TrimTabs Begged to Differ and Feels Vindicated

Courtesy of Zero Hedge:

TrimTabs Investment Research estimates that the U.S. economy lost 488,000 jobs in July, considerably more than the consensus estimate of a loss of 305,000 jobs. In addition, TrimTabs expects the Bureau of Labor Statistics to revise its job loss estimates sharply higher for the first half of 2009 based on the latest unemployment insurance survey results.

“While Wall Street is convinced the recession is over, the economy continues to shed jobs at an alarming rate,” said Charles Biderman, CEO of TrimTabs.

TrimTabs’ employment estimates are based on analysis of daily income tax deposits to the U.S. Treasury from all salaried U.S. employees. Historically, TrimTabs’ employment estimates have been more accurate than those of the BLS.

“The personal income report the Bureau of Economic Analysis released Tuesday contained huge downward revisions to wage and salary growth,” said Biderman. “Now that the BEA is using unemployment insurance reports from the first quarter to estimate current wage and salary growth, its data confirms what we have been reporting for months.”

The BEA’s estimates of wages and salary growth changed from year-over-year declines of 0.8% in April and 1.1% in May to year-over-year declines of 4.0% in April and 4.2% in May. Also, the BEA reported that wages and salaries dropped even more sharply in June, falling 4.7% year-over-year.

“Two months ago, we asked BEA economists how they reconciled the huge declines in real-time tax deposits with their report of a modest decline in wages and salaries,” said Biderman. “They could not answer our question. We know now that by ignoring real-time data, the BEA was providing an inaccurate view of the economy’s health.”

As reported here, TrimTabs also saw no improvement in wages and salaries in July; if anything they saw further deterioration.

We are now exactly 5 months from the stock market bottom. The S&P 500 is up an astounding 50%. Yet profit estimates for the current quarter are down from those then-current and unemployment is higher.
And in case any American has not figured it out, either China is in a bubble that likely is pulling the U. S. financial market upward; or China is growing internally and sucking more and more of the world's resources into it for its own use. Either way, the growth news out of China absent big increases in our imports from it is NOT good news for American stock or bond markets.

Back in the U. S., the financial firms continue to be recapitalized on the backs of savers, and companies in general are keeping their profit margins up or rising by continuing to let go of labor. Today's negative ISM report in services, and the revisions to the wages and salaries data described above, make a rationalist wonder why so many people are risking so much money on speculations as risky as stocks when they in general pay such low dividends.

Copyright (C) Long Lake LLC 2009

News Flow Remains Poor, so Why Shouldn't Stocks Soar?

Chrysler is going under, almost 30 years after the Feds bailed the company out with a now modest loan guarantee.  Its impending bankruptcy is a testament to two major factors:

dysfunctional management-labor relations that pervaded the Big Three; and the over-financialization of auto purchasing, wherein auto companies became finance companies with unprofitable manufacturing facades.

In other negative news, the Commerce Department reported today that private wage and salary disbursements dropped $33 B in March on top of $29 B in February; these are seasonally adjusted annual rates.  This $62 B (annualized) two-month drop in wages and salary is a 1% drop.

There is massive human and physical overcapacity in the United States and in many other places.

With secure income on financial assets hard to find, riskier assets such as stocks and high-yield bonds have attracted positive cash flows.  

In the meantime, the $5.2 million salary hedge fund genius ($26 million annualized salary given his reported 1 day of "work" per week) Larry Summers continues to advise President Obama that a further massive wealth transfer from taxpayers to large financial institutions is necessary via PPIP, the $750 billion "placeholder" in the first Obama budget, direct Fed purchase of Treasury debt, etc.

The Federal Open Market Committee reported yesterday a downbeat assessment of the economy.  

We know in retrospect that the jobless recovery from the mild 2001 U. S. recession was spurred by a lunatic housing and commercial real estate boom.  That boom that at some point entered bubble territory was a continuation of a bull market in real estate that began in the mid-1990s and that initially was simply a recovery from the bear market in real estate that tied into the S&L mess.  Similarly, the tech bubble in the late 1990s was an excess that grew out of a real boom and real innovation.

Where is the ongoing positive industry trend, even one without innovation, which will underpin and provide a theme for and employment/investment options, a true economic growth cycle?

The answer is obviously none, which is why Econblog Review is skeptical of the prospects for a strong economic recovery.  Printing money only goes so far and then fails.

Currently, the major leadership in the stock market is the financial sector due to your money going straight to the banksters' pockets.  The canary in this coal mine, beyond all the obvious matters, may be Northern Trust (NTRS).  NTRS is perhaps the best-regarded TARP recipient, yet it needed to raise equity at a significant discount to its stock trading range.  Its stock chart had begun looking very promising, and in a typical bull market, you want to buy the leader of the damaged sector that would be poised for a bull market recovery.

If NTRS needed to sell below-market price equity rather than debt, bad news on JPM could follow.  This has been a scripted recovery in the financials created solely by the continuing alliance between Big Finance and Big Government, an unholy alliance which continues to drain America of its money and its spirit.

Copyright (C) Long Lake LLC 2009