Jan 312020
 
 January 31, 2020  Posted by at 10:50 am Finance Tagged with: , , , , , , , , , , , , , ,  37 Responses »


Walker Evans Waterfront in New Orleans. French market sidewalk scene 1935

 

WHO Declares International Health Emergency Over Coronavirus Outbreak (RT)
Spate Of Anti-Chinese Incidents In Italy As Two Cases Of Virus Confirmed (G.)
Hillary Clinton Refuses To Be Served Tulsi Gabbard’s Defamation Lawsuit (NYP)
Major Blow For Democrats At Trump Trial (BBC)
Warren Questions Roberts ‘Legitimacy’ Without Trial Witnesses (Fox)
Was The Bolton Leak Too Perfect? (Turley)
Simon & Schuster Won’t Back Down On John Bolton’s Memoir (NYP)
Steele Trump-Russia Dossier Was “Completely Fabricated” (SHTF)
UK Brings Down Curtain On EU Membership After 47 Years (Ind.)
Ambassador Warns That Trump Will Put US Firms First In UK Trade Talks (G.)
Welcome To The Trump Recession (Ind.)
Justice Department Drops Demand For Jail For Flynn (Turley)
Government and Media Are Prepping America for a Failed 2020 Election (Webb)
Greece Plans To Build Sea Barrier Off Lesbos To Deter Migrants (G.)

 

• 2019nCoV death toll rose from 170 to 213 today. (deaths over past seven days: 15, 15, 25, 25, 26, 38, 43)

• 9,821 confirmed cases worldwide, 98 abroad, the rest in China

• 25,060 probable cases

• 15,238 new suspected cases

• 102,427 Chinese under observation

• Recovered: 171

 

 

Jim Bianco posted these graphs tracking mortality and infections, respectively:

 

 

WHO is as late as China and the US. Maybe that’s why they’re complementing China: that way their own failure gets obscured.

WHO Declares International Health Emergency Over Coronavirus Outbreak (RT)

The World Health Organization has declared a “public health emergency of international concern” over the outbreak of the 2019nCoV, or the Wuhan coronavirus. The international body didn’t recommend travel and trade restrictions. WHO Director-General Tedros Adhanom Ghebreyesus called the coronavirus “a previously unknown pathogen, which has escalated into an unprecedented outbreak” at a press conference on Thursday, but said the WHO was not recommending restrictions of trade or travel with China, where the virus originated. Tedros pointed out that the declaration was “not a vote of no confidence in China,” but made out of concern for other countries, with “weaker” healthcare systems.


China’s response to the outbreak has been “very impressive,” the WHO chief added. “So is China’s commitment to transparency and to supporting other countries.” China is actually setting a new standard for outbreak response. While the majority of coronavirus cases have been registered in China, the WHO confirmed there were 98 confirmed cases elsewhere in the world – including eight cases of direct transmission in Germany, Japan, Vietnam and the US. The “vast majority” of cases outside of China have either traveled to Wuhan or been in contact with someone who has, the WHO officials noted. “The only way we will defeat this outbreak is for all countries to work together in a spirit of solidarity and cooperation,” Tedros said. “We are all in this together, and we can only stop it together.”

Read more …

Inevitable. Wait till the first people start dying in countries such as Italy.

Spate Of Anti-Chinese Incidents In Italy As Two Cases Of Virus Confirmed (G.)

Chinese people in Italy have been the target of racist abuse as paranoia mounts over the spread of the deadly coronavirus, as the first two cases of the virus were reported in Rome. Two Chinese tourists tested positive for the virus and are being treated at Rome’s Lazzari Spallanzani national institute for infectious diseases. The couple are reported to be from Wuhan and arrived in Milan on 23 January. The prime minister, Giuseppe Conte, said on Thursday night that there was “no reason for panic or alarm”. He added that close checks were being carried out trace the tourists’ movements in Italy in order “to absolutely avoid any additional risk”.

Flights between China and Italy have been stopped, Conte said. There have been several incidents of xenophobia and calls to avoid Chinese restaurants and shops amid the coronavirus outbreak. Roberto Giuliani, the director of the Santa Cecilia Conservatory, one of the oldest music institutes in the world, was criticised by colleagues on Wednesday after telling students from China, Japan and South Korea not to come to class until after a doctor visits their homes to ensure they have not contracted the virus. Similarly, another music institute in Como told students returning from China after the lunar new year to stay at home for 14 days.


Fears over coronavirus have affected Chinese populations in other countries too. On Wednesday the mayor of Toronto condemned racism against Chinese Canadians. There have also been reports of anti-Asian racism in the UK. In France, Chinese residents have been sharing their experiences using the hashtag #JeNeSuisPasUnVirus (I am not a virus). Other episodes reported in Italian media include two Chinese tourists being spat at by a group of children in Venice, and three Chinese tourists being insulted in a restaurant in Turin.

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Not unexpected. If Hillary would sue Tulsi, would her Secret Service detail do the same?

Hillary Clinton Refuses To Be Served Tulsi Gabbard’s Defamation Lawsuit (NYP)

Hillary Clinton has now twice snubbed a process server attempting to deliver the defamation lawsuit filed against her by Democratic presidential candidate Tulsi Gabbard, according to Gabbard’s attorney. “I find it rather unbelievable that Hillary Clinton is so intimidated by Tulsi Gabbard that she won’t accept service of process,” the congresswoman’s attorney, Brian Dunne, told The Post. “But I guess here we are.” Dunne said their process server first attempted to effect service at Clinton’s house in Chappaqua on Tuesday afternoon — but was turned away by Secret Service agents.


The agents directed the server to Clinton’s lawyer, David Kendall, who on Wednesday claimed at his Washington, DC, firm, Williams & Connolly, that he was unable to accept service on Clinton’s behalf, said Dunne. Gabbard sued the former secretary of state for $50 million last week for calling her a “Russian asset.” Clinton has refused to retract the statement. Dunne said his team was weighing next steps.

Read more …

Schiff will carry this straight into the election. But they have to find a viable candidate. Schiff, Hillary, Bloomberg?

Major Blow For Democrats At Trump Trial (BBC)

US Democrats have been dealt a major blow in their efforts to call witnesses at President Trump’s impeachment trial. They needed four Republicans to vote with them to allow witness testimony, but one of the few wavering senators said he would not support the measure. Lamar Alexander said the Democrats had proved Mr Trump acted inappropriately but it was not an impeachable offence. The announcement paves the way for the possible acquittal of the president by the Senate as early as Friday. The Democrats had especially wanted to call former National Security Adviser John Bolton who reportedly said Mr Trump told him directly that he was withholding US military aid to Ukraine until it agreed to investigate his rival, Joe Biden.

In a statement late on Thursday after a long question-and-answer session at the Senate, Mr Alexander, who represents Tennessee, said the Democrats had proven that Mr Trump’s actions were “inappropriate”. But the 79-year-old said: “There is no need for more evidence to prove something that has already been proven and that does not meet the United States Constitution’s high bar for an impeachable offence.” He added: “The question then is not whether the president did it, but whether the United States Senate or the American people should decide what to do about what he did. I believe that the Constitution provides that the people should make that decision in the presidential election that begins in Iowa on Monday.”


[..] Each side is expected to present closing arguments in Friday’s session, before the Senate votes on hearing witnesses. If the vote were to end in a tie, it would mean that the motion had failed unless US Supreme Court Chief Justice John Roberts, who is presiding over the trial, decided to break it, which is unlikely.

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A pivotal moment yesterday for me: Roberts reads question that says some claim Trump didn’t pay Giuliani, so who did? Schiff comes on, says he doesn’t know, but still takes the full 5(?) minutes to repeat for the 1000th time his schtick about Ukraine.

Warren Questions Roberts ‘Legitimacy’ Without Trial Witnesses (Fox)

Chief Justice John Roberts seemed visibly irritated when Sen. Elizabeth Warren, D-Mass., formally asked a question during President Trump’s impeachment trial Thursday that referenced him and questioned the legitimacy of the Supreme Court and Constitution in relation to the proceedings. In accordance with Senate rules, the chief justice of the United States must read aloud the questions posed by senators to the impeachment managers and the president’s counsel. Roberts formally recognized Warren, a Democratic presidential candidate, who then submitted her written question to a clerk. Roberts read her question from the card — which referenced him.

“At a time when large majorities of Americans have lost faith in government, does the fact that the chief justice is presiding over an impeachment trial in which Republican senators have thus far refused to allow witnesses or evidence contribute to the loss of legitimacy of the chief justice, the Supreme Court, and the Constitution?” Roberts read from the card handed to him by the clerk. When he finished reading the question — explicitly posed to the House Impeachment managers — Roberts pursed his lips and shot a chagrined look.


After a moment, Rep. Adam Schiff, D-Calif., the lead impeachment manager, appeared at the dais to answer the question — standing mere feet in front of Roberts. Schiff appeared to try to distance himself from Warren’s question, offering a short answer to the question before speaking at length about a tangential exchange. “I would not say that it leads to a loss of confidence in the chief justice,” Schiff said, adding that Roberts has thus far “presided admirably.”

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Nice take: ” It felt like the sudden discovery of a gun near the victim at the scene of a police shooting.”

Was The Bolton Leak Too Perfect? (Turley)

It was the seeming Perry Mason moment of President Trump’s impeachment trial. Just after the White House team presented its defense denying any quid pro quo over Ukrainian aid, former national security adviser John Bolton jumped up from the gallery to scream, “He did it!” Not really, but close. A few hours after the start of the president’s defense, details from Bolton’s forthcoming book leaked, including his account of Trump asserting that $391 million in military aid would be withheld until Ukraine announced investigations into the 2016 election and the Bidens. If that seems a tad contrived for either an episode or an impeachment, that is because it is.

In responding to a defense built around Trump’s insistence that his call was “perfect,” this leak was perfect to a fault. Perfect timing. Perfect content. It was so perfect that there is little doubt that the Senate is being played. The leak happened at the exact time that it would inflict the most damage on the defense and throw the trial into disarray. It occurred hours after the White House team gave opening statements that seriously undermined critical points made by the House managers, including the assertions that Trump never previously raised corruption in other countries or that this type of hold on aid was uncommon. It felt like the sudden discovery of a gun near the victim at the scene of a police shooting.

That does not mean the leak will not succeed. The disclosure about Bolton’s book could well make the difference in securing the four Republican votes needed to obtain witnesses. But it could also succeed too well if it leads senators to plunge into the unknown of calling witnesses such as former vice president Joe Biden or his son Hunter. There are already indications that the leak may have secured the four votes for witnesses, while even Sen. Lindsey O. Graham (R-S.C.) has said the Senate may need to subpoena the book draft itself.

[..] Trump has never denied asking for the investigations, but insisted that they were meant to deal with his concerns over ongoing corruption in Ukraine. Moreover, the first of the two investigations could not be a basis for impeachment. Trump asked for assistance in investigating allegations into the 2016 election — matters that were currently being investigated by U.S. Attorney John Durham. It is the Biden investigation that raises legitimate questions, but it comes down again to a question of intent. Finally, the leak refers to the freeze on the funds but does not indicate that Trump was prepared to hold the aid past the deadline at the end of September. (It was released on September 11th.).

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It has lost all relevance though. Good luck.

Simon & Schuster Won’t Back Down On John Bolton’s Memoir (NYP)

Despite the uproar surrounding John Bolton’s new memoir, publisher Simon & Schuster is standing firm on its intended March 17 publication date. An S&S spokesman declined to make an official statement amid blowback from President Donald Trump, saying only that there is “no change” in the publication date for “The Room Where it Happened.” Trump has called for his former national security adviser’s memoir to be blocked, claiming that it contains classified material.


The yet-to-be-published manuscript played a central role in Senate impeachment discussions this week after the New York Times late Sunday reported that Bolton’s claims that Trump told him in August 2019 that he was withholding $391 million in aid to Ukraine until he had a promise that the powers that be there would launch investigations into Joe Biden, whose son had ties to Ukraine. Trump on Monday denied he said it. “If John Bolton said this, it was only to sell a book,” he said. Bolton lawyer Charles Cooper said he does not believe “The Room Where It Happened” contains classified material but is pushing for an expeditious decision from the National Security Council on its content — even as it remains possible for Bolton to be called to testify in the Senate impeachment trial.

Read more …

I forgot to include this in earlier Debt Rattles, but it should be read. We must wonder, and investigate, how the dossier became the pillar on which Russiagate rested when it was such obvious nonsense.

“Some of the most glaring mistakes were those such as treating one particular source as an expert in three entirely different fields or making up the existence of the Russian consulate in Miami, Florida. The source in question starts out as a middle-manager at the Ritz-Carlton in Moscow, but is later described as an expert on cyber warfare, and later yet as an expert on money-laundering by Russian immigrants in the US, West explained.”

Steele Trump-Russia Dossier Was “Completely Fabricated” (SHTF)

In some not so surprising news, a spy expert has come out saying what most of us already knew: the Steele dossier was completely “fabricated.” Nigel West, one of Britain’s leading experts on espionage, was hired to examine the dossier written by his friend Christopher Steele. He concluded it was all manufactured falsehoods. West, hired to examine the dossier back in 2017, quickly concluded that “there is… a strong possibility that all Steele’s material has been fabricated,” according to the Sunday Times. “Steele’s scandalous document, which claimed extensive ties between the then-US President-elect Donald Trump and the Kremlin, was published by BuzzFeed in January 2017 and quickly became the cornerstone of “Russiagate.” Media talking heads insisted that much of it had been corroborated. In fact, nothing was.” –RT

It took West a long time to come out with the information that the dossier was an utter fabrication. It isn’t clear why he waited so long to reveal what most already knew anyway. Even the FBI director at the time, James Comey, described the dossier as“salacious and unverified” in testimony to Congress. But the fact that this dossier was “unverified” did not stop Comey from signing an application for a FISA warrant that the Bureau used to spy on the Trump campaign via one of its advisers, Carter Page. Steele himself was paid purely above-board, of course: by Fusion GPS, which was a client of the law firm Perkins Coie LLP, on behalf of the Democratic National Committee, at the direction of Hillary Clinton’s presidential campaign.


West told RT that he was surprised Steele made such obvious errors in the dossier. Some of the most glaring mistakes were those such as treating one particular source as an expert in three entirely different fields or making up the existence of the Russian consulate in Miami, Florida. The source in question starts out as a middle-manager at the Ritz-Carlton in Moscow, but is later described as an expert on cyber warfare, and later yet as an expert on money-laundering by Russian immigrants in the US, West explained. “On the face of it, it looked inherently improbable that this single source was as proclaimed.”

Read more …

Hardly any celebrations. What happened?

“A light display beamed onto the frontage of No 10 will be visible only to a few journalists and security staff inside the black gates of Downing Street. And a pre-recorded video message risked going unseen by TV viewers, due to a spat with broadcasters”

UK Brings Down Curtain On EU Membership After 47 Years (Ind.)

Britain brings down the curtain on 47 years of European Union membership on Friday with little in the way of official ceremony to mark the historic moment. Some 1,317 days after the 2016 referendum vote to Leave, the formal departure from the 28-nation bloc will take place at 11pm UK time – midnight in Brussels. Boris Johnson, who served as the figurehead of the Vote Leave campaign and last Friday signed the withdrawal treaty after its passage through parliament, said the day would signal “the dawn of a new era”. But Labour leader Jeremy Corbyn said that the country stood at “a crossroads” with many of the most important decisions about its future relations with the EU and the wider world yet to be made.

And Nicola Sturgeon, the Scottish first minister, is expected to say that Scotland is being taken out of the EU against the wishes of the “overwhelming majority” of its people, in a speech setting out the next steps in her battle for an independence referendum. Downing Street made clear the prime minister will not be making any public appearance to celebrate the moment of withdrawal. After chairing cabinet in Sunderland – the city whose vote for Brexit was the first sign of Leave’s victory on referendum night – the prime minister will return to London to attend an evening reception with staff behind closed doors. A light display beamed onto the frontage of No 10 will be visible only to a few journalists and security staff inside the black gates of Downing Street.


And a pre-recorded video message risked going unseen by TV viewers, due to a spat with broadcasters who objected to No 10’s insistence of filming the footage itself rather than following the normal practice of inviting in a pool camera from one of the television companies.

Read more …

Who could have predicted that?

Ambassador Warns That Trump Will Put US Firms First In UK Trade Talks (G.)

Donald Trump will put the interests of corporate America first and demand that the NHS pays higher prices for US drugs in a free-trade deal with the UK, the outgoing British ambassador to Washington has told the Guardian. Kim Darroch, in his first interview since his resignation from his post in July, from where he spearheaded attempts to grow trade with the US, insisted that Trump would reward his backers in drug firms and farming communities by opening up British markets, while questioning where the UK’s gains would be found. The former British envoy, who left Washington after a leak of his confidential cables to London, said it was doubtful whether the UK had the resources for parallel negotiations with the US and the EU, a strategy championed by Downing Street as a way to give British negotiators leverage in Brussels.


Darroch, who said that similar warnings on the US’s trade demands had been made to No 10 during his tenure in Washington DC, also said it was “impossible” for a deal to get through Congress by the end of 2020 and that it appeared to be “a narrow and rocky path to get to where they [the UK government] want to be”. He said: “I know what the US will be pitching for when they negotiate a free-trade deal with us. They will pitch for massively greater access for agricultural products. People talk about chlorinated chicken – it is a lot more than that. Farmers in America vote for Trump, pretty much all of them vote for Trump … “They also want us to pay the same for American pharmaceuticals as they pay in their own market. Do they want us to pay more for their pharmaceuticals? Do the pharmaceutical companies want to use this leverage? Of course they do.”

Read more …

Dems’ final weapon? For now the article feels contrived.

Welcome To The Trump Recession (Ind.)

Donald Trump won’t have to run his re-election campaign amid a 2020 recession — but numbers now emerging are bad enough, and their shape is bad enough, to show he won’t be running a Morning in America campaign either. New government data Thursday showed the economy’s GDP grew at a 2.1 per cent annual rate in the fourth quarter — the second straight quarter at that tepid number, closing out the weakest year of Trump’s presidency. Worse, the slowdown is aimed straight at Trump’s base, including a decent-sized manufacturing recession. It’s based directly on the failure of Trump’s policies. And the details belie the idea, popular in Washington, that consumer confidence is high and that such confidence begets confidence in the president.

Let’s walk through this fairly complicated argument one step at a time. First, the economy really didn’t do well in the last nine months of 2019, even if the stock market thinks it did. Thursday’s report marks the third straight quarter where the economy grew at 2.1 per cent or less, since the second quarter of the year saw only 2.0 per cent growth. Forecasts for the first half of 2020 are a little worse: Consulting firm IHS Markit expects first-quarter growth at a 2 per cent annual rate, and High Frequency Economics thinks it could go as low as 1.2 per cent as Boeing attempts to solve its 737 Max safety issues. “Welcome to 2016, when it was one quarter after another of roughly 2 per cent growth,” said Joel Naroff, president of Naroff Economic Advisors.


“We have had three consecutive quarters right about that level. And sifting through the data, there is no reason to think that will change significantly in one direction or the other.’’ The details, though, are nastier than headline numbers. Consumer spending grew only 1.8 per cent annualized, down from 3.2 per cent in the third quarter — which Naroff attributes to slowing income gains. Private investment — investment was supposed to surge because of a 2017 tax cut focused on corporations and small business owners — was down 6.1 per cent. Imports were way down — which propped up short-term growth, given the technical details of how economists measure growth. But exports of manufactured goods were also down.

Read more …

They got scared. Time for Sidney Powell to go into full attack mode. Go after Comey, McCabe, Strzok.

Justice Department Drops Demand For Jail For Flynn (Turley)

The Department of Justice has dropped its demand for former National Security Adviser Michael Flynn to serve time under his plea agreement. Flynn was attempting to withdraw his plea after the Justice Department set out in what was an overtly vindictive campaign against him in court. The Flynn case remains a troubling matter for those who have followed the Russian investigation. He pleaded guilty to a false statement that seems relatively minor in comparison to false statements made by Justice officials like Andrew McCabe or leaks by figures like James Comey. Only a few weeks ago, the Justice Department was demanding up to six weeks of jail time. Some of us have questioned the case for years. Prosecutors threatened to go after Flynn’s son and to bankrupt him if he continuing to assert his innocence. Flynn broke with his prior lawyers and accused them of giving him poor advice.


He now maintains that he did not lie to two FBI agents in 2017. His recent filings slam the process and the charges. He wrote “One of the ways a person becomes a 3-star general is by being a good soldier, taking orders, being part of a team, and trusting the people who provide information and support. Lori and I trusted Mr. Kelner and Mr. Anthony to guide us through the most stressful experience in our lives, in a completely incomprehensible situation. I have never felt more powerless.” The position of the Justice Department seemed wholly at odds with other cases, including the light sentences received by individuals sentenced as part of the Russian investigation. He was also the subject of a bizarre hearing with Judge Emmet Sullivan where he was accused of things outside of his charges or the record. He is due to be sentenced on Feb. 27.

Read more …

US intelligence has taken over, writes Whitney Webb.

Government and Media Are Prepping America for a Failed 2020 Election (Webb)

[..] what is particularly odd about this narrative surrounding imminent “chaos” and meddling in the upcoming 2020 election is the fact that, not only have the instruments of said meddling been named and described in detail, but their use in the election was recently simulated by a company with deep ties to both U.S. and Israeli intelligence. That simulation, organized and run by the Israeli-American company Cybereason, ended with scores of Americans dead, the cancellation of the 2020 election, the imposition of martial law and a spike in fear among the American populace.

Many of the technologies used to create that chaotic and horrific scenario in the Cybereason simulation are the very same technologies that U.S. federal officials and corporate media outlets have promoted as the core of the very toolkit that they claim will be used to undermine the coming election, such as deep fakes and hacks of critical infrastructure, consumer devices and even vehicles.


While the narrative in place has already laid the blame at the feet of U.S. rival states China, Russia and Iran, these very technologies are instead dominated by companies that are tied to the very same intelligence agencies as Cybereason, specifically Israeli military intelligence. With intelligence agencies in the U.S. and Israel not only crafting the narrative about 2020 foreign meddling, but also dominating these technologies and simulating their use to upend the coming election, it becomes crucial to consider the motivations behind this narrative and if these intelligence agencies have ulterior motives in promoting and simulating such outcomes that would effectively end American democracy and hand almost total power to the national security state.

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They’ll simply use another route, another island.

Greece Plans To Build Sea Barrier Off Lesbos To Deter Migrants (G.)

The Greek government has been criticised after announcing it will build a floating barrier to deter thousands of people from making often perilous sea journeys from Turkey to Aegean islands on Europe’s periphery. The centre-right administration unveiled the measure on Thursday, following its pledge to take a tougher stance on undocumented migrants accessing the country. The 2.7km-long netted barrier will be erected off Lesbos, the island that shot to prominence at the height of the Syrian civil war when close to a million Europe-bound refugees landed on its beaches. The bulwark will rise from pylons 50 metres above water and will be equipped with flashing lights to demarcate Greece’s sea borders.

Greece’s defence minister, Nikos Panagiotopoulos, told Skai radio: “In Evros, natural barriers had relative [good] results in containing flows,” referring to the barbed-wire topped fence that Greece built along its northern land border with Turkey in 2012 to deter asylum seekers. “We believe a similar result can be had with these floating barriers. We are trying to find solutions to reduce flows.” Amnesty International slammed the plan, warning it would enhance the dangers asylum-seekers and refugees encountered as they attempted to seek safety.


“This proposal marks an alarming escalation in the Greek government’s ongoing efforts to make it as difficult as possible for asylum-seekers and refugees to arrive on its shores,” said Massimo Moratti, the group’s Research Director for Europe.“The plan raises serious issues about rescuers’ ability to continue providing life-saving assistance to people attempting the dangerous sea crossing to Lesbos. The government must urgently clarify the operational details and necessary safeguards to ensure that this system does not cost further lives.”

Read more …

 

 

 

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Nov 182017
 
 November 18, 2017  Posted by at 1:49 pm Finance Tagged with: , , , , , , , , ,  8 Responses »


Rembrandt van Rijn The Three Crosses 1653

 

John Rubino recently posted a graph from Bob Prechter’s Elliot Wave that points to some ominous signs. It depicts the S&P 500, combined with consumer confidence and savings rate. As the accompanying video at Elliott Wave, What “Too Confident to Save” Means for Stocks, shows, when the gap between high confidence and low savings is at its widest, a market crash -often- follows.

In 2000, the subsequent crash was 39%, in 2007 it was 54%. We are now again witnessing just such a gap, with the S&P 500 at record levels. Here’s the graph, with John’s comments:

 

Consumers Are Both Confident And Broke

Elliott Wave International recently put together a chart that illustrates a recurring theme of financial bubbles: When good times have gone on for a sufficiently long time, people forget that it can be any other way and start behaving as if they’re bulletproof. They stop saving, for instance, because they’ll always have their job and their stocks will always go up. Then comes the inevitable bust. On the following chart, this delusion and its aftermath are represented by the gap between consumer confidence (our sense of how good the next year is likely to be) and the saving rate (the portion of each paycheck we keep for a rainy day). The bigger the gap the less realistic we are and the more likely to pay dearly for our hubris.

 

 

John is mostly right. But not entirely. Not that I don’t think he knows, he simply forgets to mention it. What I mean is his suggestion that people stop saving because they’re confident, bullish. To understand where and why he slightly misses, let’s turn to Lance Roberts. Before we get to the savings, Lance explains why the difference between the Producer Price Index (PPI) and Consumer Price Index (CPI) is important to note.

Summarized, producer prices are rising, but consumer prices are not.

 

You Have Been Warned

There is an important picture that is currently developing which, if it continues, will impact earnings and ultimately the stock market. Let’s take a look at some interesting economic numbers out this past week. On Tuesday, we saw the release of the Producer Price Index (PPI) which ROSE 0.4% for the month following a similar rise of 0.4% last month. This surge in prices was NOT surprising given the recent devastation from 3-hurricanes and massive wildfires in California which led to a temporary surge in demand for products and services.

 

 

Then on Wednesday, the Consumer Price Index (CPI) was released which showed only a small 0.1% increase falling sharply from the 0.5% increase last month.

 

 

Such differences have real life consequences. In Lance’s words:

 

This deflationary pressure further showed up on Thursday with a -0.3% decline in Export prices. (Exports make up about 40% of corporate profits) For all of you that continue to insist this is an “earnings-driven market,” you should pay very close attention to those three data points above. When companies have higher input costs in their production they have two choices: 1) “pass along” those price increase to their customers; or 2) absorb those costs internally.

If a company opts to “pass along” those costs then we should have seen CPI rise more strongly. Since that didn’t happen, it suggests companies are unable to “pass along” those costs which means a reduction in earnings. The other BIG report released on Wednesday tells you WHY companies have been unable to “pass along” those increased costs.

The “retail sales” report came in at just a 0.1% increase for the month. After a large jump in retail sales last month, as was expected following the hurricanes, there should have been some subsequent follow through last month. There simply wasn’t. More importantly, despite annual hopes by the National Retail Federation of surging holiday spending which is consistently over-estimated, the recent surge in consumer debt without a subsequent increase in consumer spending shows the financial distress faced by a vast majority of consumers.

 

That already hints at what I said above about savings. But it’s Lance’s next graph, versions of which he uses regularly, that makes it even more obvious. (NOTE: I think he means to say 2009, not 2000 below)

 

The first chart below shows a record gap between the standard cost of living and the debt required to finance that cost of living. Prior to 2000(?!), debt was able to support a rising standard of living, which is no longer the case currently.

 

 

The cut-off point is 2009, unless I miss something in Lance’s comment. Before that, borrowing could create the illusion of a rising standard of living. Those days are gone. And it’s very hard to see, when you take a good look, what could make them come back.

Not only are savings not down because people are too confident to save, they are down because people simply don’t have anything left to save. The American consumer is sliding ever deeper into debt. And as for the Holiday Season, we can confidently -there’s that word again- predict that spending will be disappointing, and that much of what is still spent will add to increasing Consumer Credit Per Capita, as well as the Gap Between Real Disposable Income (DPI) And Cost Of Living.

The last graph, which shows Control Purchases, i.e. what people buy most, a large part of which will be basic needs, makes this even more clear.

 

With a current shortfall of $18,176 between the standard of living and real disposable incomes, debt is only able to cover about 2/3rds of the difference with a net shortfall of $6,605. This explains the reason why “control purchases” by individuals (those items individuals buy most often) is running at levels more normally consistent with recessions rather than economic expansions.

 

 

If companies are unable to pass along rising production costs to consumers, export prices are falling and consumer demand remains weak, be warned of continued weakness in earnings reports in the months ahead. As I stated earlier this year, the recovery in earnings this year was solely a function of the recovering energy sector due to higher oil prices. With that tailwind now firmly behind us, the risk to earnings in the year ahead is dangerous to a market basing its current “overvaluation” on the “strong earnings” story.

“Prior to 2009, debt was able to support a rising standard of living..” Less than a decade later, it can’t even maintain the status quo. That’s what you call a breaking point.

To put that in numbers, there’s a current shortfall of $18,176 between the standard of living and real disposable incomes. In other words, no matter how much people are borrowing, their standard of living is in decline.

Something else we can glean from the graphs is that after the Great Recession (or GFC) of 2008-9, the economy never recovered. The S&P may have, and the banks are back to profitable ways and big bonuses, but that has nothing to do with real Americans in their own real economy. 2009 was a turning point and the crisis never looked back.

Are the American people actually paying for the so-called recovery? One might be inclined to say so. There is no recovery, there’s whatever the opposite of that is, terminal decline?!. It’s just, where does that consumer confidence level come from? Is that the media? Is The Conference Board pulling our leg? Is it that people think things cannot possibly get worse?

What is by now crystal clear is that Americans don’t choose to not save, they have nothing left to save. And that will have its own nasty consequences down the road. Let’s raise some rates, shall we? And see what happens?!

One consolation: Europe, Japan, China are in the same debt-driven decline that Americans are. We’re all going down together. Or rather, the question is who’s going to go first. That is the only hard call left. America’s a prime candidate.