Wednesday, July 29, 2009

The Mother of All Bubbles.....Trouble Ahead.

The Government Bubble is by far going the bubble with the biggest bang when it pops. Total American Government spend is about $6.5 trillion dollars, 50% more than the GDP of China.

Government spend is responsible for over half of all health care dollars, practically all of defense spending, and employs over 20% of the workforce directly and/or indirectly. On balance, those that work for the government make above average incomes. Consequently, government workers' spending contributes significantly to the consumer economy.

Having a $6.5 trillion dollar spend in a $13 trillion dollar economy, once you factor in the multiplier effect, one could say government spending is practically our entire economy as the private economy has contracted.

Up until recently, the private sector was pretty much able to generate enough taxes to support governments seemingly never ending growth. The two worked well together. The private sector generated more and more taxes and government spent more and more driving the private sector.

Nobody took advantage of that relationship more than the Bush/Pelosi era...where government in the U.S. doubled and drove fantastic stimulus into the economy. Instead of balancing the budget when tax receipts flowed in from the credit bubble, they increased the deficit even further by spending trillions of extra dollars mainly on health care and defense.

Now the credit bubble bubble is popping, revenues to government are evaporating, and government must cut back....way back, or else our currency will be worthless. Desperate measures are underway, such as selling off government assets:

Call it a sign of desperate times: Legislators are considering selling the House and Senate buildings where they've conducted state business for more than 50 years.

Dozens of other state properties also may be sold as the state government faces its worst financial crisis in a generation, if not ever. The plan isn't to liquidate state assets, though.

Instead, officials hope to sell the properties and then lease them back over several years before assuming ownership again. The complex financial transaction would allow government services to continue without interruption while giving the state a fast infusion of as much as $735 million, according to Capitol projections.

We as citizens of a nation have an implied contract with our government that we will work in exchange for the Federal Reserve's money as long as the Federal Reserve maintains its obligation to preserve the value of the money.

If the money we were paid was worthless, few of us would be willing or able to work.

Here rests Obama's paradox, cut spending and drive our country into a deep temporary depression, or keep spending and destroy the value of our currency?

For an idea where this may be headed, here is a timely article about Ireland:

Fiscal Ruin of the Western World Beckons

For a glimpse of what awaits Britain, Europe, and America as budget deficits spiral to war-time levels, look at what is happening to the Irish welfare state.

Thursday, July 23, 2009

Americans Giving Up as America Shuts Down....

In some U.S. states, nearly half of the job seekers who have stopped looking for work have done so because they simply don't believe they'll find anything. Indeed, the number of discouraged workers nationwide has more than doubled in the past year. This trend won't be reflected in the widely publicized unemployment rate, as discouraged workers aren't included among the unemployed. Still, in states as diverse as Mississippi, South Dakota, and New York, the span of this often invisible slice of workers signals a population losing its hope.

Interesting.... discouraged workers not counted as unemployed even though they are unemployed

After this quarter's reports, it is now clear that America is in a Depression as measured by a 10% decline in GDP. We have seen transportation company after transportation company report declines in sales of 20-30%. Similar reports by industrials. Technology not far behind. Auto Sales are down 50% from peak and New housing is down 80%.

We now have 50% or our nation's Architects unemployed, wages to tens of millions evaporating, and retail sales are falling off a cliff. No doubt current conditions are terrible and the outlook is even worse.

We have still not felt the brunt of the impact from State, County and City cutbacks....and hit will be very visible. We are already starting to see unrest among our poor, students, and government workers.

Where this goes is still unknown, but what we do know is if we continue down this Zombulation road, the slope is only down.

Tuesday, July 21, 2009

Will Grannis Be Green With Embarrassment?

Scott Grannis is a respected Economist with a blog at Scott is in the Larry Kudlow the world is Green Shoots camp.

Alstrynomics was created because it was clear Economists are ill prepared and incompetent to deal with the Zombulation impacting this economy. Now it appears a big problem also confronting Economics and Economists is an indifference to the facts.

A few years ago, I once attended a party where an Economist from the Federal Reserve told me to my face that he didn't like to cloud his analysis of theory with the facts. From that day on, I knew a new approach needed to be applied to deal with an economic contraction that our nation has not seen in over a century.

It appears that the indifference to facts is a pandemic infecting the entire field of Economics. On his blog a few days ago, Scott Grannis tried to defend his Green Shoots perspective by pointing out container volume decline was contracting at a slower rate at the ports of Long Beach and L.A.

Here is where things get a bit comical and intellectually embarrassing for Mr. Grannis and the entire Green Shoots field of Economics.

First of all, container volumes are still declining which is direct evidence that the economy is still contracting. This is supported by recent Q2 revenue declines from multiple transportation companies of anywhere between 20-30% including CSX, J.B. Hunt, and Werner. Further, we are seeing comparable REVENUE declines in important industrial companies as well, such as Caterpillar(over 40%), GE, Eaton, DuPont etc......

MOREOVER, most of the exports leaving the ports of L.A. and Long Beach are nothing more than containers filled with Trash. Of the top 26 exporters by container volume from the L.A. port, 12 of them are waste paper exporters with the number #1 being American Chung Nam Inc..

To measure the health of an economy by its trash exports seems a bit of a waste, sorry I couldn't resist. But to try to use it as support that the economy is turning around, such a conclusion is about as valuable at the nature of the subject being exported.

Further, even though brought to Scott's attention otherwise, he seems to believe that waste paper is only 10% of the container volume leaving the L.A. ports. Scott seems to be unaware that there is a clear distinction between waste paper and finished paper from manufacturers like Weyerhaeuser. Finished paper is actually about 10% of exports by container volume.

Altough exporting waste paper is definitely green, if Economists can't distinguish between finished paper and trash, how can we take their opinions very seriously?

Saturday, July 18, 2009

Is America Zombulated?

Zombulation is defined as running out of savings AND access to capital.

The reason is simple:

For 60 years, private industry drove profits to government. For most of those years, private industry grew based on increased production. In the last ten years, a significant amount of profits in America was simply based on leveraged transactions. People and businesses borrowing money and buying and selling things back and forth to each other at a profit.

The BIGGEST beneficiary of this behavior was GOVERNMENT with huge tax revenues flowing in and property taxes going through the roof. Federal, State, and Local spending grew from about $3 Trillion to OVER $6 Trillion dollars. Even though government was continuing to spend more than it was bringing in, all was fine because it was NOT spending much more (just a few hundred billion per year) AND RECEIPTS WERE GROWING.

As a result, since we were buying lots of stuff, foreigners were more than happy to finance this relatively small deficit. This wonderful relationship flourished as economies around the world boomed.

All was fine until we borrowed so much that we could no longer service the debt. Debts started defaulting, banks stopped lending, and prices crashed. Anyone with a pulse could see this was coming.

So here we are today, millions of jobs that were created simply because of the credit bubble have been lost, tens of millions more suffered massive wage losses WHILE costs(especially health insurance) have increased AND THE DEBT REMAINS.

Servicing debt is suffocating our economy and destroying profits. Earnings for American corporations are a fraction of what they were just a couple years ago. Same with earnings for many individuals and families. Many are on the brink of bankruptcy.


In The Great Depression, government was very small and ran a did not play a significant role in our economy. Today, if you factor total spend, INCLUDING ENTITLEMENTS, the government is practically the entire economy once you consider direct and derivative payments.

It was one thing to ask the world economy to finance a few hundred billion dollar deficit against a backdrop of growing tax receipts and flourishing trade relationship.....BUT SOMETHING VERY DIFFERENT when trade is DOWN over 25% in just a year, the deficit is now collectively OVER $2 TRILLION per government estimates, and tax receipts evaporating as fewer and fewer Americans can afford to pay taxes .

If Obama tries to apply a new stimulus package, and receipts keep contracting at the current rate, our total government deficit WILL double again to $4 trillion dollars factoring the current rate of declining tax receipts.


You rarely hear commentary on the shrinking revenues to our also rarely hear how important government spend has become so important to keeping our economy going.

Tens of millions of Americans depend on Social Security, tens of millions more on Medicaid and Medicare, even more tens of millions on Welfare and Food Stamps, further, THERE ARE OVER 20,000,000 GOVERNMENT millions depend on unemployment checks. The numbers get higher and higher. Hundreds of billions of dollars of sales to our private companies result from these payments that in effect were paid for primarily by American taxpayers and supplemented by a little borrowing each year.

WalMart should not only pay taxes to government, but send the American Taxpayer a rebate.

All was good when the America's private sector could generate enough tax revenues to support our government. In turn, our government supported us. However, much of our profits and tax revenues in the last ten years came simply from borrowing and buying.

Without government continuing to spend, we really do not have much of an economy today. Now that our government needs so much, there is no one in the world that can provide anything close to the required amount, especially if you consider that tax receipts are so low and getting lower.

It is one thing to borrow when you have a strong income and your outlook is is quite another when your income evaporates. Today, our government requires $6.5 Trillion for its spending requirments and tax receipts are not even close anymore and getting lower.

Yes it is a mess...and monetizing this amount of deficit without any hope of generating tax revenues would destroy our nation's economy in an instant. Once everyone realized what was going on, panic selling would occur and the world would liquidate their dollars and interest would skyrocket into triple digits.

Many are dependent on the government for income...we are all dependent on government to provide for our that our government is running out of money, we must as citizens prepare for a unprecedented restructuring of our economy.

Let's hope it's done in a fair and equitable manner....Goldman seems to be in charge.

Friday, July 17, 2009

Is America Going Communist?

The following is a quick back of the napkin perspective....

For the purposes of this blog, we will define communism as depending on the state, all forms of government, for one's livelihood.....we will not address the issues of civil liberties.

If you think about it, if you depend on the state for your income, you are "owned" by the state. And whether you get a check directly from the state, or indirectly from the state, it really is a difference without a distinction....the original source is the same.

We know about 1/3 of the American population gets their primary source of income from the state whether welfare, social security, medicare, medicaid, food stamps and unemployment etc. We also know that over 10% of the population works for the state earning their incomes. In sum, over 40% of America makes its livelihood directly from payments from government.

Then there are a bunch of people that work in private companies whose primary source of income is dependent on checks directly from the state, such as defense contractors and other contractors. Heck, much of the population of the Washington D.C. metro area fits this category....about 2% of the population.

As you can see, we rapidly approach about 40- 45% of the American population depends on a government check to make their living. The 10-15% that work for the state, including University and College employees, or contractors for the state are relatively high income earners generating a large percentage of consumer sales that drives many jobs.

Then adding in those who benefit indirectly from state entitlement payments, the numbers become staggering. These include businesses where welfare recipients, food stamp recipients and unemployment recipients shop such as WalMart and grocery stores and apparel stores. In addition, OVER 50% of our entire health care system comes from payments from government such as medicare and medicaid benefiting hospitals, clinics, drug companies and drug stores plus factoring the insurance proceeds from government employees and contractors.

If you add it all up, practically our entire economy is now dependent on government spending in one way or another to survive.

If you add in the recent government funding to the banks and massive NOL carry backs to a number of businesses, including home builders, OVER 100% of S&P earnings this quarter comes directly and/or indirectly from government payments. Under the Bush era, the size of government doubled. Now Obama is in control and he is making it a larger and larger percentage of our GDP as the private economy shrinks.

In the mean time, as banks cut credit to a credit dependent society, the private economy will implode further . As the economy contracts but the debt remains outstanding, servicing the debt will take up a bigger and bigger percentage of the revenue stream.

We are rapidly getting to the point where servicing debt will consume the majority of the GDP.....but government will still need to generate revenues someplace. The only place left will be assets, unless we purge the debt.

Under the current direction, if the state stops spending, so will the revenue to the vast majority of Americans, and our economy will crash.....but at least it will be our economy.

Now that you have left the matrix for a moment, the choice is yours on how to proceed.....for now.

Wednesday, July 15, 2009



President Obama is the Economy

Trucking and rail ships over 90% of the goods in America. We know if transportation shipments are down 20%(confirmed by CSX and JBHT recent reports) we are making 20% fewer goods.

Recent reports reveal that imports and exports are down over 25%.

Further, technology leaders Intel and Dell both reported 20% revenue declines. We are seeing much larger declines from other technology companies.

Airline powerhouse American Airlines reported a 20% revenue decline.

Auto companies have seen sales contract 50% in the last few years.

New home builders, if they haven't shut down completely, have seen sales contract 80%.

Office rents are down 50% in just one year in New York.

Commercial vacancies are skyrocketing and values are crashing.

Total retail sales are down 10% year over year as retailers shut down across the nation.


Government drives massive revenues to Health Care, Technology, Defense Contractors, Drug Companies, Retailers, Manufacturers, Transportation, Food, and Fuel in addition to providing approximately 25,000,000 jobs directly and countless millions indirectly.

The only problem is that receipts to government are evaporating. The Federal Government alone is on track to spend almost $2 Trillion more than its receipts. $2 Trillion dollars is the difference between a 6% decline in GDP and a 20% decline in GDP.

If President Obama was not borrowing and spending trillions of dollars that government didn't have......revenues to Health Care, Technology and other industries would contract dramatically.

So next time you look at your stock portfolio, you should pause a second and thank your President for spending so much to keep the revenues flowing to your bottom line.

The only problem is who will keep financing a nation whose economy is driven primarily by government spending? And not just any economy, the largest economy in the world.

Intel, Dell, AMR, Gannett, CSX.....What happend to Sales?

Intel, Dell, Gannett, AMR, and CSX.......major players in Technology, Media, Airlines, and Transportation all reporting revenue declines around 20%.

This is 20% revenue declines, not just 20% earnings declines. The disturbing part about this MASSIVE, across the board, sales contraction is it is occurring while collective government spend is running at historically high levels with over a $2 Trillion dollar deficit.

If important corporate revenues are declining 20% with government spending skyrocketing, imagine the NEGATIVE impact on corporate sales if government spending slowed?

It is clear that the world is heading into a global depression as defined as a 10% decline in GDP from peak to trough.....confirmation came this morning form this release about Russia:

NEW YORK (MarketWatch) -- Russia's gross domestic product contracted by an estimated 10.1% in the first half of 2009 compared to the year-ago period....

Tuesday, July 14, 2009

Government Economists Gone Whacky????

These guys must be smoking Green Shoots to issue a report like this:

The Commerce Department said Tuesday that retail sales rose 0.6 percent last month

Retail sales rise in June by largest amount since January, led by a surge in gasoline prices

Someone needs to examine these Economists for reporting the above data!

Last year, gasoline was OVER $4 per gallon. Thousands of retailers have closed since last year including Circuit City and Linens N Things. Retail vacancies are skyrocketing. And practically every retailer that reported JUST LAST WEEK reported NEGATIVE comps.

Target Corp. June Sales DOWN 6.2 pct

Costco Wholesale Corp. June Sales DOWN 6 pct

BJ's Wholesale Club Inc. June Sales DOWN 7.5 pct

Bon-Ton Stores Inc. Sales DOWN 8 pct

Macy's same-store sales down 8.9% in June

Dillard's June same-store sales down 14%

Limited Brands June same-store sales fall 7.9%

The Limited June same-store sales down 12%

Children's Place June same-store sales down 12%

Destination Maturnity: June comp. sales down 10.7%

Hot Topic June same-store sales down 7.9%

American Eagle June same-store sales down 11%

Gap June same-store sales down 10%

Abercrombie & Fitch same-store sales off 32%

Kohl's Corp. -5.6 pct

Neiman Marcus Group Inc. -20.8 pct

Nordstrom Inc. -10 pct

Saks Inc. -4.4 pct

Stage Stores Inc. -12.6 pct

Cato Corp. -3 pct

The Children's Place Retail Stores Inc. -12 pct

Last week we learn retail sales in the tank, this week they are up? The mistakes seem to be getting more obvious as each week goes by!

Monday, July 13, 2009

Is Merideth Whitney BiPolar?

A few months ago, this Merideth Whitney gave the following interview on CNBC:

In the above interview, she states the bank rally was overdone and stocks "grossly overvalued" justifying in part on the government intervening and enabling the banks to deliver earnings better than they could organically earn otherwise.

Then early in the morning, just a few months later and with seemingly little fundamental changes in banking, she appears to do a 180 turn, and recommends GS while putting other banks in a positive light, including J.P. Morgan, without offering much reasoning for her reversal?

One might argue that Ms. Whitney's GS call may possibly be logically consistent. However, her dramatic reversal on J.P. Morgan seems untrustworthy on its face in light of her earlier comments, and maybe something even more questionable if you factor the timing during options expiration week.

If the above is not mind boggling enough, just listen to her statements made just a few minutes later when she is seated in a more informal setting with a couple more CNBC anchors joining in.......Merideth seems to go back to her old perspective when the conversation is unrehearsed and apparently unscripted.

If it wasn't for the fact that she is wearing the same designer dress and her hair style identical, you would think that this couldn't be the same person making the above assertions just minutes apart on T.V. Then, factoring the earlier statements, made on the same network, just a few months ago, and with little intervening fundamental changes to banking, you begin to question veracity when Ms. Whitney was in the earlier controlled scripted environment versus her seemingly straightforward delivery in the more informal unscripted environment.

At this point, something just doesn't seem right. As one who has cross examined a number of witnesses, the impeachment value of the inconsistent statements above would make any trial lawyer salivate.

CSX, Dell, Advertising and Fastenal CONFIRM Depression!


(MarketWatch) -- Ad-supported media will see a 14% decline in advertising revenue this year, the ad buying agency Magna said Monday, but there is room for optimism.

Magna, a division of Interpublic's Mediabrands, said the ongoing economic crisis triggered last September will continue, as ad revenues drop to $161 billion from $189 billion in 2008.

"The first half of 2009 will likely turn out to be the worst period of this recession, during which time Magna estimates ... advertising revenues will have fallen by 18% vs. the same period in 2008," the company said.


WINONA, Minn., July 13, 2009 The Fastenal Company of Winona, MN (Nasdaq:FAST - News) reported the results of the quarter ended June 30, 2009. Except as otherwise noted below, dollar amounts are in thousands.

Net sales for the three-month period ended June 30, 2009 totaled $474,894, a decrease of 21.4% from net sales of $604,219 in the second quarter of 2008. Net earnings decreased from $76,166 in the second quarter of 2008 to $43,538 in the second quarter of 2009, a decrease of 42.8%. Basic and diluted earnings per share decreased from $.51 to $.29 for the comparable periods.

Fastenal is a key supplier to construction and industrials. If FAST is slow, you know the landscape of the industrial flow.

NEW Housing sales DOWN 80%.
NEW Auto dales DOWN over 50%.

DELL's revenues DOWN over 20% y/y.
CSX's revenues DOWN over 20% y/y.

Housing, Autos, Airlines, Advertising, Media, Hotels, Technology, Transportation...

industry after industry now reporting double digit sales declines, a couple years in a row in some cases, leaving little room for doubt that our economy entered into a depression sometime in the second quarter of this year(backing out deficit government spending of course).

My guess is in a relatively short period of time, the "economists" will stop smoking the green shoots and actually realize what is happening in the real world by collectively calling a DEPRESSION months after it happened.

Sunday, July 12, 2009

Are Economists Smoking Green Shoots?

From Bloomberg Today:

July 12 (Bloomberg) -- Retail sales in the U.S. probably increased in June for a second straight month and factory production fell at a slower pace as the recession abated, economists said before reports this week.

Sales gained 0.4 percent after a 0.5 percent increase in May, according to the median estimate in a Bloomberg News survey before the Commerce Department’s report on July 14. The next day, Federal Reserve figures may show industrial output fell 0.6 percent last month after a 1.1 percent drop in May.

Consumers are venturing back into stores, seeking discounts and favoring necessities such as food or fuel. Even as the projected increase in sales and reports this week on housing may show the worst of the downturn has passed, a turnaround is likely to be gradual.

Confirmation from MarketWatch:

On Tuesday the Commerce Department will report retail sales for June, and economists polled by MarketWatch are looking for a gain of 0.5%, matching the prior month's result.

That is TWO sources where Economists are calling for HIGHER June numbers!

Vs. CNN LAST WEEK!!!!!!!!!!!!!!!!!!!!!!!!

( -- It looks like Americans still aren't in the mood to splurge at the mall.

Several of the nation's leading retail chains reported Thursday that their same-store sales declined again in June.

The reports raise questions about whether the government's effort to use stimulus spending to boost consumer spending is working.

Sales tracker Thomson Reuters, which tracks monthly same-store sales for 30 chains such as Target (TGT, Fortune 500), Gap Inc. (GPS, Fortune 500) and J.C. Penney (JCP, Fortune 500), said overall June sales for the group fell 4.9%, compared to a gain of 1.9% last June.

It marked the 10th-straight monthly decline for that index, which measures sales at stores open at least a year. That's worrisome because consumer spending fuels two-thirds of all economic activity.

Confirmation from

It was a mess of a month (or, should we say, a miss of a month) for retailers, with at least a dozen of the retailers reporting June same-store sales on Thursday missing expectations. Overall June same-store sales tumbled 5.1%, according to the International Council of Shopping Centers.

You just can't make this stuff up:

Sales gained 0.4 percent Vs. June sales for the group fell 4.9%


Consumers are venturing back into stores... Retail sales in the U.S. probably increased in June Vs. Americans still aren't in the mood to splurge...It marked the 10th-straight monthly decline for that index

If the Commerece Department's report shows a rise in June's retail sales, you have to question the data....since almost every retailer reported declining June sales last week. If it doesn't show an increase, you have to question sobriety of the surveyed economists.....could it be Scott Grannis and his buddies?

Saturday, July 11, 2009

The FU Virus goes PRIME TIME

The mortgage default crisis has an ominous new face. It's your neighbor with a traditional fixed-rate loan.

No longer is the real estate bust simply the result of exotic, subprime loans that doubled payments and blew up in homeowners' faces. As the Sacramento economy buckles, even the safest mortgages have become part of a new wave of loan defaults, experts say.

With capital-area job losses reaching 45,000 in the past year and unemployment at 11.1 percent, lenders, bankruptcy attorneys and debt counselors all say they're seeing rising delinquencies among prime borrowers with fixed-rate loans and good credit.

Any idiot could have seen this coming with the current ZOMBULATION POLICIES AND ZOMBATIC FALLOUT FROM THE ZOMBULATOR.

Soon the delinquinies will EXPLODE with hundreds of thousands facing massive wage cuts and furloughs in upcoming months.


Aspiring nurses, teachers and community college transfer students planning to enroll at Sacramento State in the spring may be forced to delay their education.

California State University officials announced this week that the 23-campus system will not accept applications for the 2010 spring semester, and campuses on the quarter system stopped taking applications for the winter term July 6.


"We're planning for the worst – that we're going to have to take that hit," said John Kepley, a Sacramento State spokesman. "But until they make that decision, all we can do is plan."

The admissions freeze is aimed at implementing $584 million in cuts to the CSU budget. CSU officials have set a two-year goal to reduce student enrollment by 40,000.

The Zombulator is spreading the FU Virus across the nation. It is already at pandemic stage, now the only question is how many will be infected before the process plays out.

Thursday, July 9, 2009

History Repeating Deja Vu All Over Again?

Click Picture for Larger View

1934 Chicago Tribune

The more that changes, the more things stay the same.

Is America Shutting Down?

Schwarzenegger plans 20% pay cuts for hundreds of thousands of workers.

How many of those workers were even saving 10% of their incomes?

America is shutting down based on the current Zombulation policies.

Alcoa's sales are down OVER 40%.
Auto sales are down OVER 50%.
New home sales are down OVER 75%.
Country Clubs are shutting down.
Restaurants are shutting down.
Neighborhoods becoming ghost towns.
Shopping malls becoming ghost malls.
Box stores becoming ghost boxes.
Bank Closures growing rapidly.
Foreclosures so no sign of abating.
Loan defaults reaching new highs.

And here are some not so fun y/y retail numbers:

BJ's June same-store sales down 7.5%
Macy's same-store sales down 8.9% in June
Dillard's June same-store sales down 14%
Aloca sales down 41%
German exports fall 25 percent in May
Limited Brands June same-store sales fall 7.9%
The Limited June same-store sales down 12%
Children's Place June same-store sales down 12%
Destination Maturnity: June comp. sales down 10.7%
Costco June same-store sales fell 6%
Hot Topic June same-store sales down 7.9%
American Eagle June same-store sales down 11%
Gap June same-store sales down 10%
Abercrombie & Fitch same-store sales off 32%

Now even the homeless are getting kicked out of shelters:

A new tent city populated by about 100 homeless people along a Sacramento street has prompted a charity agency to propose that the city allow it to lease land to establish a legal place for those people and others to stay.

On Tuesday, Sacramento police told people staying in the encampment that they had three days to move to another site.

After the Cal Expo homeless shelter closed for budgetary reasons on July 1, the more than 200 homeless men, women and children were left without a legal place to reside, said officials with Volunteers of America, the charity that ran the shelter.

What does it say about the state of the ecnomomy when the homeless have no place to say?

Saturday, June 27, 2009

The Zombulator Turning America into Ghost Towns

“Joshua Hamann jokingly compares himself to the last human in a city overrun by zombies. He’s not suggesting his neighbors are zombies. The problem is, he has no neighbors.Hamann occupies one of only about 50 sold condos in his 49-story tower, out of 409 units.

A couple miles north at Midtown Miami, Alisha Marks knows the same feeling. ‘It was pretty much a ghost town when I got here,’ she says.”

“On a recent Friday morning, Hamann encountered exactly three people over the course of several hours — two security guards, and a concierge. ‘This is how it goes every day,’ Hamann said, adding that he interacted with more neighbors growing up in rural Kentucky, where farms were spaced a mile apart.”

“The housing crisis is creating ghost towns of once-bustling communities like Merced. In largely abandoned neighborhoods, paved sidewalks and driveways lead to empty lots strewn with utility coils. Unfinished frames with rotting rafters and rusted hinges sit alongside occupied homes. Roughly 40% of the homes in Merced are considered distressed.”

“The University of California announced in 2001 that it would open its first new campus in more than 40 years on 84 acres in northern Merced. In anticipation of the potential demand, builders flocked to the area, and real estate investors bid up prices. But they were overly optimistic. Now the market lies in ruins, as unemployment tops 20%. Says Janet Young, assistant chancellor at UC Merced, which opened in 2005: ‘The housing boom was a huge surprise to us.’”

The Zombulator is now being felt coast to coast......five banks shut down yesterday across America...FIVE !

Unemployment OVER 20% in many counties!

Completed condo buildings practically empty, abandoned neighborhoods littering the landscape, food shelters running out of food.

And now this from Sacramento after learning earlier this week that 168 firefighters and union members will lose their jobs....

The Sacramento County Sheriff's Department says it will need to lay off almost 80 more deputies than it had anticipated – significantly reducing the department's ability to patrol unincorporated county streets – because of a miscalculation.

Sheriff John McGinness said Friday that he'll need to lay off 209 deputies and 22 non-sworn department employees. That's up from the 130 to 140 deputy layoffs McGinness projected when the Board of Supervisors approved a fiscal 2009-10 budget earlier this month including a $2 billion general fund spending plan.

"It is a huge hit to public safety," McGinness said. "There is nothing legal, moral or ethical I won't do to change that number."

Currently there are about 270 deputies patrolling unincorporated Sacramento County and several units such as SWAT, K-9 and air support that they can call on for help.

The cuts announced Friday would leave 171 patrol deputies and no ancillary units for backup, McGinness said. At any given time, there would be about nine or 10 two-officer patrol units on duty – five north of the river and four or five to the south. That's down from 38 units today, McGinness said.

"That is so scary. The safety of the public is being compromised," said Marianne Mueggenburg,Carmichael Service Center – an office staffed by volunteers and problem-oriented policing officers, which could be closed as a result of the cuts.

The Sacramento count is already 400 getting Zombulated.....AND THAT IS JUST ONE CITY! Multiply that by the number of cities across America....and we have not even addressed teachers or professors yet!!!

If you are one of the hundreds of thousands that work for the State of California....prepare for ANOTHER wage cut!!!!

Gov. Arnold Schwarzenegger plans to furlough state workers an additional day each month starting in July if lawmakers do not send him an immediate solution for the entire $24 billion budget deficit, he said Friday.

Schwarzenegger's move would force at least 215,000 state workers to take three unpaid days of leave each month, the equivalent of a 14 percent pay cut in all. A third furlough day would strike another economic blow to the Sacramento region, where more than 80,000 area residents work for the state.

A 14% PAY CUT for hundreds of thousands of workers! How many of those families will not be able to meet their monthly expenses with a 14% wage cut? What about the millions that may lose you think there are jobs waiting?

Maybe those blackhawks flying over L.A. will not have to go overseas for their next mission after all......

And many of you frustrated at Alstry for simply giving you a heads up reporting the facts?

Isn't it about time you get off your backside and start getting frustrated with your elected officials?

You may want to inform them.......when you bail out the banks and not the people, the Zombulator will quickly turn everyone into sheeple.

Are you prepared for the Zombatic Fallout.....The House just passed the Cap and Trade may soon find out what it's like to be capped by your politicians.

Friday, June 26, 2009


A few random Headlines re KB Homes:

KB Home says home orders are up

KB Home 2Q loss narrows, new orders up from 1Q

KB Home new home orders up from 1Q

KB Home's quarterly loss narrows


Revenues totaled $384.5 million in the second quarter of 2009, down 40% from $639.1 million in the year-earlier quarter.

The Company ended its 2009 second quarter with a cash balance of $1.10 billion.....the Company’s debt balance totaled $1.71 billion

The Company’s backlog at May 31, 2009 totaled 3,804 homes, representing potential future housing revenues of approximately $796.9 million, compared to a backlog of 6,233 homes representing potential future housing revenues of approximately $1.47 billion at May 31, 2008.

Company-wide net orders for new homes in the second quarter were 2,910, down 31% from 4,200 in the second quarter of 2008 but up 59% from 1,827 net orders in the first quarter of 2009.

Some Real Analysis:

Orders were DOWN 31% from last years DEPRESSED ORDER RATE!!!!!!

Backlog was DOWN approaching 50%!!!

Due to depressed pricing, the company is losing money as it sells homes, the more homes it sells, the more it loses.....its losses "narrowed" because it sold a lot less homes this year than last year.....if the company simply shut's losses would go away.

To use a quarter over quarter sales/order comparison is IDIOTIC at best, and more likely DECEPTIVE at its origin. Spring selling quarter is ALWAYS the historically best selling quarter for housing. Could you imagine a retailer bragging its Christmas/Holiday December selling month was better than November??? How do you think January would compare???

Do you think it would be fair to compare next quarter's KB orders to this quarter's???? NOT A CHANCE!!!!

As indicated above, on a year over year basis, orders are collapsing and backlog is even worse!!!! Selling prices are crashing destroying margins. Ask yourself....why is the mainstream media treating us like IDIOTS???? And if it is being done in this context, where else are we being LIED to?????

Thursday, June 25, 2009

It's Official!!! A DEPRESSION!!!!!

A Depression is defined as a 10% decline in GDP from peak to trough.

We know:

Auto Sales are DOWN around 50%.
New Home Sales DOWN over 75%.
Hotel Revenues DOWN over 20%.
Trucking Sales DOWN over 20%....rail not far behind.
Banking in TROUBLE....Credit Card Defaults OVER 10% and CRE imploding.
Commercial Construction coming to a grinding halt at the end of this summer.
Major Law Firms cutting staff at unprecedented levels.
Architectural Billings evaporating with not much on the books after August.
Government Tax Receipts off 20, 30, 40% and MORE!

Below are just a sample of this afternoon's headlines:

Palm Q4 revenue $86.8 mln vs $296.2 mln

Accenture Q3 revenue $5.54 bln vs $6.59 bln

Micron Technology Q3 sales $1.11 bln vs $1.5 bln

It is obvious Technology and Services are feeling the slowing effect HARD!!!!!!

The two key sectors left are Health Care and Government, and both are tied at the hip and starting to feel the pain. Based on California's predicament, major cutbacks in spending will be necessary....and soon. The cutbacks will be material and not limited to just California. Major cutbacks will occur nationwide as most State and Local governments have seen tax revenues evaporate. As the large cutbacks kick in over the next few weeks, our economy will slow materially.

Based on the typical lag of government statistics, there is little doubt that we will look back sometime in the Fall and determine the Depression started sometime around the end of the 2nd Quarter.

As far as unemployment being reported under 10%.....U6 is now over 16% and many are not being counted as unemployed due to benefits expiring. Further, making an apples to apples comparison to The Great Depression, welfare NEVER existed in the if you added in welfare recipients to the unemployment numbers, we are likely well OVER a 25% unemployment rate.

Here is an example from the WSJ of citizens going from being counted as "unemployed" to becoming "welfare" recipients:

Michigan's generous jobless benefits and strict eligibility rules have kept the welfare rolls down despite the state's 14.1% unemployment rate, the highest in the country. But a surge in jobless workers reaching the time limit for unemployment benefits in coming months could change that.

A major test for the state's welfare system could come by January, when nearly one in seven unemployed workers will have exhausted their jobless benefits, unless the laws change, said Norm Isotalo, a spokesman for Michigan's unemployment-insurance agency. Many of the more than 680,000 unemployed workers in the state are collecting jobless benefits, which last for as long as 79 weeks.

Other states with high unemployment, such as Florida and Oregon, have already seen significant increases in welfare caseloads.

"We're expecting a huge influx of applications in the next few months," said Barbara Anders, the director of adult and family services at the Michigan Department of Human Services. About 100,000 people's jobless benefits will expire by January. Officials hope for funding to add staff to handle the influx, and the state Senate appropriations committee has approved hiring 200 more staffers.

Just extrapolating from the above, it is easy to see that millions of Americans are likely to transfer from being counted as "unemployed" to "welfare" recipients. From a practical perspective, they are still unemployed.

Then if you factor in the number of spouses and elderly who will be forced to return to the workforce but unable to find a job....we should exceed 30-35% unemployment by the end of the year.

30% unemployment and a 20% contraction in fast do you think Benny B can print? Will it be an INFLATIONARY DEPRESSION?

Wednesday, June 24, 2009

A cash shortfall not seen since The Great Depression!!!

State controller John Chiang warned today that if legislators and Gov. Arnold Schwarzenegger fail to come up with a budget-balancing package in the next week, he would begin paying California's bills with IOUs on July 2.

The controller's warning came as legislators began what many on both sides of the aisle acknowledged was a rhetorical song-and-dance over closing a $24 billion deficit that stretches over the fiscal year that ends Tuesday and the one that begins Wednesday.....

"Next Wednesday we start a massively unbalanced spending plan and a cash shortfall not seen since the Great Depression," Chiang said in a news release. "The state's $2.8 billion cash shortage in July grows to $6.5 billion in September, and after that we see a double-digit freefall."

Resorting to IOUs -- whose technical name is registered warrants -- would mark only the second time since the 1930s that California has paid its bills that way. The last time was 1992.

Chiang and other state officials had said that the state would first probably resort to delaying payments to vendors, local governments and others of the state's creditors while a budget balancing deal was worked out so the state could borrow money from Wall Street for its cash flow problems.

Both borrowing for cash flow and delaying payments are commonplace. In fact, Chiang delayed payments in February for 30 days while legislators and the governor wrestled with a budget deficit.

But, Chiang said said, the current cash shortfall was five times larger than the February hole.
Since Gov. Schwarzenegger said last month he would not authorize a form of short-term borrowing through what are called revenue anticipation warrants, Chiang said IOUs were the only option.

A federal court ruled in 1996 that state employees couldn't be paid with IOUs. Others who receive them will draw interest on them, but banks and other financial institutions can refuse to accept them. Chiang said the IOUs would have a maturity date of Oct. 1

Could you imagine paying your taxes this way??????


From MarketWatch:

SAN FRANCISCO (MarketWatch) -- Berkshire Hathaway Chairman Warren Buffett told CNBC Wednesday that he has trouble seeing so-called green shoots of economic recovery in the U.S. The risk of a collapse in the financial system has past, but "we haven't got the economy moving again," he explained. When asked whether Ben Bernanke should be re-appointed as Federal Reserve Chairman, Buffett said "I don't see how you could do better." He also said the stock market is attractive versus other types of investments over a long-term period such as 10 years. Fixed-dollar investments will be eaten away by inflation over the long term, Buffett added. "We could see a lot of inflation," Buffett warned.

The data today supports Mr. Buffet's perspective about NO green shoots:

NEW YORK (MarketWatch) -- Supervalu Inc.said Wednesday that earnings for the first quarter would be substantially below "First Call consensus earnings for the quarter." Analysts polled by FactSet Research estimated, on average, earnings of 65 cents a share for the grocer. Chief Executive Craig Herkert stated, "Consumers have become more value focused and cautious in their spending which has pressured sales and margins greater than anticipated. We currently estimate our identical store sales will be approximately negative 3%."

Supervalu is a national grocer and groceries are the last spend a consumer cuts. Sales tend to be more resilient due to tens of billions in food stamps the government hands out each year.

It is clear that the strain on the consumer is getting much more severe. Credit card delinquencies are increasing to historically high levels. We are now seeing Health Care and Government start to ramp up layoffs and pay cuts making the economic prognosis very negative at the current time.

The city of Sacramento has cut off talks with the fire union - and as many as 68 firefighters will lose their jobs next week as a result.

One city......68 Firefighters!

Hospitals are starting to cut staff in material numbers in addition to hundreds of thousands of teachers and professors whose careers are in jeopardy due to lack of funding.

Prepare for lots of downward revisions as the summer the following:

(MarketWatch) -- Monsanto Co. said Wednesday its third-quarter profit slipped 14% on fewer sales of Roundup herbicide as low-cost competition eroded its market share, leading to a reorganization of the company and the dismissal of about 900 employees.


Wednesday, June 17, 2009

The Solution to the Financial Crisis




Sunday, June 14, 2009

Could California Homes Be Practically Worthless???

In the past five years, Californian's took out mortgages far exceeding their ability to service the debt. Now residents are suffering massive wage cuts and job losses.....many simply can't afford to make their mortgage payments and foreclosures are exploding.

The problem is simply not just home buyers who purchased homes, but the thousands who borrowed against their existing homes to sustain a "California" lifestyle:

The latest argument comes from Michael LaCour-Little, a finance professor at Cal State Fullerton. He is lead author of a new study, which found that during the housing boom some long-time owners borrowed against all their property's equity gain, or paper profits. They treated their houses like cash machines.

People who owe their bank as much or more than their home is worth are most vulnerable to foreclosure. When they suffer a job loss or other drop in income, they can't sell, because the sale price won't cover the debt.

It's long been assumed that home buyers who purchased at housing's peak with little money down are among the most likely to face foreclosure. They owed more than their property was worth once prices tanked.

But the study concludes 'cashing-out' is about as predictive of foreclosure for the same reason: negative equity.

Think of the countless number of elderly, small business owners, and others that survived over the past few years simply from extracting millions of dollars from perceived home equity......and now that the supplemental income has evaporated.....few can sustain their lifestyle and the equity is gone.

Many families are in financial distress and that distress is driving DOWN home values. Pricing projections are constantly being revised lower. Most recently, Fitch is calling for an ADDITIONAL 30% decline in California.

The projected losses also reflect an assumption that from the first quarter of 2009, home prices will fall an additional 12.5% nationally and 36% in California, with home prices not exhibiting stability until the second half of 2010.


With countless numbers unable to make their payments.....California is struggling with the torrent of foreclosures flooding its court system every month.....a court system already stretched due to budget constraints. Things have gotten so bad that lawmakers are suggesting a moratorium on foreclosures....

California is imposing a 90-day moratorium on housing foreclosures under a new law that takes effect Monday.

The law is expected to make lenders try harder to keep borrowers in their homes. Loan companies must prove they tried to modify the delinquent loans before they can begin foreclosing.

But supporters acknowledge the California Foreclosure Prevention Act won't stop thousands of foreclosures from eventually happening. There have been more than 365,000 foreclosures in California since early 2007, with many more already scheduled.

However, the moratorium will accomplish little other than delay a growing problem of affordability....evidenced by the most recent federal moratorium's failure to slow the rising the tide once lifted.

Foreclosures occur as a result of insufficient income and savings to service debt and other obligations. Without good jobs, savings or easy access to the home equity machine......many more in CA face eviction. In addition, the state faces the loss of billions in property tax revenues at a time when it's $24 Billion in the hole.

If wages continue to evaporate and jobs sliced like limbs on a sepsis patient....pretty soon there won't be much left to cut in California. Few will be able to afford much of anything.

Due to budget constraints, California faces the biggest cycle of wage cuts and job losses in its history. Especially vulnerable are high paid government and health care workers(and those that support government)....the cuts could easily affect millions of residents.

As many know, to destroy home values, it doesn't take every house on a street to be in foreclosure to impact all homes.....just a few distressed homes in the same area can drop values dramatically.

The most extreme case right now is in Michigan where home median home prices in a number of municipalities have dropped below $10,000.....simply due to the fact that there are no jobs and/or very low incomes......

It has become so bad in some areas that the government is now leveling ENTIRE sections of towns to save money!!!!!

Dozens of US cities may have entire neighbourhoods bulldozed as part of drastic "shrink to survive" proposals being considered by the Obama administration to tackle economic decline.

California will be no different, although not likely to reach Michigan extremes for a variety of reasons, if you think that CA home prices have come close to reaching a may want to sit back, have a drink, and watch the spectacle. Fitch is only predicting an ADDITIONAL 30% decline, I am predicting at least 50% MORE.

If we continue down this path of government spending money it just doesn't have, few will consider supporting our uncontrollable welfare payments and interest rates will likely climb into double digits in very short order destroying affordability. Conversely, if we lower government spending to income, California could loose or cut wages on hundreds of thousands of jobs imposing MASSIVE pressure on an already stressed state.

The above exemplifies why we, as a nation, are stuck between a rock and a hard place!!!!!

Economists used to laugh when I predicted homes values would drop 50-70% a few years ago. We are already there in a number of areas across America. The problem is the problem is a BIG problem....and not very funny, especially for those getting evicted from their homes and families destroyed.

Now the distressed home issue has morphed into a state concern. Tax revenues are evaporating and the burden of taxation is being focused on fewer and fewer. If this process continues, soon there will be few left in California to support state services. I am already aware of a number of wealthier Californian's who have migrated from the state due to fear of draconian taxes. For confirmation, just give the Austin, Texas MVA a call and see how many of the new license applicants are from CA!!!!!

Without tax revenues, California's economy faces serious hurdles maintaining the states standard of living. Right now tax revenues are imploding. If the situation is not reversed soon, many of you may be surprised how many may leave California. And if you are surprised by the migration out of the state, you will really be SHOCKED how low home prices can go in a state with negative population growth.

For those of you who think Great Depression pricing is the bottom, you may want to talk to residents in Detroit. What receives little commentary is that in the 1930s, property taxes and insurance payments were insignificant. Ask yourself, how much more of a home could be purchased today if you didn't pay taxes and insurance on your house and deduct it from its current value.

Soon you will begin to understand that massive structural change is ahead. Alstry is confident of this and very confident of a very bright future. However, the change will be very convulsive to many existing paradigms and few are prepared.

Are you ready to leave the matrix??????

Let's hope our government officials don't take us on a path of WAR to distract us from the symptoms of change.

Friday, June 12, 2009

Prepare to be ZOMBULATED!!!!

Zombulation is a term created by the Institute of Alstrynomics defined as the point when one runs out of money and extinguishes all access to credit OR when the government taxes you 100% of your income and assets. In either case, you economically lose everything.

The private economy in America is DYING QUICKLY!!!!

Today Cravath, Swain & Moore Firm Asked Incoming Lawyers to Delay Start a Year!!!!

For years government has been growing as the private sector has been shrinking. A greater and greater percentage of private sector revenues came from government...WalMart(welfare, food stamps, unemployment checks), Defense, Health name it.

Now the true private sector has become so small, without Ponzi like bubbles....there is simply very little money flowing out of the Private Sector to sustain a MASSIVE government sector.


The above is one of the largest law firms in America....and there is just no work for incoming lawyers.....slowing is happening at practically every law firm in America.....many partners are coming to work and twiddling their most of the law firms at this size generate a HUGE amount of revenues from government spending....SO IF GOVERNMENT SPENDING SLOWED...SO WOULD THEIR BUSINESS!!!!


And now the private sector is simply not generating enough money to sustain California's massive this point.....revenues are soooo low that it threatens a shut down of the entire state government unless a resolution comes forth.

Barring a miracle, California lawmakers will miss their June 15 deadline for passing a balanced budget -- a staggering challenge with the state facing a $24.3 billion shortfall amid the worst drop in state revenues since the Great Depression.

Gov. Arnold Schwarzenegger vowed Wednesday to let California government come to a "grinding halt" rather than agree to a high-interest loan to keep the state afloat if he and the Legislature do not close the yawning budget gap in coming weeks.


Soon the light will turn on in many of your heads and you will begin to appreciate Alstrynomics. We are running out of money in the private sector.....and government has grown so large.....that if we took every dime the private sector generated in would not be enough to sustain government since much of current private sector revenues actually comes from government.

Yes my friends, during the past 10 or so years.....the entire American economy has morphed into one big Ponzi scheme (Private sector borrowing money it didn't have generating profits for government and in turn government spending driving the private sector).....your government officials have known this for some have foreign bankers......and same with you guys are about to leave the is my job to condition you so the shock won't kill you.

In the end.....ask yourself how small would our economy really be if the government stopped will be SHOCKED by the answer if you take the time to carry it out fully.

The only solution is to equitably bankrupt the nation or your politicians and bankers will rob you dry and there will be nothing left for anyone except those who stole the money and left the country.

Remember, the other course of action is WAR of course!!!!! You think if Madoff could have chosen war....he might have thought about it instead of getting caught???

Stuck between Barack and a Hardplace!!!!!!

President Obama faces THE MOST DIFFICULT economic issue ever to confront an American President.

Throughout our nations history, we have been a nation where the PRIVATE economy generated sales and profits and supported our government and its currency. As time passed our private industry grew and so did our government......but a few decades ago our private side failed to keep up with the growth of government and government grew and grew and grew becoming a more important part of the economy as each year passed.

Right now our total government spending is about $6.5 Trillion dollars........about half of our GDP.

Unfortunately, after popping the debt bubble of the last ten years....our private economy is simply too small to sustain a government with $6.5 Trillion in spending.....and that spending drives our entire economy including health care, defense, and welfare which drives trillions into the private sector.

As a nation, we are now only generating about $3.5 to $4 Trillion dollars in tax revenues......and a HUGE gap is forming......and the outlook for the gap to widen is almost assured with an aging population and more and more becoming un/underemployed.


If government slowed spending to match receipts, our nation, and the world, would immediately implode into the biggest depression in history.......if government keeps spending money it doesn't have......our currency will collapse as few will want to deal with a country that produces very little and has such a MASSIVE social welfare spend while their own citizens are living at a much lower standard.

In sum, our President has two choices.......a depression where we restructure and start over or hyperinflation with a depression where our currency is worthless and nobody can afford to fill up their cars with gas unless they live outside the U.S...

War is always a third alternative.

You pick.

Saturday, June 6, 2009

How OFF are Economists??????

As this is written, the government published U3 unemployment rate is 9.4%.....the U6 rate exceeds 16%. Many economists are predicting unemployment to peak at 11%.


The U.S. labor force is a bit over 150 million people. About 21 million are employed by Federal, State and Local Governments who are generally paid better than average private sector workers.

Many were hired in the last eight years as tax receipts to government gushed in from revenues, profits, and incomes generated in the credit bubble years. Taxes were flowing and government was unprecedented rates. According to recent data, TOTAL government spending approached $6.5 TRILLION put that number in approximates half of our total GDP.

With the growing number of government workers also came growing government spending on practically everything including technology and supplies, real estate, and health care. The Ponzi like boom in the private sector created fantastic prosperity in the public sector which in turn drove revenues back into the private sector........and we could go on and on and on......

But as too many borrowed too much.....the accumulated debt became a crushing burden and borrowers started to default and banks slowed lending. The party came to a halt and revenues evaporated all over the place. Nowhere more obvious than new home construction with sales down over 75% from peak. Auto Sales are down over 50% and retail sales are evaporating as thousands of stores are shutting down around the nation.

As sales and profits slowed, businesses started reducing workforces and millions of workers went from being taxpayers to unemployment recipients. In addition, millions of formerly highly paid workers in real estate sales, mortgage/finance sales, and construction saw their incomes contract dramatically.

FACT: The top 5% of taxpayers pay about 60% of the taxes.....and many of these taxpayers have seen their incomes drop materially in recent years without much prospect of returning to the good old days anytime soon.

Tax receipts to government declined sharply this year through April, Federal Income Tax receipts are DOWN 44%.....and state and local governments are not doing much better with collections.

In the next few weeks....state and local governments are going to have to make some very difficult decisions regarding budgets and labor reductions. 20% cuts are being routinely contemplated.

So let's think about this for a second.....if government cuts 20% of its labor force.....that alone will increase unemployment by about 3% taking the U3 rate to over 12%....WITHOUT factoring the impact of MASSIVE government spending cuts on the private sector.........which will likely take U3 to over 15% without too much effort.

A 15% unemployment projection fails to account for likely additional deterioration as more and more individuals and businesses get Zombulated......a term we will define in a future blog.

If you think a 11% peak unemployment projection is reasonable based on the currently known have little appreciation for Alstrynomics......the practical application of facts to economics.

Economists better wake up......because the economy just may shock them in the very near future!!!!!!