2/16/11…Heinz 57

Producer Prices ROSE 0.8% in January vs. consensus +0.9%. Ex-food and Energy they were up 0.5% and 3.7% from a year ago…where is the inflation? Raw materials prices which are not able to be passed on…ask General Mills and Kraft! But why with crude off 9.1%  since  peaking on  1/31 to the lowest level since 12/1 do gas prices continue to rise?…ask the refiners!

Industrial Production fell 0.1%  in January vs. consensus +0.5% due to a drop in mining activity. Capacity Utilization fell 0.1% to 76.1 vs. consensus 76.4 and is way below the peak of 81.5% set in April 2007…also not inflationary!

Housing Starts rose 14.6% despite a drop in single family starts and are 73.8% below the 1/2006 peak! Multi-Family however surged by 77.7%…guess the weather didn’t affect that???

…TB heard survey results last night on the news that 57% of Americans don’t believe the recession is over…do you know any of them-other than TB? Economists are convinced it is over but that is based on statistics which is precisely why it is wrong. When you get to as low a point as the U.S. – and the other developed nations – were at…China and India excepted…

So how come students of the dismal science are so much more optimistic? Could it be that they are like the tea leave reading stock analysts who haven’t figured out that if stocks are up 50% after being down 50% they are still down 25%? It all has to do with the benchmark you start with…then of course it is also who you talk to…if your friends all have their jobs, haven’t been denied credit or lost their home, all is well in River City…and we tend to talk to…and mingle with those who are of the same social status.

Over lunch with a friend who is an economist…a ‘thinking’ economist, like Roberr Reich, who like TB recently went through the pain of selling a home, not his primary one, but an asset he no longer desired to ‘carry’ as it wasn’t carrying him, he told TB that in his area where there is normally no more than one home for sale (on TB’s one mile circle there were eight in an area that might see one up for sale in a year!), there is one foreclosed property, one short-sale, and one over-priced home by an optimistic (albeit stupid) owner who believes the home is still worth what he paid for it.

TB takes little joy even in hearing of the minimal 4.2% unemployment of college graduates. What kind of jobs did they land? …would they normally go to a high school grad or less? What are they being paid? How many of them are working one or more part-time jobs? Lastly, how much a month are they paying on those pesky student loans?

Here are some other surveys obtained by googling ‘recession 57%’ while looking for the full story:

2/6/11: 57% of people say that because of the recession their marriage is stronger…BUT 38% have postponed plans to divorce…why? Pretty obvious two can live cheaper than one…79% in 1970 were committed to making their marriage work

9/1/10: 86% of small businesses fear a double-dip recession while 57% are managing expenses to maintain earnings – so are the major public companies, right?

10/21/09: Despite the recession, 57% of consumers globally say they are buying from companies that support social issues…67% say they would switch to another company if it began to do so?

As for the lenders, they are getting bitten…rightfully by judges over their shoddy documentation, failure to provide original documents, and the lack of proof of title due to the ‘nominee name’ MERS system that Wall Street so eagerly shoved down the throats of county assessors since it speeded up the process of securitizing the crap before it defaulted.

But what does this mean for homebuyers? The lender of last resort is the government through its quasi-agencies FNMA and FHLMC. However, the plan is to cut the maximum amount from the super-conforming back to the old levels, which will hurt sales in high price areas like the Northeast and West. This was part of Obama’s budget proposal, but since it doesn’t shut them down entirely is not going to be acceptable to the GOP, let alone the tea bagger contingent.

Monday, Appropriations Committee Chairman Paul Ryan, proposed a budget cut which was met with derision within his own party by the aforementioned tea baggers…they want to cut it by the amount promised $100 billion even though were are talking about a 7 month period which is the amortized amount of the GOP plan: $70 billion. They hold the swing votes however.

To this, their fearless leader Boehner said, without a tear in sight, we will cut the size of government and if more jobs are lost “so be it.” Those words may come back to haunt them in the 2012 elections…isn’t it about jobs? Since when do you cut the size of government during a recession…and technically or otherwise we are still in one based on the jobless rate and the hoarding of cash by corporations as they hit record profits. Boehner also pointed to the surge in the deficit under Obama…which economics says should occur in a recession, but is mostly due to the bailouts, much of which have already been returned…figures lie and liars figure. Then he said Obama has boosted the size of government by 260,000 while in office…hello? Government jobs have been declining at the rate of 10k per month…each and every month due to the Postal Service…it is also basic economics that fewer government jobs mean fewer private sector jobs. TB has no idea where Boehner gets his data but it certainly isn’t from BLS!

What do tea baggers and Egyptians have in common? They all want the same thing but can’t agree on what comprises it. Where do you cut? But also their hatred of taxes, without which we would be in a global depression at this point. As the new Medal of Freedom recipient Warren Buffett says: why should I pay a smaller percentage in taxes than my secretar? Yet the wealthiest 1% pay just 22.7% of their income…mainly due to capital gains and that is not gains on businesses primarily but INVESTING…stocks and dividends and tax-free income…somebody better start thinking and thinking soon.

TB sees two years of hell and a solid chance of a double dip if the tea baggers win and that means a second term for Obama…like it or not…so it will all be a pyrrhic victory then we will go back to business as usual unless a true leader emerges that can unite the majority and if that happens all bets are off.

As for the market sell-off yesterday…presumably due to the weak retail sales report…it too was on volume of just 912 million shares and marking the 11th consecutive below average volume day (1.11B). Bonds staged a minor rally but it was minuscule with the 10 year barely below the 3.73% hit on Friday which pushed the 30 yr mortgage rate up 1 basis point to 5.12%.

There are no easy answers but what we do know is that getting out of this mess requires dumping special interests (including your own), and working together…something we have been unable to do for the past four years!

Have a great day!

TB

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