Jeremy Grantham's GMO: "The S&P Is Approximately 75% Overvalued; Its Fair Value Is 1100"

 It has been a while since we heard from the rational folks over at GMO. Which is why we are happy that as every possible form of bubble in the capital markets rages, Jeremy Grantham lieutenant Ben Inkster was kind enough to put the raging Fed-induced euphoria in its proper context. To wit "the U.S. stock market is trading at levels that do not seem capable of supporting the type of returns that investors have gotten used to receiving from equities. Our additional work does nothing but confi rm our prior beliefs about the current attractiveness – or rather lack of attractiveness – of the U.S. stock market.... On the old model, fair value for the S&P 500 was about 1020 and the expected return for the next seven years was -2.0% after inflation. On the new model, fair value for the S&P 500 is about 1100 and the expected return is -1.3% per year for the next seven years after inflation. Combining the current P/E of over 19 for the S&P 500 and a return on sales about 42% over the historical average, we would get an estimate that the S&P 500 is approximately 75% overvalued."Key highlights:Our recent client conference saw the unveiling of our new forecast methodology for the U.S. stock market, a methodology that we are extending to all of the other equity asset classes that we forecast. It is the result of a three-year research collaboration by our asset allocation and global equity teams, and involved work by a large number of people, although Martin Tarlie of our global equity team did a disproportionate amount of the heavy lifting. In a number of ways it is a “clean sheet of paper” look at forecasting equities, and we have broadened our valuation approach from looking at valuations through the lens of sales to incorporating several other methods. It results in about a 0.7%/year increase in our forecast for the S&P 500 relative to the old model. On the old model, fair value for the S&P 500 was about 1020 and the expected return for the next seven years was -2.0% after inflation. On the new model, fair value for the S&P 500 is about 1100 and the expected return is -1.3% per year for the next seven years after inflation. For those interested in the broader U.S. stock market, our forecast for the Wilshire 5000 is a bit worse, at -2.0%, due to the fact that small cap valuations are even more elevated than those for large caps.With that assumption, “true” ROE has been 6.5%, against a real return of 5.7% for the S&P 500 since 1970, which is certainly in the ballpark, if not quite spot on. You could simply stop there and declare that the S&P 500, which is currently trading at about 2.5 times book value, must therefore be overvalued by 25%. The problem is, even if book value has been half of economic capital on average over the last 40 years, how do we know it is still half of economic capital today?One way to get around the problem of accounting changes on book value is to look instead at return on sales. Sales have the nice feature that accounting changes have relatively little impact on them. Sales figures from 1970 were calculated on basically the same basis as sales figures today, and probably the same as they will be in 2050. Return on sales has looked fairly stable historically, and as you can see in Exhibit 3, we are significantly further above normal profit margin on sales than we are above normal ROEs.Combining the current P/E of over 19 for the S&P 500 and a return on sales about 42% over the historical average, we would get an estimate that the S&P 500 is approximately 75% overvalued. But the assumption of stable return on sales is problematic for a different reason than ROE. Book value is at least an accounting estimate of equity capital, and as imperfect as it is, return on equity capital is what is supposed to mean revert in a capitalistic system. There is not such a strong argument for reversion when it comes to return on sales. Historically it has been mean reverting, but a high return on sales for a given company does not necessarily mean that competition will follow. Intel has a high return on sales on its microprocessors, but being in a position to sell those microprocessors requires huge amounts of investment and intellectual capital. An economy driven by Intels could easily support higher profit margins than one of supermarkets. So there is a chance that this return on sales framework overstates the degree of overvaluation in the U.S.But enough about the details. The basic point for us remains the same – the U.S. stock market is trading at levels that do not seem capable of supporting the type of returns that investors have gotten used to receiving from equities. Our additional work does nothing but confirm our prior beliefs about the current attractiveness – or rather lack of attractiveness – of the U.S. stock market. To answer the question we get most often about our forecast – “How could you be wrong?” – there are a couple of ways we could be wrong. One of them is pleasant and implausible, the other is more plausible, but far less pleasant.The less pleasant way we could be wrong is if 5.7% real is no longer a reasonable guess at an equilibrium return for U.S. equities. If equity returns for the next hundred years were only going to be 3.5% real or so, today’s prices are about right. We would be wrong about how overvalued the U.S. stock market is, but every pension fund, foundation, and endowment – not to mention every individual saving for retirement – would be in dire straits, as every investors’ portfolio return assumptions build in far more return. Over the standard course of a 40-year working life, a savings rate that is currently assumed to lead to an accumulation of 10 times final salary would wind up 40% short of that goal if today’s valuations are the new equilibrium. Every endowment and foundation will find itself wasting away instead of maintaining itself for future generations. And the plight of public pension funds is probably not even worth calculating, as we would simply fi nd ourselves in a world where retirement as we now know it is fundamentally unaffordable, however we pretend we may have funded it so far. William Bernstein wrote a piece in the September issue of the Financial Analysts Journal, entitled “The Paradox of Wealth,” which explains far too plausibly why generally increasing levels of wealth might drive down the return on capital across the global economy. It’s well worth a read, although perhaps not on a full stomach, as it is one of the most quietly depressing pieces I have ever come across (and this is coming from someone who has spent the last 21 years reading Jeremy Grantham’s letters!).Full letter below (pdf):Average: Your rating: None Average: 5 (9 votes)

Monday Humor: Let Them Eat iPads

Two-and-a-half years ago, none other than the Fed's Bill Dudley explained why the inflating price of food was nothing to worry about because iPads were dropping in price (to which an audience member, rightly, exclaimed - "I can't eat an iPad"). Fast forward to today, and it seems, based on the highly scientific chart below, that the growth of food stamps (the benefit provided to members of our society that need caramel macchiatos or liquor - oh and food) correlates uncomfortably closely with the demand for iPads. Perhaps, Bill Dudley was right after all - we can eat our iPads...(h/t @Not_Jim_Cramer)Average: Your rating: None Average: 5 (7 votes)

"Bubble" In Riskiest Credit Exceeds 2008 Peak

AppId is over the quota
AppId is over the quota

As we warned two months ago, the bubble in credit markets (which if you ask anyone at the Fed, except Jeremy Stein, does not exist) is nowhere more evident than in the explosive growth of so-called cov-lite loans. While total volumes of cov-lite loans are already at record, as the FT reports, we now have 55% of new leveraged loans come in “cov-lite” form, far eclipsing the 29% reached at the height of the leveraged buyout boom just before the financial crisis. LBO multiples have reached record highs and demand for secutizations of these levered loans (CLOs) has surged on the back of the Fed's repressive push of investors into more-levered firms and more-levered instruments.

Via The FT,

The amount of riskier loans offering fewer protections to lenders contained in packages of debt sold to investors have hit record levels, amid resurgent lending markets and a continued thirst for higher returns.

...

as “covenant-lite” loans, or loans that come with fewer protections for lenders, have this year become the norm in the US, CLO managers have been forced to relax the limits on the percentage of the loans that can go into their deals.

Already, 55 per cent of new leveraged loans come in “cov-lite” form, eclipsing the 29 per cent reached at the height of the leveraged buyout boom just before the financial crisis.

...

“CLO managers have clearly taken notice of this trend, and structures have come with more relaxed caps on cov-lites this year.”

While the majority of CLOs sold last year had a 40 per cent limit on the amount of cov-lite loans that could be bought by the vehicles, a 50 per cent cap has become the industry standard in 2013, according to data from S&P Capital IQ.

At least three deals have come to market this year with a 70 per cent limit.

So wondering where the leverage is building this time? Well, record high margin debt in stocks and record high exposure to the riskiest (and least protected) credit structures once again... but it's different this time (as Moodys told us).

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Icahn Pours Cold Water On Stocks, Says "Market Could Easily Have A Big Drop"

Carl Icahn, who is currently speaking at the Reuters Global Investment Outlook Summit, just poured cold water over the Fed's 16,000 DJIA EOD price target.ICAHN: ‘VERY CAUTIOUS ON EQUITIES, MARKET COULD EASILY HAVE BIG DROP'ICAHN SAYS MANY COS. EARNINGS ARE A ‘MIRAGE,’ REUTERS SAYSICAHN: DOESN’T WANT FIGHT WITH APPLE,NO PLANS TO WALK AWAYBut... but.. two POMOs... Still, not too late for K-Fed and his merry unlimited balance sheet trading men to pull a record third POMO today and keep the "wealth effect" illusion going. The credit cycle is getting long in the tooth... Was it just a month ago that we warned "Carl Icahn's nightmare" was about to occur? - as the credit market became saturated...With the inability to proxy-LBO every and any firm, the fun ends - as Icahn just let everyone know... it's called a credit 'cycle' for a reason.Of course - it's all about carry..Average: Your rating: None Average: 4.9 (7 votes)

Hey, Is It A Problem That We're All On One Side Of The Boat?

Submitted by Charles Hugh-Smith of OfTwoMinds blog,It may appear to be safe for everyone to be on the same side of the boat, but the gunwale is awfully close to the water.Gee, we're all on one side of the boat now--long the S&P 500, NASDAQ, Dow, Eurozone stocks, the Nikkei, not to mention rental housing, junk bonds, bat quano, 'roo belly futures and the quatloo--basically every "risk-on" trade on the planet--is that a problem?The conventional (and convenient) answer is "nah--stocks can only rise from here." So what if market bears have fallen to 15% or less? So what if 85% of investors are on the same side of the boat? You'd be nuts to leave the winning side, the trend-is-your-friend side, the "don't fight the Fed" side, the side with all the "smart money."It may appear to be safe for everyone to be on the same side of the boat, but the gunwale is awfully close to the water. With the sea remarkably calm (i.e. no waves of turbulence or volatility), the fact that the boat is overloaded doesn't seem dangerous.But once the sea rises even a bit and water starts lapping over the gunwale, the "guaranteed safety" of the bullish trade might start looking questionable.When the boat takes on water quicker than anyone believes possible and capsizes, it will be "every punter for himself." But few longside punters are wearing lifejackets.This is all Investing 101: be wary of extremes of euphoria and confidence and being on the same side of the trade as everyone else. Yet everyone continues adding to their long positions without adding portfolio protection (puts, etc.):Three indicators suggest this move will reverse shortly, either in a "healthy correction" or a reversal of trend--which one cannot be determined until the downturn is underway.The rapid rise of the market has traced out a bearish rising wedge. This pattern usually leads to some sort of correction. The MACD histogram is divergent, dropping to the neutral line as the SPX has soared ever higher.Lastly, price has pulled away from both the 50-day and 200-day Moving Averages, suggesting the rubber band is remarkably stretched.Round-number attractors are close at hand. The SPX at 1798 is two measly points from the round-number attractor of 1800, and the Dow at 15,961 is a coin-toss away from its round-number attractor of 16,000. This level will invite great cheering ("new all time high," never mind adjusting for inflation) and also present an opportunity for the imbalanced boat to capsize.Even more astonishing, the crowd is also betting on volatility declining from extreme lows. Look at the put and call options on the VXX, a security that tracks the short-term volatility of the VIX: at the money December calls (bets volatility will rise by December 20) number 311 while puts (bets volatility will decline some time between now and December 20) number 11,265.Hey, you 311 bears! Join us 11,265 longs on the guaranteed winning side of the boat! Uh, thank you for the kind offer, but no thanks. Though the uncrowded side is uncomfortably above the water at this point, with 11,265 fattened Bulls on the side close to the waterline, the few on this side are less likely to be trampled when physics trumps psychology.Hey all you PhDs in Behavioral Economics: perhaps you could investigate the "how many angels can dance on the head of a pin?" nature of this psychological conundrum:the market can only do what few expect of it, so if everyone is looking for bubbles, there can't be any bubbles. But what else do you call a market that rises 10+% in a mere 6 weeks?In other words, if people are looking at the market and realizing it is dangerously close to capsizing, then it can't capsize because the market can only capsize if nobody expects it. The absurdity of this argument is revealed by turning it around: if Bulls confidently expect the market to keep rising, then how can it rise when everybody expects it to rise?The answer to the question "how many angels can dance on the head of a pin?" is the same as the answer to the question, "How many Bulls can crowd on one side of the trade without capsizing the boat if there are 311 Bears on the other side?" The absurdly concise answer is 11,265--at least for now. Average: Your rating: None Average: 4.1 (10 votes)

"Personal views" of Carl Icahn on the market

As wrote Carl Icahn on square Table of shareholdersPersonal views on reporting on my remarks re markets and APPL at the Reuters SummitReuters has been quite accurate that I am concerned about the level of the market.  But I made it clear on the conference call (and I believe that he told Reuters), that it is practically impossible to predict what will make a market in the short term.  There are too many variables.Often when we are concerned about the market, cover us up to a certain point, and it is one of those moments.  Interestingly, our investment fund had an annualized return of about 27% since January 1, 2009, and this return would have been larger if we had not covered.  As I have often said, collection of short-term market movements is like predicting how many sevens player of hot"will continue to roll.Apple, I told Reuters, I believe that Apple is not a Bank and that a big redemption must be implemented, but also taking advantage of the other ways that money can be made more productive.  While I do not ingest, at the risk of being pretentious, I think that in the area of capital there is very little that better then us and we hope to be able to participate, as a significant shareholder, with Apple, in this area.Average: Your rating: no Average: 3 (4 votes)

Guest Post: Personal Sacrifices: From JFK To The Federal Reserve

Submitted by Shawn Brown of SBrown & Asscociates,The Senate Banking Committee’s confirmation hearing for current Vice-Chair of the Federal Reserve began with Janet Yellen delivering prepared remarks.  Most observers likely tuned out well before the completion of the 2 ½ hours meeting to decide whether Yellen was worthy to succeed outgoing Chair Ben Bernanke and ascend to the top spot at the Fed. With the ongoing debacle of the Affordable Health Care website handcuffing Democrats, tough questions about QE, ZIRP, the oft talked about Taper and the possibility of reducing the Fed’s gargantuan $4 trillion balance sheet were verboten.  That left Republicans to address the elephant(s) in the room.  Predictably, it took nearly the entire hearing until a Senator from Nebraska offered his views about the damage being done by the various fiscal and monetary machinations undertaken to combat the Great Recession.  What happened, beginning just after the 2 hour point of the meeting, was both remarkable and revealing.   Senator Mike Johanns, who won’t seek reelection, began by thanking Dr. Yellen for stopping by his office prior to the confirmation hearing.  Yellen appeared startled when Johanns suggests that he “would like to continue, if I could with a few questions along the lines of what we talked about in my office.”   Senator Johanns said,“I found your testimony about asset bubbles to be interesting, just before the Chairman turned to me, I looked at where the Dow was at, it’s about 15,850.  An economy that quite honestly most everybody would recognize has too much unemployment, an economy where people continue to struggle, an economy where it’s kind of hard to see where the growth is going to be.  We are now starting to see real estate bidding wars just like the old days…Dr. Yellen I kind of look at these factors and I think I could go on and on with some other items and I must admit, what am I missing here?  I see asset bubbles and I think if you were to announce today that over the next 24 months you are going to bring that balance sheet down from $4 trillion to zero or $1 trillion, I think if you even said over the next 4 years we’re going to bring it down from $4trillion to zero you would see how big those asset bubbles are, wouldn’t you agree with me on that?”For obvious reasons, Dr. Yellen doesn’t want any part of a discussion that might include the mention of slowing the $85 billion per month of asset purchases and therefore any talk of a normalization of the Fed’s balance sheet is out of the question.  Logically, Yellen decides to check her notes and offer that housing is rebounding in only the hardest hit markets like Las Vegas, Phoenix and her part of the country (San Francisco Bay Area) where a substantial fraction of borrowers were/are underwater.  Whether she is waiting for her confirmation to tackle questions related to exiting QE, normalizing interest rates and ultimately reducing the Fed’s balance sheet remains to be seen but Senator Johanns decided to press for more disclosure.“Dr. Yellen, here is what I would offer and I think you would agree with me although you probably won’t want to agree with me in a public hearing setting.  But if I think if I were to say to you why don’t you announce today that you are going to draw this down over the next 24 months from $4 trillion to zero, I think you would see the impact of your policies on the value of real estate all across the United States not just in the hardest hit areas.  I think the real estate that I own and others own would go down in value.  I also think that the stock market would have the same sort of reaction that it has had when Chairman Bernanke just suggested that there might be a phase down here.Here’s what I’m saying, I think the economy has gotten used to the sugar that you put out there and I just worry that we are on a sugar high and that is a very dangerous thing for the little person out there who is just trying to pay the bills and maybe put a buck away for retirement.  The last thing I will say, the flip side of your policies that you are advocating for are very, very hard on certain segments of our society.  You know, explain to the Senior Citizen who is just hoping that CD will earn some money so they don’t have to dig into the principal what impact you’re having on a policy that says for as far as the eye can see or foreseeable future keep interest rates low, they are hurt by that policy.”Yellen’s candid admission was alarming, “I agree and I understand that savers are hurt by this policy (ZIRP, emphasis mine)… it is important to recognize that savers wear a lot of different hats, they play many different roles in the economy.”   Yellen invokes the spirit of the 35th President of the United States in her response to Senator Johanns’ accusations that Fed policies are robbing savers and Seniors, “They may be retirees who are hoping to get part-time work in order to supplement their income.  They may be people who have children who are out of work and who are suffering because of that or grandchildren who are going to college and coming out of college and hope to be able to put their skills to work...When those people who worry about our policies, thinking about themselves as savers, taking into account the broader array of interests they have even though they may harm them in that respect are broadly beneficial to them as I believe they are to all Americans.”JFK, at his inauguration in 1961 said, “Ask not what your country can do for you but what you can do for your country.”  Janet Yellen is almost certainly going to be the next Chair of the Federal Reserve, her comments about self-sacrifice, especially for savers and Seniors should sound an alarm that something terrible this way comes. forward to 2:08:30 to watch this must see segment most missed.Average: Your rating: None Average: 5 (20 votes)

The Failure Of Abenomics In One Chart... When Even The Japanese Press Admits "Easing Is Not Working"

Since late 2012 Zero Hedge has been very critical of Japan's Abenomics experiment, and its first and only real arrow: a massive increase in the monetary base thanks to the BOJ's shock and awe QE announced in April, resulting in the collapse of the Yen (although in a not zero sum world this means ever louder complaints from US exporters such as Ford competing with Japanese companies), a soaring Nikkei (if only through May), and what was expected to be an economic renaissance as a result of a return to stable 2% inflation. We repeatedly warned that the only inflation anyone would see in Japan is in imported energy costs and food prices, which in turn would crush real disposable income especially once nominal wage deflation accelerated, which it has for the past 16 months straight. So far this has happened precisely as warned. Another thing we warned about is that the result of the bank reserves tsunami - just like in the US - lending in Japan would grind to a halt, as everyone and their grandmother sought to invest the resulting excess deposits in risk markets as exemplified best by JPMorgan's CIO division. Today, with the traditional one year delay (we assume they had to give it the benefit of the doubt), the mainstream media once again catches up to what Zero Hedge readers knew over a year ago, and blasts the outright failure that is Abenomics, but not only in the US (with the domestic honor falling to the WSJ), but also domestically, in a truly damning op-ed in the Japan Times.We will let readers peruse the WSJ's "Japan's Banks Find It Hard to Lend Easy Money: Dearth of Borrowers Illustrates Difficulty in Japan's Program to Increase Money Supply" on their own. It summarizes one aspect of what we have been warning about - namely the blocked monetary pipeline, something the US has been fighting with for the past five years, and will continue fighting as long as QE continues simply because the "solution" to the problem, i.e., even more QE, just makes the problem worse. We will however, show the one chart summary which captures all the major failures of the BOJ quite succinctly.More importantly, we will repost the Japan Times Op-Ed from last night, titled "BOJ’s money mountain growing but debt may explode" because it not only copies all we have said over the past year, but is a dramatic reversal from the Japanese population eagerly drinking Abe's Koolaid long after its expiration date. Because once the media starts asking questions, the broader population can't be far behind.From Japan Times, November 17, 2013 highlights oursBOJ’s money mountain growing but debt may explodeby Reiji YoshidaHaruhiko Kuroda hit the ground running when he was appointed by Prime Minister Shinzo Abe in March to take charge of the Bank of Japan.Out of the blue, the central bank’s new governor unveiled a super-aggressive easing policy the next month to double the nation’s monetary base in just two years. He said the BOJ would buy more than ¥7 trillion in long-term Japanese government bonds per month to flood the financial system with money to end more than a decade of deflation.The BOJ’s nine-member Policy Board unanimously supported Kuroda’s goal of stoking 2 percent inflation in two years — a surprise about-face from its stance under his predecessor, Masaaki Shirakawa, who was concerned about the potential side effects of embracing such radical quantitative easing.More than six months have passed. How has the BOJ’s strategy changed Japan’s financial markets and the real economy?Critics say Kuroda’s monetary easing scheme isn’t working, although most of the public apparently believes otherwise.There are growing signs of inflation, but not the sort heralding the start of Abe’s much-advertised recovery and rising wages. Instead, imported fuel and other products have become more expensive because of the weak yen ushered in by Kuroda and Abe, and this bodes ill for the public’s living standards.Meanwhile, Kuroda’s aggressive plan is allowing the debt-ridden government to issue fresh bonds continuously, further increasing the likelihood of a fiscal crisis, they said.“People have been deceived by ‘Abenomics,’ ” Yukio Noguchi, a prominent economist and adviser to Waseda University’s Institute of Financial Studies, told The Japan Times in a recent interview.“Monetary easing is not working, and it’s going nowhere,” Noguchi said.Since April, the BOJ has been gobbling up JGBs from banks and the open market. Its purchases amount to roughly 70 percent of the value of all new JGBs issued.But the banks are just stowing that money in their accounts at the BOJ because they can’t find any companies interested in borrowing it.“There is no demand for funds on the part of businesses. That’s why the monetary easing is not working,” Noguchi said.Japan’s monetary base — the sum of cash in circulation plus banks’ current account balances at the BOJ — surged from 23.1 percent in April to 45.8 percent in October, thanks to the BOJ’s aggressive operations.But its money stock — the total amount of monetary assets available in an economy including credit created by bank loans, but excluding deposits held by financial institutions and the central government — only rose to 3.3 percent from 2.3 percent in the period.This means banks are just depositing the massive funds provided by the BOJ in their own accounts at the central bank. The unloaned cash is thus having little affect on the real economy.Meanwhile, the long-term interest rate, which theoretically factors in an expected rate of inflation, has fallen and is dwindling at an ultralow level of around 0.6 percent.This signals that the market does not yet seriously believe that inflation in Japan will reach Kuroda’s 2 percent goal, said Kazuhito Ikeo, an economics professor at Keio University.“When the policy interest rate has effectively fallen to zero, monetary policy won’t work much any more,” Ikeo said in a recent interview.Ikeo believes the economy is stuck in a rut because its potential for economic growth has declined and monetary measures alone can’t solve the problem, he said.“I think it has become clearer that there is a limit to what monetary policy can do,” Ikeo said.Much of the public believes the drastic easing measures adopted by Abe and Kuroda helped weaken the yen and benefitted exporters. The yen-dollar rate has fallen from around 78 to about 100 over the past 14 months. This helped send the Nikkei stock index soaring from December, one of the main reasons Abenomics has public support.But the yen started depreciating last fall, long before Kuroda’s widely proposed takeover at the BOJ officially took place in April, Noguchi said.Abe was just “lucky” to see the yen fall, Noguchi claimed, crediting the easing of the eurozone debt crisis last fall rather than clear signs that Abe’s Liberal Democratic Party was getting ready to boot the unpopular Democratic Party of Japan from power.In September, Japan’s consumer price index rose 0.7 percent from the same month last year to log its fourth consecutive rise, hinting at inflation. The uptick, however, was misleading. It was largely caused by the costly rise in energy imports, exacerbated by a weaker yen.This, of course, is not a sign of economic recovery, both Noguchi and Ikeo said.Workers’ real wages fell 2 percent in August compared with the same month the previous year, logging two drops in a row. Inflation without wage hikes will only erode people’s living standards.“It is wages that matter. If prices go up without a rise in wages, the real income of the people just goes down,” Noguchi said.Abe apparently is well aware of this risk and has repeatedly urged top business leaders in Keidanren, the nation’s largest business lobby, to push for wage hikes to generate “a virtuous cycle” of raises and economic expansion.Noguchi calls Abe’s approach “sheer nonsense” because Japan is not a planned economy and the government thus cannot force businesses to raise wages against their will.Probably the biggest risk with Abenomics, however, is a potential crash in JGB prices that would cause long-term interest rates to spike and gut the debt-laden government.Ikeo pointed out that the BOJ’s massive bond purchases are in fact helping the debt-ridden government finance itself, even if the central bank claims this is not its intention. If the BOJ keeps up this charade, confidence in JGBs might crash, Ikeo said.“Soon or later, concerns over fiscal sustainability will emerge. You can’t rule out the possibility of a surge in the (long-term) interest rate at a critical point,” he said.The resulting surge in debt-serving costs would devastate the government, which has already racked up a public debt totaling almost 200 percent of gross domestic product — the highest of all developed countries. Nearly half of Japan’s ¥92.6 trillion general account for fiscal 2013 is barely being financed by fresh JGB issues.According to Noguchi’s simulation, if the average JGB yield jumps to 4 percent in fiscal 2014, debt-serving costs will leap to a staggering ¥50 trillion in fiscal 2025 alone, which is more than half the size of the fiscal 2013 budget.“This is nothing but fiscal bankruptcy,” Noguchi warned.For some two decades, fears and rumors have swirled about just such a scenario. Economists who warned of the impending crisis were labeled alarmists while speculators who bet on it always lost.That situation may soon change.Japan’s trade balance has turned into a deficit and the current account surplus has shrunk. Japan posted a surplus of ¥3.05 trillion in the current account for the April-September half, the second-lowest level since 1985, when comparable data became available.Ikeo warned that if the current account balance sinks into red and people are convinced the yen will no longer strengthen, investors may start buying foreign bonds and ditch their JGBs.Another possible danger is, ironically, a full-fledged economic rebound, which would also push up long-term interest rates, Ikeo said.The government needs to walk “a dangerous narrow path” of seeking a recovery while trying to prevent interest rates from surging at the same time, he said.Average: Your rating: None Average: 4.8 (11 votes)

This Explains A Lot

Moments ago, the following news broke across various news feeds: BREAKING: Princeton U. to distribute meningitis vaccine not approved in the US to halt campus outbreak.— NBCWashington (@nbcwashington) November 18, 2013This is great news. But we wonder: considering the list of such prominent Econ department graduates as:Ben Bernanke – professor of economics and public affairs, Chairman of the Federal Reserve BoardPaul Krugman – professor of economics, New York Times columnist,winner of the John Bates Clark Medal, Nobel Prize in economics (2008)Alan Blinder- Vice Chairman of the Federal Reserve Board, 1994–96... couldn't this vaccine have been distributed some years earlier?Average: Your rating: None Average: 5 (10 votes)

Ron Paul: "The Fed Steals From The Poor And Gives To The Rich"

Submitted by Ron Paul via The Free Foundation blog,Last Thursday the Senate Banking Committee held hearings on Janet Yellen's nomination as Federal Reserve Board Chairman. As expected, Ms. Yellen indicated that she would continue the Fed’s “quantitative easing” (QE) polices, despite QE’s failure to improve the economy. Coincidentally, two days before the Yellen hearings, Andrew Huszar, an ex-Fed official, publicly apologized to the American people for his role in QE. Mr. Huszar called QE "the greatest backdoor Wall Street bailout of all time.”As recently as five years ago, it would have been unheard of for a Wall Street insider and former Fed official to speak so bluntly about how the Fed acts as a reverse Robin Hood. But a quick glance at the latest unemployment numbers shows that QE is not benefiting the average American. It is increasingly obvious that the Fed’s post-2008 policies of bailouts, money printing, and bond buying benefited the big banks and the politically-connected investment firms. QE is such a blatant example of crony capitalism that it makes Solyndra look like a shining example of a pure free market!It would be a mistake to think that QE is the first time the Fed's policies have benefited the well-to-do at the expense of the average American. The Fed’s polices have always benefited crony capitalists and big spending politicians at the expense of the average American.By manipulating the money supply and the interest rate, Federal Reserve polices create inflation and thereby erode the value of the currency. Since the Federal Reserve opened its doors one hundred years ago, the dollar has lost over 95 percent of its purchasing power —that’s right, today you need $23.70 to buy what one dollar bought in 1913!As pointed out by the economists of the Austrian School, the creation of new money does not impact everyone equally. The well-connected benefit from inflation, as they receive the newly-created money first, before general price increases have spread through the economy. It is obvious, then, that middle- and working-class Americans are hardest hit by the rising level of prices.Congress also benefits from the devaluation of the currency, as it allows them to increase welfare- and warfare-spending without directly taxing the people. Instead, the increase is only felt via the hidden “inflation tax.” I have often said that the inflation tax is one of the worst taxes because it is hidden and because it is regressive. Of course, there is a limit to how long the Fed can facilitate big government spending without causing an economic crisis.Far from promoting a sound economy for all, the Federal Reserve is the main cause of the boom-and-bust economy, as well as the leading facilitator of big government and crony capitalism. Fortunately, in recent years more Americans have become aware of how the Fed is impacting their lives. These Americans have joined efforts to educate their fellow citizens on the dangers of the Federal Reserve and have joined efforts to bring transparency to the Federal Reserve by passing the Audit the Fed bill.Auditing the Fed is an excellent first step toward restoring a monetary policy that works for the benefit of the American people, not the special interests. Another important step is to repeal legal tender laws that restrict the ability of the people to use the currency of their choice. This would allow Americans to protect themselves from the effects of the Fed’s polices. Auditing and ending the Fed, and allowing Americans to use the currency of their choice, must be a priority for anyone serious about restoring peace, prosperity, and liberty. Average: Your rating: None Average: 4.9 (28 votes)

Bitcoin Trades Over $1000 On BTC China Exchange And Crashes 30% ... Then Rebounds

Mise à jour : suite à la chute de 30 % à moins de 600 $ en quelques secondes, BTC promptement remonter à 800 $ en quelques secondes, comme l'ensemble du marché BTC est maintenant juste une arène algo.* * *Mettre au repos les craintes qu'audition sénatoriale d'aujourd'hui sur devises numériques serait cratère Bitcoin (si dans l'immédiat), il y a des moments la monnaie numérique au prix en USD sur l'échange de Mt Gox, est passé à un autre prix inédite, frapper des moments de 850 $ il y a, soit environ 50 % supérieure à où il a été ce matin.Mais vous n'avez rien vu encore.Parce que dans le même temps, le prix libellés en Renminbi pour Bitcoin sur Chine du BTC, a la monnaie numérique à 6780CNY. À un taux de change USDCNY de 6.09, cela signifie un prix plus de 1100 $ par Bitcoin.Et comme le graphique de deux jours représente, en quelque sorte Bitcoin est passé de 50 % en 2 jours, il a doublé sur le marché chinois.Naturellement, à ce stade nous proposerions ramasser les 20 % + libre arb, cependant on ne sait pas comment on peut court CNY au prix de jambe de la transaction, ou si, d'ailleurs, il y a même un marché réel et liquid dans la monnaie.Et comme si pour prouver BTC tête juste nous, comme le montre le tableau final, pris littéralement quelques instants avant que nous allions publier cet article, BitCoin touché 900 $ sur Mt Gox... et rapidement plongé à un peu moins de 600 dollars, entrant dans un marché baissier en l'espace de secondes sur ce qui semble être environ 10 000 métiers.Et une meilleure carte de la dégringolade qui envoyé BTC inférieur de 33 % de 900 $ à 600 $ en quelques secondes :Moyenne : Votre notation : aucun moyenne : 4.9 (14 votes)

Marc Faber Exposes The Consequences Of A Dysfunctional Political System

Submitted by Marc Faber via The Daily Reckoning blog,As H.L. Mencken opined, 'The most dangerous man to any government is the man who is able to think things out for himself, without regard to the prevailing superstitions and taboos. Almost inevitably he comes to the conclusion that the government he lives under is dishonest, insane, and intolerable.'It is no wonder that, according to a Gallup Poll conducted in early October, a record-low 14% of Americans thought that the country was headed in the right direction, down from 30% in September. That's the biggest single-month drop in the poll since the shutdown of 1990. Some 78% think the country is on the wrong track.Some readers will, of course, ask what this expose about the political future has to do with investments. It has nothing to do with what the stock market will do tomorrow, the day after tomorrow, or in the next three months. But it has a lot to do with the future of the US (and other Western democracies where socio-political conditions are hardly any better).I have written about the consequences of a dysfunctional political system elsewhere. In May 2011 I explained how expansionary monetary policies had favoured what Joseph Stiglitz called 'the elite' at the expense of ordinary people by increasing the wealth and income of the 'one percent' far more than that of the majority of the American people.click to enlargeI also quoted at the time Alexander Fraser Tytler (1747-1813), who opined as follows: 'A democracy cannot exist as a permanent form of government. It can only exist until voters discover that they can vote themselves largesse from the Public Treasury. From that moment on, the majority always votes for the candidates promising the most benefits from the Public Treasury with the result that a democracy always collapses over loose fiscal policy, always followed by dictatorship'.Later, Alexis de Tocqueville observed: 'The American Republic will endure until the day Congress discovers that it can bribe the public with the public's money.'To be fair to Mr. Obama, the government debt under his administration has expanded at a much slower pace in percentage terms than under the Reagan administration and the two Bush geniuses. In fact, as much as I hate to say this, Mr. Obama has been (or has been forced to be) a fiscal conservative.click to enlargeHowever, what 18th and 19th century economists and social observers failed to observe is that democracies can also collapse over loose monetary policies. And in this respect, under the Obama administration, the Fed's balance sheet has exploded. John Maynard Keynes got it 100% right when he wrote:'By a continuing process of inflation, Governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method they not only confiscate, but they confiscate arbitrarily; and, while the process impoverishes many, it actually enriches some...'Those to whom the system brings windfalls...become 'profiteers' who are the object of the hatred... The process of wealth getting degenerates into a gamble and a lottery... Lenin was certainly right. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.'The Fed takes great pride in the fact that US household wealth has now exceeded the 2007 high. However, I was pleasantly surprised when I recently attended a presentation by Larry Lindsey, at my friend Gary Bahre's New Hampshire estate. He unmistakably showed, based on the Fed's own Survey of Consumer Finance and Flow of Funds, that the recovery in household wealth has been extremely uneven.click to enlargeReaders should focus on the last column of Table 1, which depicts the change in household wealth between 2007 and 2013 by wealth percentile. As can be seen, the bottom 50% of the population is still down more than 40% in terms of their 'wealth' from the 2007 high. (Lindsey is a rather level-headed former Member of the Board of the Governors of the Federal Reserve System, in which capacity he served between 1991 and 1997.)Besides the uneven recovery of household wealth among different wealth groups, a closer look at consumer credit, which is now at a record level, is also revealing. Furthermore, consumer credit as a percentage of disposable personal income is almost at the pre-crisis high.But what I found most interesting is how different income and wealth groups adjusted their outstanding total debt (including consumer credit, mortgage debt, etc.) following the crisis.Larry Lindsey showed us a table - again based on the Fed's own Survey of Consumer Finance and Flow of Funds data - which depicts total debt increases and decreases (in US$ billions) among these different income and wealth groups.I find it remarkable that the lower 40% of income recipients and the lower 50% of wealth owners actually increased their debts meaningfully post-2007. In other words, approximately 50% of Americans in the lower income and wealth groups who are both voters and consumers would seem to be more indebted than ever. A fair assumption is also that these people form the majority of the government's social benefits recipients.Now, since these lower income and wealth groups increased their debts post-2007 and enjoyed higher social benefits, they were also to some extent supporting the economy and corporate profits. But what about the future?Entitlements are unlikely to expand much further as a percentage of GDP, and these lower-income recipients' higher debts are likely to become a headwind for consumer spending. Simply put, in my opinion, it is most unlikely that US economic growth will surprise on the upside in the next few years.It is more likely there will be negative surprises.Average: Your rating: None Average: 4.8 (19 votes)

A Peek Beneath Tesla's Non-GAAP Hood Reveals Nothing But Cockroaches

Back in August, we joked that in the Tesla Q2 earnings press-release the one most often used word was Non-GAAP (43 times). Conveniently, we provided a word cloud of the company's Q2 release for the visual learners to grasp just this:That TESLA's earnings were an epic non-GAAP adjustment joke was only further cemented by the fact that the company itself provided a bridge between its GAAP and Non-GAAP earnings. Needless to say, the bottom line number was not kind to GAAP resulting in a nearly $60 million Net Income swing depending on which set of numbers was used.Of course, back then TSLA stock was merely the latest bubble frenzy so pointing out the obvious, namely that the realty behind the numbers presented for public consumption was far uglier than most expected, was utterly meaningless.Now, the euphoria is over and the story is different, as not only has the company's self-reported and erroneous record of making the safest car in the world gone up in, well, flames but the momentum appears terminally broken and following today's most recent 11% drop, TSLA stock could soon be headed for double digit territory again.More importantly, however, the end of the momentum story means that those who care about such anachronisms as fundamentals can once again look beneath the hood of TSLA to get the true story of what is really going.There, with the help of Bloomberg's forensic accounting sleuth Jonathan Weil one uncovers nothing but cockroaches.From Weil:Most companies that play the non-GAAP game goose their numbers by excluding expenses. Tesla does this, too. It backs out stock-based compensation, for example. But the biggest kick to its non-GAAP earnings comes from an increase in top-line revenue.The company reported third-quarter non-GAAP revenue of $602.6 million, which was about 40 percent more than its GAAP revenue. It achieved such a boost by transforming $171.2 million of liabilities into sales.Here’s how it worked. In April, Tesla started a new financing program under which customers have the option to sell their vehicles back to the company after three years for guaranteed minimum amounts. The accounting rules say Tesla can’t recognize all of the revenue immediately in those instances and must account for such transactions as leases. So after Tesla takes customers’ cash, it records liabilities for “deferred revenue” and “resale value guarantee” on its balance sheet.Mahoney noted two main problems with including so much of those amounts in non-GAAP revenue. Some customers wouldn’t have chosen Tesla cars were it not for the financing program. So the non-GAAP revenue isn’t comparable to Tesla’s sales before the program began, and it may overstate the true growth and demand. Plus, by adding back the resale-value guarantee, the company “assumes that nobody is going to return the vehicle, for purposes of the non-GAAP revenue,” he said.Lots of companies use gimmicky benchmarks in their earnings releases. What makes Tesla special is that it behaves as if it doesn’t know the proper way to present its non-GAAP numbers. In an ironic twist, two attorneys at Wilson Sonsini Goodrich & Rosati, which helped take Tesla public in 2010, penned a lengthy article in 2008 explaining the legal requirements and best practices for earnings releases; it’s still on the law firm’s website.“GAAP comparison numbers in an earnings release must be set forth with equal or greater prominence to the non-GAAP numbers,” attorneys Steven Bochner and Richard Cameron Blake wrote. “For instance, if an issuer announces GAAP and non-GAAP earnings per share in its press release, it should report the GAAP earnings per share prior to the non-GAAP earnings per share.”The bigger concern here should be what some investors call the “cockroach theory": Where there is one problem, there probably are more. Tesla has disclosed compliance failures before. In March, its management concluded that Tesla’s ‘‘internal control over financial reporting was ineffective as of Dec. 31, 2012.’’ Its auditor, PricewaterhouseCoopers LLP, concurred. In a related matter, Tesla had to restate its cash-flow numbers for much of 2011 and 2012. In its latest quarterly report, filed last week, Tesla said its controls still weren’t effective as of Sept. 30.  Because the only thing better than one flaming cockroach are many flaming cockroaches.Weil's conclusion:None of these flubs has been especially damaging. Yet taken together, they suggest a company that lacks basic skills in accounting and disclosure, which could be a serious problem for a young manufacturer with a $17 billion stock-market value that loses money and trades for 9.5 times its revenue for the past four quarters. The next time Tesla messes up because of poor controls, the consequences could be worse.As Tesla said in its latest annual report: ‘‘If we are unable to assert that our internal control over financial reporting is effective, or if our independent registered public accounting firm is unable to express an opinion on the effectiveness of our internal controls, we could lose investor confidence in the accuracy and completeness of our financial reports, which would have a material adverse effect on the price of our common stock.’’Oh well, at least the fully spontaneously combusted Tesla Model S (because the safest car in the world is never expected do something as silly as run over a metal object while on the road) makes for a very handy, if slightly smoldering, paperweight.Average: Your rating: None Average: 4.5 (10 votes)

The report pre-election jobs October 2012 was rigged

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Home The October 2012 Pre-Election Jobs Report Was Faked Submitted by Tyler Durden on 11/18/2013 22:29 -0500

Barack ObamaBLSBureau of Labor StatisticsCensus BureauFederal ReserveGeneral ElectricHFTPresident ObamarecoveryRick SantelliUnemployment


 

On Friday October 5, 2012, the BLS released what was arguably the most important report of Obama's first term: the final jobs number, and unemployment rate before the November 2012 presidential election. As so many predicted, it "plunged" from 8.1% to 7.8% allowing the president to conduct countless teleprompted speeches praising the success of his economic recovery. It also served as the basis for the infamous Jack Welch tweet: "Unbelievable jobs numbers..these Chicago guys will do anything..can't debate so change numbers" and prompted the pro-Obama media to quickly brand all those who questioned it as conspiracy theorists. The Atlantic did perhaps the most exemplary job in its task to discredit the "random anonymous cranks" who challenged the bullshit spewed by the administration's manipulative economic data reporting apparatus. From The Atlantic's Unemployment Plummets To 7.8%.

The unemployment rate plunged to 7.8 percent in September, its lowest level since Barack Obama took office in 2009. In addition, the Bureau of Labor Statistics made big revisions to data from previous months, showing huge increases in the number of jobs being created over the last three months. Total employment from the "household survey" also showed an increase of 873,000 jobs last month, the biggest one-month jump since June of 1983.

 

Not only has the unemployment rate gone down, but the report also undercut one of the key criticisms of previous drops in the number—that it was because the "participation rate" went down. That rate has actually gone back up, which means unemployment is down because people are actually getting work, not because they've stopped looking. Public sector jobs also went up, as did the average number of hours worked per week.

 

This report looks so good for President Obama that conspiracy theorists are already alleging that the fix is in. And not just random anonymous cranks, but supposedly serious business people, like former General Electric CEO Jack Welch.

 

Unbelievable jobs numbers..these Chicago guys will do anything..can't debate so change numbers

— Jack Welch (@jack_welch) October 5, 2012

 

He wasn't alone:

 

No, there's nothing at all curious about the last jobs report diving to 7.8% unemployment before the election.

— Keith Urbahn (@keithurbahn) October 5, 2012

Total data manipulation. Such a farce

— zerohedge (@zerohedge) October 5, 2012

 

Rick Santelli of CNBC, noting that the rate has dropped below the magical number of 8 percent, said,  "You can let America decide how they got there." When one side is convinced that something smells rotten, you know it's good news for the other guy.

 

As we noted his comment at the time...

 

"the current trend of these [jobs] numbers is so different from the current trend of any other numbers. If you were looking for conspiracies (and I'm not), you only need to change a certain number."

 

 

Of course, who cares if the "conspiracy theories" were substantiated by actual data. Such as the following from the same day:

An Odd Arima-X-12 Statistical Aberration?

 

Here's a peculiar statistical aberration:

Household Survey people employed: +873,000 (source)Part-time jobs for economic reasons: +582,000 (source)

-> 582,000 divided by 873,000 = 0.666666666666*

 

Aka: precisely two thirds. Whatever are the odds... Goalseeking much Arima-X-12?

Or this also from the same day:

Reason For Today's Unemployment Rate Plunge: Part-Time Jobs For Economic Reasons Surge Most Since QE1 Announcement

 

We already noted the absolutely stunning surge in reported Household Survey jobs which "added" 873,000 jobs, or the most since 2003 and the second most in the past decade, which was just a little bit off the Household Survey used in the monthly NFP jobs changes, which came at 114,000, or about 8 times less. But what was the reason for this epic jump in Household survey jobs? Simple, and those who have read our series on America's transition to a part-time worker society know the answer. The reason is that the number of part-time people employed for economic reasons soared by 582,000 to 8,613,000, the most since October 2011, and the largest one month jump since February 2009, when "restoring" confidence in the economy was all the rage... and just before the Fed announced the full blown QE1 in March of 2009. Odd symmetry.

 

 

So putting it all together, what does this mean for the true state of the US economy? Recall back in September one of our Charts of the Day was the number of Unemployed and Underemployed for the month of August, which was 25.8 million. Readers may be surprised to learn that when putting it all together, in September this number increased to 26.2 million.

 

Or this also from the same day:

The Strangest Number In Today's Jobs Number

 

While we already presented the explanation for the dramatic drop in today's unemployment report (almost entirely driven by the surge in part-time jobs for economic reasons, hardly a thing to be proud of as more and more full time jobs, especially those on Wall Street, are a thing of the past, while the transition to a part-time worker society has been documented extensively in the past here), there is another number that is by far the most perplexing in today's NFP dataset: that showing the employment of workers in the 20-24 year age category (both seasonally adjusted and unadjusted). See if you can spot the outlier in the chart below.

 

 

And many more other such reports posted on this site on the same day, alleging fabrication which as it turns out courtesy of the just released stunning disclosure by the Post, were absolutely spot on since the number was, you guessed it, manipulated.

The Post's John Crudele reveals the details on a data manipulation scandal, which we exposed back in October 2012, but this time with the actual "dirty details" that has the potential to be so big, Obama will need to start another YouTube-fabricated, false flag war just to distract from this latest scandal.

From The Post's "Census ‘faked’ 2012 election jobs report"

In the home stretch of the 2012 presidential campaign, from August to September, the unemployment rate fell sharply — raising eyebrows from Wall Street to Washington.

 

The decline — from 8.1 percent in August to 7.8 percent in September — might not have been all it seemed. The numbers, according to a reliable source, were manipulated.

 

And the Census Bureau, which does the unemployment survey, knew it.

 

Just two years before the presidential election, the Census Bureau had caught an employee fabricating data that went into the unemployment report, which is one of the most closely watched measures of the economy.

 

And a knowledgeable source says the deception went beyond that one employee — that it escalated at the time President Obama was seeking reelection in 2012 and continues today.

 

“He’s not the only one,” said the source, who asked to remain anonymous for now but is willing to talk with the Labor Department and Congress if asked.

 

The Census employee caught faking the results is Julius Buckmon, according to confidential Census documents obtained by The Post. Buckmon told me in an interview this past weekend that he was told to make up information by higher-ups at Census.

 

Ironically, it was Labor’s demanding standards that left the door open to manipulation.

 

Labor requires Census to achieve a 90 percent success rate on its interviews — meaning it needed to reach 9 out of 10 households targeted and report back on their jobs status.

 

Census currently has six regions from which surveys are conducted. The New York and Philadelphia regions, I’m told, had been coming up short of the 90 percent.

 

Philadelphia filled the gap with fake interviews.

 

“It was a phone conversation — I forget the exact words — but it was, ‘Go ahead and fabricate it’ to make it what it was,” Buckmon told me.

 

Census, under contract from the Labor Department, conducts the household survey used to tabulate the unemployment rate.

 

Interviews with some 60,000 household go into each month’s jobless number, which currently stands at 7.3 percent. Since this is considered a scientific poll, each one of the households interviewed represents 5,000 homes in the US.

 

Buckmon, it turns out, was a very ambitious employee. He conducted three times as many household interviews as his peers, my source said.

 

By making up survey results — and, essentially, creating people out of thin air and giving them jobs — Buckmon’s actions could have lowered the jobless rate.

 

Buckmon said he filled out surveys for people he couldn’t reach by phone or who didn’t answer their doors.

 

But, Buckmon says, he was never told how to answer the questions about whether these nonexistent people were employed or not, looking for work, or have given up.

 

But people who know how the survey works say that simply by creating people and filling out surveys in their name would boost the number of folks reported as employed.

 

Census never publicly disclosed the falsification. Nor did it inform Labor that its data was tainted.

 

“Yes, absolutely they should have told us,” said a Labor spokesman. “It would be normal procedure to notify us if there is a problem with data collection.”

 

* * *

 

During the 2010 Census report — an enormous and costly survey of the entire country that goes on for a full year — I suspected (and wrote in a number of columns) that Census was inexplicably hiring and firing temporary workers.

 

I suspected that this turnover of employees was being done purposely to boost the number of new jobs being report each month. (The Labor Department does not use the Census Bureau for its other monthly survey of new jobs — commonly referred to as the Establishment Survey.)

 

Last week I offered to give all the information I have, including names, dates and charges to Labor’s inspector general.

 

I’m waiting to hear back from Labor.

 

I hope the next stop will be Congress, since manipulation of data like this not only gives voters the wrong impression of the economy but also leads lawmakers, the Federal Reserve and companies to make uninformed decisions.

Don't hold your breath: the reason is that this particular instance manipulation is merely the tip of the iceberg - since virtually all data out of the BLS is manipulated and fabricated, as we report each and every month, the last thing the legislative and certainly the executive want is to offer the general public a glimpse of just how deep the rabbit hole goes. Because it goes very, very deep.

One can only hope this forces at least some more people to wake up about the sad farce this once great nation has devolved to in its quest to destroy the middle class.

The only real good news, as noted above, is that yet another conspiracy theory is forever cast into the void, and going forward the only thing the random, but manipulated, number generator out of the Bureau Of Lies And Subterfuge will be good for, is to prod the just as pathetic HFT algos into a buying frenzy when month after month the economy is painted with rosy brushes, even as millions forever drop out of the labor force, never to return.

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Similar Articles You Might Enjoy: 2012 Year In Review - Free Markets, Rule of Law, And Other Urban LegendsTrimTabs Continues Throwing Sand In The Eyes Of Fake Economic DataEric Sprott On America's Great Endangered Species: "The 99%"Pre-election America Reads In Red And BlueWill Obama Strike Libya In Delayed Pre-election War? Comment viewing options Flat list - collapsedFlat list - expandedThreaded list - collapsedThreaded list - expanded Date - newest firstDate - oldest first 10 comments per page30 comments per page50 comments per page70 comments per page90 comments per page150 comments per page200 comments per page250 comments per page300 comments per pageSelect your preferred way to display the comments and click "Save settings" to activate your changes. Mon, 11/18/2013 - 22:34 | 4168299 max2205

Barry needs to go to a FEMA Camp....now

Login or register to post comments Mon, 11/18/2013 - 22:36 | 4168305 Alpo for Granny

I AM SHOCKED! SHOCKED I TELL YOU!!!

Login or register to post comments Mon, 11/18/2013 - 22:42 | 4168330 HoofHearted

I picked the wrong week to stop sniffing glue!

It's gonna get worse before it gets better. Of that we can be sure.

Login or register to post comments Mon, 11/18/2013 - 22:49 | 4168358 dryam

If you like your job numbers, you can keep.......oh never mind.

Login or register to post comments Mon, 11/18/2013 - 23:06 | 4168394 NoDebt

"Philadelphia filled the gap with fake interviews"

Philadelphia, huh?  Same place that entire voting precincts went 100% (OR MORE!) for Obama in 2012?  Same place they threw out all non-Democratic polling observers ON ELECTION DAY before the GOP got them back in (hours later) by emergency injunction?  Same place I have been talking about here for YEARS as the "New Chicago" when it comes to corruption?

Color me fucking shocked.

If this lying-ass motherfucking cocksucking son of a bitch Manchurian Candidate president makes it to the end of his 2nd term and exits in the normal fashion, we all deserve the 2x4 that's currently being shoved up our asses.  

"If you like your son of a bitch president, you can keep your son of a bitch president."

And yeah, you can quote me on that.

Login or register to post comments Mon, 11/18/2013 - 23:20 | 4168465 YBNguy

UH OH Mr. investigative journo-man is willing to release his information to Congress, and to what end? More kabuki congressional hearings? Yeah, because those were sooooo effective in rooting out corruption from Benghazi, IRS targetting, NSA targetting, Fast n furious, ad naseum... 

Login or register to post comments Mon, 11/18/2013 - 23:39 | 4168499 James_Cole

Better get 60 mins on this. 

Login or register to post comments Mon, 11/18/2013 - 23:44 | 4168513 JohnnyBriefcase

Gimmee a sec...

 

*puts on shocked face*

 

I am SHOCKED!!

Login or register to post comments Mon, 11/18/2013 - 23:48 | 4168520 LetThemEatRand

Did anyone else notice that Jack Welch owns the Obama pro-media?  Jesus, people. Please, ZH, don't succumb to WWF antics.

Login or register to post comments Mon, 11/18/2013 - 23:51 | 4168529 HulkHogan

World Wildlife Federation?

Login or register to post comments Mon, 11/18/2013 - 23:56 | 4168534 LetThemEatRand

Welch, owner of the "liberal media."  "Jamie Dimon is a great CEO"  http://www.nbcnews.com/video/cnbc/53346236#53346236

It is all a lie.  All of it.

Login or register to post comments Mon, 11/18/2013 - 23:59 | 4168547 James_Cole

I don't get it, are you saying Tyler was claiming Welch is a liberal?

Login or register to post comments Tue, 11/19/2013 - 00:12 | 4168560 LetThemEatRand

It's much more complicated than that.  Welch goes on his own TV shows to debate whether the job numbers are real while his paid employees tell him and the public they are.  Think about that for a second.  Divide.  Conquer.  ZH is putting him out there as a voice of reason.   Our entire political system is based on this.  False debate.  Control the message.  Fake in-fighting among the Teams.  Is Hulk or the Destroyer going to win this round?

Login or register to post comments Tue, 11/19/2013 - 00:15 | 4168573 James_Cole

To be fair Tyler is quoting this story from....the nypost lol

zh QC slipping tonight

Login or register to post comments Tue, 11/19/2013 - 00:16 | 4168576 AlaricBalth

From the year end 2012 ZH Greatest Hits:

"The 13th most popular post reminds us just what the biggest media circus for public consumption of 2012 was: the presidential election, where a key part of assuring the success of the incumbent was the battery of ridiculously strong economic reports, subsequently all revised far lower, in the days and weeks leading to the November election. In "Data Massaging Continues: Initial Claims Tumble To 339K Lowest Since 2008, Far Below Lowest Expectation" the October headlines were there merely to spoon-feed the masses; one look beneath the headlines, however, proved that as in every other banana republic, the US was no better off. However, all is fair in pre-election campaigns and data fudging, and the BLS would certainly not be held accountable."

http://www.zerohedge.com/news/2012-12-30/2012-greatest-hits-presenting-m...

Login or register to post comments Tue, 11/19/2013 - 03:43 | 4168781 Acet

Just like the World Wrestling Federation it's completelly fake and for entertainment purposes only.

Login or register to post comments Mon, 11/18/2013 - 23:53 | 4168536 OneTinSoldier66

The Corzining/Rehypothicating of Employment figures will continue until morale improves.

Login or register to post comments Tue, 11/19/2013 - 00:30 | 4168587 Deo vindice

In a righteous society, election results that were based on false information would be overturned.

But, of course, that would be in a righteous society.

Login or register to post comments Mon, 11/18/2013 - 23:40 | 4168505 dryam

Obama can simply apologize and all is well. Isn't that the formula?

Login or register to post comments Mon, 11/18/2013 - 23:48 | 4168523 HulkHogan

I'm already accepting his fake apology.

Login or register to post comments Tue, 11/19/2013 - 01:52 | 4168691 PT

Like this?  :

http://www.youtube.com/watch?v=6oeSFAIKaX4 

Login or register to post comments Mon, 11/18/2013 - 23:20 | 4168466 Xibalba

Fake. Just like the birth certificate 

Login or register to post comments Tue, 11/19/2013 - 00:33 | 4168593 JohnnyBriefcase

That's like saying Yellen's hair is ugly shade of grey.

 

The birth certificate is fake? Everything about our political system is fake!

 

Everything that our entire civilization is built on is fake!!

 

Nevermind, It's way more safe to focus on little shit...

Login or register to post comments Mon, 11/18/2013 - 23:09 | 4168436 bunzbunzbunz Not alot, but still FREE BITCOINS: http://freebitco.in/?r=25727

Login or register to post comments Mon, 11/18/2013 - 23:22 | 4168471 bonin006

If you don't like your jobs numbers you can change them.

Login or register to post comments Mon, 11/18/2013 - 23:27 | 4168479 Anusocracy

Those job numbers are probably accurate.

Within two miles of me are dozens of urban outdoorsmen working at picking up returnables, panhandling on street corners, and occasionally recycling catalytic converters.

All of them go uncounted.

Login or register to post comments Mon, 11/18/2013 - 22:51 | 4168367 So What

All you whities, Goyim, who voted for that obozzo should be the happiest shit heads on the planet right now.

666 on chicago lottery the day after obozo got elected.
666 on manipulated bls numbers.

Fukushima will blow, you bitches. it's bad omen but you won't admit it. Take refuge for you and your family from the coming radiation. Of course if you're black, your skin will protect you.

Login or register to post comments Mon, 11/18/2013 - 22:58 | 4168391 bunzbunzbunz

Superstition makes you smart.

Login or register to post comments Mon, 11/18/2013 - 23:26 | 4168478 So What

no but it's fun as hell.

How is this for smart? There are unexplainable phenomena, which logic failed to explain, for example, quantum entanglement for which time doesn't exist and information travel instantaneously. Experiments also showed that human beings are capable of predicting events a few seconds into the future that's statistically significant. P>.05 of randomness. Maybe, just maybe, future human beings dying from future Fukushima event are in quantum entanglement in present human beings and are sending us messages, but which we're too damn stupid to figure out. Anyhow, too many randomness indicated nonrandomness. Bet your ass Fukushima will blow. No chance of removing those damn rods, and that ain't no superstition.

Login or register to post comments Tue, 11/19/2013 - 00:34 | 4168597 Deo vindice

I gave up on your logic when you claimed hell is fun.

Login or register to post comments Tue, 11/19/2013 - 00:45 | 4168621 SilverIsKing

Can he tell us the price of a Bitcoin one year from now?

Login or register to post comments Tue, 11/19/2013 - 02:15 | 4168720 yofish

So What - good name, keep it.

Login or register to post comments Tue, 11/19/2013 - 03:33 | 4168772 Tom_333

p<0.05 if it´s statistically significant by accepted convention. Less not more.

Login or register to post comments Mon, 11/18/2013 - 22:52 | 4168369 Stackers

The whole idea that 60,000 house holds is a big enough statistical sample to be able to know what 300,000,000 people are doing is absurd.

Login or register to post comments Mon, 11/18/2013 - 22:58 | 4168389 seek

If it's a correctly selected sample set with reasonable confidence bounds, it's not absurd.

When the sample set is one guy not-so-randomly writing down "employed," the statistics will be complete shit.

Login or register to post comments Mon, 11/18/2013 - 23:27 | 4168461 TruthInSunshine

Stackers, just so you know - and do your due diligence if you don't trust me-

A properly conducted scientific statistical sample of as FEW as 2,200 likely voters (so, that would approximately equal 100,000,000 votes cast) can consistently & successfully predict the result within a margin of error of + or minus 2% to 3%.

In fact, this is the approximate sample pool size that all major polling entities (AP, Rasmussen, Real Clear Politics, ABC/CNN/Fox/Gallup, etc.) utilize when projecting the overall, national results commute POTUS election.

Anyone who has had a basic statistics course in college will understand this.

p.s. - It would not be the least bit shocking to me if the actual U3 rate in the U.S. was 18% to 20% and if the actual U6 rate in the U.S. was 25%+.

We're basically in 4 years of real economic contraction, propped up by record government debt creation, record consumer debt levels (household debt surpassed 3 trillion USD for first time in history last month), credit cards, SNAP/EBT, Social Security, Medicare, UE, extended UE, SSI, etc.

We're actually in a depression, that's masked by the aforementioned programs & things that didn't exist in 1933.

Login or register to post comments Mon, 11/18/2013 - 23:29 | 4168480 IndyPat

Anyone who has had a basic statistics course in college will understand this....and also should have learned that there are statistically about a billion ways to make statistics lie like crazy.
My personal fav is the not-so-random sample pool

Edit
.."We're actually in a depression"
Thank you! Damn. Someone finally said it.

Login or register to post comments Tue, 11/19/2013 - 00:22 | 4168549 TruthInSunshine

A properly designed scientific sample methodology with properly constructed survey questions is designed to reduce noisy data & prevent manipulation of the results - hence the repeatable, consistent, reliable results, within the pre-set margin of error acknowledged by the construct.

p.s.- I almost forgot; FUCK YOU, BARRY RITHOLTZ

Login or register to post comments Tue, 11/19/2013 - 00:15 | 4168564 OneTinSoldier66

So why would illustrious leaders say we're in a recovery? Certainly those beyond reproach people wouldn't lie. If they lie about stuff how could they ever get elected to office?

 

Errr, do I need to start taking lessons in lying?(hopefully covered under H.A.M.P or H.A.R.P.) Have I been lied to all this time about that honesty and integrity stuff?

 

What if I like my honesty? Can I keep it?

 

I'm so confused.

Login or register to post comments Tue, 11/19/2013 - 02:10 | 4168710 TruthInSunshine

"So why would illustrious leaders say we're in a recovery? Certainly those beyond reproach people wouldn't lie. If they lie about stuff how could they ever get elected to office?"

Just my hypothesis:

http://directorblue.blogspot.com/2012/12/it-explains-alot-confidence-fai...

Login or register to post comments Tue, 11/19/2013 - 03:38 | 4168777 cynicalskeptic

Shadowstats.com has government stats calculated the way they were originally - before all the 1980's games playing started.  

REAL unemployment is worse than 1932 levels - approaching 25% - while 1932 peaked at 23+%.

REAL inflation is 2 1/2 time shigher than the 'official' number and CPI well below what's claimed.

Bush presided over a collapsing economy - a bubble losing air despite all the efforts made to keep it inflated.  Obama inherited a mess but instead of being honest and telling the American public just how fucked we were, he simply kept playing the same old games, propping up the same banks and Wall Street while trying to pacify the masses with food stamps.   Keep the bread and circuses going...... that's been the plan throughout history - until it no longer works.

Politicians learned their lesson with Carter - it's far easier to simlply LIE and say 'all is well' even when shit is hitting the fan and with the bought and paid for media we have now, nobody is going to call them on the BS.   Democrats do it, Republicans do it.  Our governing system is broken and instead of admitting that, our 'leaders' will lie - and continue to do so - until the whole mess collapses.

Login or register to post comments Mon, 11/18/2013 - 23:02 | 4168404 bunzbunzbunz

HAAAAAAAAAAAAA. Go take a statistics class please.

Login or register to post comments Tue, 11/19/2013 - 00:09 | 4168554 Trampy

The whole idea that 60,000 house holds is a big enough statistical sample to be able to know what 300,000,000 people are doing is absurd.

Not necessarily, because they're not doing a straight extrapolation, but rather are coming up with numbers to throw into a complex computer model.  Without realizing it you've hinted at a truth not discussed much.

With such a small sample size, <<0.1%, the "unemployment rate" from a straight extrapolation would be jumping all over the place from month to month, like maybe from 2% up to 20% one-sigma standard deviation.  The fact that it moves so little month to month, "stickiness" at 7.8%, shows that there is a hell of a lot of "smoothing" going on and that 7.8% is the number they want to report.  There's nothing wrong with doing data smoothing, but if people mistakenly confuse simulation with reality, well, that's just normal human stupidity.

They don't calculate the unemployment rate as #UNEMPLOYED/#WORKERS.  They take the survey results and put them into a computer model that "massages" the data for seasonal adjustment, etc.  But it's just GIGO and probably has been this way for as long as they've been doing it.

The only absurdity is that anyone at all is stupid enough to think the first-Friday "NFP print" has any more relevance to our economy than the price of tea in China.  The fact that so many think it's important is the real absurdity.

I think the best quote from the Obama regime is Hillary's "What difference does it make?!?"  That's a keeper, fer shure. 

Login or register to post comments Tue, 11/19/2013 - 01:52 | 4168692 Deo vindice

Quote: The only absurdity is that anyone at all is stupid enough to think the first-Friday "NFP print" has any more relevance to our economy than the price of tea in China.  The fact that so many think it's important is the real absurdity.

I think the price of tea in China probably has more relevance to our economy that the "NFP print".

Login or register to post comments Tue, 11/19/2013 - 00:41 | 4168612 caustixoid

"It's gonna get worse before it gets better." 

It's going to get better?

Login or register to post comments Mon, 11/18/2013 - 22:45 | 4168347 Buckaroo Banzai

RAYCESSSSS!!!

Login or register to post comments Mon, 11/18/2013 - 22:38 | 4168318 Richard Chesler

His whole life is a fake. What difference does it make?

 

Login or register to post comments Mon, 11/18/2013 - 23:02 | 4168407 wee-weed up

His minions are always trying to polish the Turd!

Login or register to post comments Mon, 11/18/2013 - 23:30 | 4168487 Eireann go Brach

Otherwise known as NiggaNomics!

Login or register to post comments Tue, 11/19/2013 - 02:24 | 4168731 yofish

Don't drink and post. That you get ups is disgusting. What a pig pen this place is.

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