, a proven defender of the financial aristocracy.

Whatever political differences exist between Romney and Obama are limited to matters of a secondary character. The Republicans and Democrats agree on the big issues: continuing and escalating the wars of US imperialism; defending the profits of the giant banks and corporations at the expense of working people; building up the infrastructure of a police state in the name of an open-ended “war on terror.”

The outcome at the ballot box November 6 will be determined, not by the wishes of the American people, but by whether the ruling elite decides to continue to entrust the Obama administration with the defense of its interests or chooses to install a new administration that will introduce certain tactical shifts in policy. The sentiments and views of the people will hardly be involved, under conditions where polls show that the majority of the population looks upon both Obama and Romney with hostility.

US presidential elections have long been dominated by political duplicity and media manipulation. The two parties are both controlled by the financial elite and employ the filthiest methods of corporate marketing to promote their candidates. The entire corrupt framework is aimed at creating the pretense of political choice while exclusively offering alternatives that are acceptable to and vetted by the corporate oligarchy....

The popular illusions created in 2008 in the course of the campaign that installed Obama in the White House have long since been dashed. The major actions of the current administration make clear that the past four years have represented, not a break with the Bush administration, but its continuation.

They include the expansion and extension of the Wall Street bailout, combined with opposition to any program of direct government job-creation or serious relief for the victims of the economic crisis; intervention in the auto industry to restore the companies to profitability by slashing workers’ jobs, wages, pensions and other benefits; intensified attacks on democratic rights, with expanded surveillance and spying, assertion of the “right” of the president to order assassinations, including of American citizens, protection of government torturers, and keeping the Guantanamo gulag open and running; escalation of the war in Afghanistan and Pakistan and new US-backed wars and interventions in Libya, Yemen and Somalia, as well as threats against Syria and Iran.

The fundamental class character of the Obama administration can be illustrated by how its policies have impacted the distribution of income in America. A study by Emmanuel Saez of the University of California at Berkeley found that in the course of 2010, the first full year of “economic recovery” according to the Obama White House, the top one percent of Americans raked in 93 percent of the total increase in national income. The incomes of this top one percent rose 11.6 percent in that year alone, while the incomes of the bottom 90 percent actually declined.

12--Argentina moves to seize control of Repsol's YPF, Reuters

Excerpt: Argentine President Cristina Fernandez unveiled plans on Monday to seize control of leading energy company YPF, drawing swift warnings from key trade partners and risking the country's further economic isolation.

YPF (YPFD.BA), controlled by Spain's Repsol (REP.MC), has been under intense pressure from Fernandez's center-left government to boost production, and its share price has plunged due to months of speculation about a state takeover.

Until recently, YPF had a harmonious relationship with Fernandez, whose increasingly interventionist and off-beat policies infuriate critics. She praised YPF when it found massive resources of shale oil and natural gas in late 2010.

However, a surging fuel import bill has pushed a widening energy shortfall to the top of her agenda at a time of worsening state finances in Latin America's No. 3 economy.

Fernandez said the government would ask Congress, which she controls, to approve a bill to expropriate a controlling 51 percent stake in the company by seizing shares held exclusively by Repsol, saying energy was a "vital resource".

If this policy continues - draining fields dry, no exploration and practically no investment - the country will end up having no viable future, not because of a lack of resources but because of business policies," she said.

13--Financial markets demand deep cuts following French presidential election, WSWS

Excerpt: In the run-up to the first round of the French presidential elections April 22, international financial markets are preparing to step up pressure for social cuts once a new government is sworn in.

On Saturday various media reported that Eurex, a subsidiary of the German stock exchange, is about to launch a new futures contract on French government bonds on April 16. The bonds would allow financial markets to speculate on France’s insolvency.

Marco Fiorentino, a millionaire banker and columnist for La Tribune, described the new financial instrument as “an ideal weapon against France.” He writes that it is now possible “for nearly everybody to buy or sell short French state bonds—and this with a leverage factor of 20. That is to say with 50,000 euros it is possible to sell short one million euros of French bonds.”

The Thomas More Institute, a Paris-based think-tank, writes: “For the first time, a presidential election takes place under the surveillance of the markets. The next president will have no margin for manoeuvre.”

The two leading presidential candidates, the incumbent conservative president Nicolas Sarkozy and Socialist Party (PS) candidate Fran├žois Hollande, have made clear that they intend to implement the austerity measures demanded by the banks....

Both candidates have vowed to reduce France's deficit to zero if elected—with the only difference being that Sarkozy declared that he aimed to do so by 2016, as opposed to Hollande’s goal of 2017....

France, the second largest economy in Europe after Germany, is increasingly in the crosshairs of the international financial markets. France's annual debt is approaching 90 per cent of gross domestic product (GDP), and the bankers insist that too high a proportion of France’s GDP goes to public spending. The financial elites believe that money spent on education, health care, social security, infrastructure, etc., should go directly in their pockets...

At the behest of the troika—the European Central Bank (ECB), the IMF and the World Bank—the Greek ruling elite slashed wages 30-50 per cent, cut unemployment benefits 22 per cent and laid off tens of thousands of workers. With the Greek economy now in its fifth year of recession because of the austerity measures, over half of Greek youth are unemployed, and the official unemployment rate stands at 21 percent. The suicide rate has doubled in the last two years. Is this the future for France?

14--Credit: A Starring Role in the Downturn, FRBSF

Excerpt: Credit is a perennial understudy in models of the economy. But it became the protagonist in the Great Recession, reviving a role it had not played since the Great Depression. In fact, the central part played by credit in the downturn and weak recovery of recent years is not unusual. A study of 14 advanced economies over the past 140 years shows that financial crises have frequently led to severe and prolonged recessions. Shining the spotlight on credit turns out to be crucial in understanding recent economic events and the outlook.

From the Great Depression until the fall of Lehman Brothers, the United States did not experience any large-scale systemic banking crises. Modern macroeconomic models generally omitted banks and finance. But that did not seem to be a problem as long as the financial sector remained reasonably stable. In the waning years of the 20th century, there was ample support for such models. In the United States, output grew 4% annually, inflation ran about 2%, and unemployment was around 4%.

The Great Recession upended this paradigm. Attention has focused once again on leverage and excess credit—the “Achilles’ heel of capitalism,” in the words of James Tobin’s (1989) review of Hyman Minsky’s book Stabilizing the Unstable Economy. Of course, this was not the first such rude awakening. Economic history is replete with financial crises that force economists to relearn the role that credit plays in their genesis and aftermath. This Economic Letter reaches back 140 years, examining the experiences of 14 advanced countries, to document the enduring influence of credit in the economic fortunes of nations. Credit is critical to correctly understanding current economic events. The Great Recession broke the mold cast in the typical post-World War II downturn. The recovery appears to be following a different model as well.

The march of economic history is punctuated by a few landmark events. One worth highlighting is the dramatic explosion of credit that followed World War II. Schularick and Taylor (2012) show that, up until then, real private lending had grown apace with economic activity. After World War II, and especially when the Bretton Woods international monetary system broke down in the early 1970s, credit grew at about twice the rate of output. The outsized role played by the financial sector in the past few decades has become a focus of controversy in studies of the recent crisis and the post-crisis period.

A cursory review of the 2008 global financial crisis lends support to the notion that excess credit was the culprit....

It is difficult to separate cause and effect. Does faster credit formation lead to faster growth or is it the other way around? Even assuming credit facilitates growth, are these gains enough to compensate for deeper recessions and the occasional financial crisis? Let’s first consider the type of recession that follows a credit binge.

Credit and the bust

Is the intensity of credit creation in the expansion phase systematically related to the severity of the subsequent recession? And is there a difference between how credit behaves in an ordinary recession versus how it performs in a recession associated with a financial crisis? The answers to both questions appear to be yes, and therein lie the lessons that can inform the economic outlook.

Broadly speaking, in a financial crisis, a large fraction of banking system capital becomes depleted. However, directly measuring such an effect can be difficult. An alternative is to look at the responses to capital depletion...

Today employment is about 10% and investment 30% below where they were on average at similar points after other postwar recession...

Any forecast that assumes the recovery from the Great Recession will resemble previous post-World War II recoveries runs the risk of overstating future economic growth, lending activity, interest rates, investment, and inflation. The data suggest that, this time around, credit cannot be considered a secondary effect. The interaction between the financial system and the real economy remains a weak spot of modern macroeconomic modeling. A careful analysis of 14 advanced economies over 140 years—data that extend far beyond the narrow post-World War II experience of the United States—reveals that the role of credit is sometimes central to understanding the business cycle.

15--Big Ooops, rivast blog

Excerpt: Two years after President Barack Obama vowed to eliminate the danger of financial institutions becoming “too big to fail,” the nation’s largest banks are bigger than they were before the credit crisis.
Five banks — JPMorgan Chase & Co. (JPM), Bank of America Corp., Citigroup Inc., Wells Fargo & Co., and Goldman Sachs Group Inc. — held $8.5 trillion in assets at the end of 2011, equal to 56 percent of the U.S. economy, according to the Federal Reserve.

Five years earlier, before the financial crisis, the largest banks’ assets amounted to 43 percent of U.S. output.

16--Inequality still growing in US, NY Times

Excerpt: As much as Mr. Piketty’s and Mr. Saez’s work has informed the national debate over earnings and fairness, their proposed corrective remains far outside the bounds of polite political conversation: much, much higher top marginal tax rates on the rich, up to 50 percent, or 70 percent or even 90 percent, from the current top rate of 35 percent.

The two economists argue that even Democrats’ boldest plan to increase taxes on the wealthy — the Buffett Rule, a 30 percent minimum tax on earnings over $1 million — would do little to reverse the rich’s gains. Many of the Republican tax proposals on the table might increase income inequality, at least in the short term, according to William G. Gale of the Tax Policy Center and many other left-leaning and centrist economists.
Conservatives respond that high tax rates would stifle economic growth, at a minimum, and cause some businesses and high-income workers to flee to other countries. When top American tax rates were much higher, from the 1940s through the 1970s, businesses could not relocate as easily as they can now, say critics of Mr. Piketty and Mr. Saez.

“I materially disagree with the idea you can raise a marginal tax rate to 70 percent and not have an impact on economic growth,” said Ike Brannon, an economist at the American Action Forum. “It’s absurd on its face.”
But Mr. Piketty and Mr. Saez argue that history is on their side: Many countries have higher tax rates — and the United States has had higher tax rates — without stifling growth or encouraging the concentration of income in the hands of the very rich.

“In a way, the United States is becoming like Old Europe, which is very strange in historical perspective,” Mr. Piketty said. “The United States used to be very egalitarian, not just in spirit but in actuality. Inequality of wealth and income used to be much larger in France. And very high taxes on the very rich — that was invented in the United States,” he said.

Mr. Saez added, “Absent drastic policy changes, I doubt that income inequality will decline on its own.” ...
As in other industrially advanced countries, income inequality in the United States fell after World War II, a period that economic historians call the “Great Compression,” and remained stable through much of the 1970s.

But then inequality started increasing again, with the top 1 percent of earners drawing a bigger and bigger share of overall income. Their graph showing the trend became well-known: a deep U, with inequality as acute today as it was just before the depression.

When they first published their work, income inequality was mostly off the political radar screen, thanks to the 1990s boom, Mr. Saez said.

“Growing inequality was not perceived to be an issue because the economy was growing fast and even the incomes of the 99 percent were growing significantly,” he said.

But the deep downturn of the last few years, and Mr. Obama’s election, brought the issue back to the fore. Peter R. Orszag, the former Obama budget director, has said the Piketty-Saez work “helped to point the way for the administration in its pledge to rebalance the tax code.”

17--More Help for the Wealthy, NY Times

Excerpt: Taxes are never popular, especially in April of an election year. But the Republicans’ latest effort to tilt the tax code in favor of the wealthy, and starve the government of needed revenue, is particularly cynical.
This week, the House Republican leadership is expected to bring up the “Small Business Tax Cut Act,” a bill to let most business owners deduct up to 20 percent of their business income in 2012 — a $46 billion tax cut. Despite the Mom-and-Pop label, it is designed so that nearly half of the tax cut would go to people with annual income over $1 million, and more than four-fifths would go to those making over $200,000, according to the Tax Policy Center.

The bill’s proponents, led by Majority Leader Eric Cantor, say that lower taxes would lead to more hiring. But the economic reality is that employers, big and small, are hesitant to hire because of slow or uncertain demand for their products and services, not because of their tax burden. And companies would receive the tax cut even if they did not hire new workers — making it a windfall, not an incentive....

As for the broader economy, the Congressional Budget Office analyzed 13 policies last year for their potential impact on economic growth and job creation in 2012 and 2013. The option of a business tax cut along the lines of the Cantor bill ranked next to last in bang for the buck. More effective options include fiscal aid to states and increased safety net spending, which create jobs by bolstering consumer demand — and which Republicans fiercely oppose.

Another immediate step Congress could take to create demand and jobs would be for House Republicans to drop their objections and reauthorize the highway bill, at least for two years, as the Senate has done...
The business tax cut for not-so-small businesses will almost certainly pass the House. Senate Democrats have introduced a tax relief bill that is linked specifically to companies hiring new employees. They should stick with that. This doesn’t mean that the tax system doesn’t need fixing. It does. In the Senate this week, the Democratic leadership will make an argument for more fairness, by calling for a vote on the Buffett Rule. It would require the wealthiest taxpayers to pay at least 30 percent of their income in federal taxes and, in the process, raise some $47 billion over 10 years. Republican senators are expected to block the vote. When you mail your taxes this week, think about that.

18--- Ignorance is Bliss Regarding Economic Data, TrimTabs

Excerpt: Ignorance is bliss, particularly when it comes to US government economic data. The latest bad joke occurred this morning when the US Census Bureau said retail sales rose 0.8% in March.

And the financial press reported that 0.8% sales increase as gospel showing once again how totally ignorant the media is when it comes to reporting economic numbers put out by the US government. The AP headline was that US retail sales in March rose 0.8%, helped by job gains. The Wall Street Journal online site reported not only that U.S. retail sales rose 0.8% in March, but also that Americans spent more on autos.

Really? This is garbage reporting of the worst sort. Why? Well first let us look at the actual Census Bureau press release, which is entitled Advanced Monthly Sales for Retail and Food Services March 2012. Lower down the press release explains that the advance estimates are based on a subsample of the Census Bureau’s full retail and food services sample.

What is a subsample? Would you believe in this broadband world that what is reported as a hard fact by the financial media morons, is based upon a mailed, snail mail, survey to 5,000 retailers and the mailed back response?

Let’s see, the US Census Bureau mails surveys to a mere 5,000 retailers and from the responses mailed back guesses at the fraction of a percent change in month to month retail activity. Wow! One would think that the Census people never heard of credit, debit and cash cards. Actual cash is much less than 10% of sales these days and I would rather have all the credit and debit card data than a survey of 5,000 outfits, wouldn’t you? Believe it or not, Master Card and Visa sell their data to the public and I am sure all would give summary data to the government, if asked.

But no, the US government agencies, which also include the Bureau of Labor Statistics and the Bureau of Economic Analysis, in their infinite wisdom ignore available real time data. And what is even more unbelievable is that no one in the financial media – except us that I am aware of – is saying that this data is a bad joke!

The Wall Street Journal online today reported that March retail sales were up in part due to car sales. Car sales? March car sales were reported to be running at just over 14 million annualized, down around 6% from a February sales rate of 15 million. Yet the advanced census bureau estimate showed auto sales rose 1.1% in March? One would think that someone would have said, wait a second, how can the actual new car sales rate be down while the Census Bureau is reporting higher revenues from new vehicle sales?

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