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?