Posted by Larry Doyle on November 10th, 2010 7:47 AM |
Economic data is typically released and then reviewed in aggregate fashion. As such, understanding the dynamics at work within our economy is often clouded by the inability to access and analyse ‘the trees’ as opposed to ‘the forest.’ What happens as a result of this reality? Economic programs to address issues are typically crafted while looking through the rear view mirror. Regrettably results generated are often sub-standard and fraught with unintended consequences.
How might we change our perspective? Let’s check in with Rick Davis of Consumer Metrics Institute who projects what will occur in our economy based on a forward looking process that captures real-time consumer activity. As a longstanding admirer of Rick and his work, I welcome sharing his recent fabulous piece, Revisiting The Character of “The Great Recession”
We have commented before about how the “Great Recession” has changed character over time, evolving from a relatively normal “garden variety” and V-shaped consumer confidence recession into something far more persistent — where a lack of jobs and negative home equity has transformed it into a “new frugality.” But we haven’t previously discussed how the “Great Recession” has been an uneven experience among even those living in “Main Street” America. A recent review of our data has convinced us that this has not been a recession of shared pain, but one that has cut much deeper in some demographics than in others. (more…)
Posted by Larry Doyle on August 31st, 2010 5:56 AM |
I have informed more people than I care to count that I do not believe we are going to have an economic double dip. Am I turning positive on the economy? Do I see blue skies and fair winds on our economic horizon? No, regrettably not. The reason I do not believe we will have an economic double dip is very simply I do not believe that our “real” economy, not the government sponsored version, ever really came out of the initial recession.
People may care to debate or challenge me on my premise, but my ‘sense on cents’ leads me to believe that we have been experiencing one long and ongoing recession. I definitely sense that more people are now coming to accept this reality as well. This ‘walking pneumonia’ economic syndrome is captured in a recent commentary by Rick Davis of Consumer Metrics Institute,
The “Great Recession” that began in 2008 has had many nuances, but among the most important are that many of the observed changes in consumer behavior have begun to linger, much as the recession itself now appears to have done. If a new consumer thrift paradigm becomes endemic — either because of natural demographic processes or scarred generational memories of upside-down loans — the lingering recession might well end up being measured in years, not quarters as commonly expected. (more…)
Posted by Larry Doyle on January 4th, 2010 9:47 AM |
For those who missed last evening’s No Quarter Radio’s Sense on Cents with Larry Doyle Hall of Fame and Shame Induction, I am compelled to provide a recap and listing of all those honored or dishonored — depending on one’s perspective. What was the measuring stick to make these assessments? Very simply, the pursuit and promotion of truth, transparency and integrity as we navigate the economic landscape.
Some names you will immediately recognize, others you may not. Additional information about these individuals can be found via the search window (located above the right sidebar) at Sense on Cents. The names appear in no specific order of priority or importance. With no further adieu . . .
Sense on Cents 2009 Hall of Shame Inductees
1. Bernie Madoff
2. Nicholas Cosmo: ran financial scam at Agape World
3. Tim Geithner: tax cheat amongst other things
4. Larry Summers: arrogant, condescending, and sleep deprived
5. Auction-Rate Securities dealers and managers, especially Oppenheimer Holdings, E-Trade, Schwab, Pimco, Van-Kampen, Blackrock
6. The Wall Street Journal
7. George Soros
8. Chris Dodd (D-CT): reasons too numerous to mention
9. The Board of FINRA
10. Franklin Raines and Leland Brendsel: former CEOs of Fannie and Freddie
11. Wall Street management, especially Lloyd Blankfein of Goldman Sachs
12. Frank Dipascali: a special place in hell for Madoff’s CFO
13. Rahm Emanuel
14. Jimmy Cayne: CEO of Bear Stearns
15. Dick Fuld: CEO of Lehman Bros.
16. Congress collectively
17. Barney Frank (D-MA): reasons too numerous to mention, but start with “I want to roll the dice…”
18. Bank Stress Tests: a total sham
19. Allen Stanford
20. Steven Rattner: car czar
21. Bruce Malkenhorst: receiving a 500k pension from Vernon, CA
22. Barack Obama: just another politician (more…)
Posted by Larry Doyle on November 16th, 2009 11:24 AM |
“If you can keep your head when all about you are losing theirs…”
Retail sales rebounded strongly this month posing a 1.4% gain. Good news, right? In an attempt to provide a degree of sanity to what has become an extremely volatile report, let’s break this report down a little bit further.
Recall that our automotive sales have bounced around tremendously over the course of the last three months due to the Cash for Clunkers program. Auto sales soared in August given Uncle Sam’s handout. Once Uncle Sam shut that spigot off, auto sales dropped like a stone in September. In October, auto sales had a respectable bounce. All this said, there is no respected economist who doubts that the Cash for Clunkers program pulled demand forward. In the process, it has skewed the overall retail sales readings. What is the American consumer doing away from the auto sector? Let’s navigate. (more…)
Posted by Larry Doyle on October 5th, 2009 3:31 PM |
How did that “Cash for Clunkers” program ultimately grade out? While auto dealers were relishing the traffic that overwhelmed their showrooms, the fact is the program was nothing short of a government redistribution charade masked as an economic stimulus. If this type of program is the best we can do, we are in worse shape politically and economically than I thought.
While some pundits would sing the praises of the “Cash for Clunkers” program, fundamentally I have a difficult time understanding how real value is created when current value is destroyed in the process. Additionally, there was never a doubt that this program was merely pulling demand forward. How do we know this?
U.S. auto sales declined 23% for the month of September on a year over year basis. Sales for GM (-45%) and Chrysler (-42%) vehicles declined precipitously while Ford (-5%) declined only marginally. What does that indicate? Car buyers want to purchase a vehicle in which they have confidence in the manufacturer.
The Wall Street Journal sheds further light on this ‘clunker’ in writing, Clunkers In Practice:
Cash for clunkers had two objectives: help the environment by increasing fuel efficiency, and boost car sales to help Detroit and the economy. It achieved neither. According to Hudson Institute economist Irwin Stelzer, at best “the reduction in gasoline consumption will cut our oil consumption by 0.2 percent per year, or less than a single day’s gasoline use.” Burton Abrams and George Parsons of the University of Delaware added up the total benefits from reduced gas consumption, environmental improvements and the benefit to car buyers and companies, minus the overall cost of cash for clunkers, and found a net cost of roughly $2,000 per vehicle. Rather than stimulating the economy, the program made the nation as a whole $1.4 billion poorer.
The basic fallacy of cash for clunkers is that you can somehow create wealth by destroying existing assets that are still productive, in this case cars that still work. Under the program, auto dealers were required to destroy the car engines of trade-ins with a sodium silicate solution, then smash them and send them to the junk yard. As the journalist Henry Hazlitt wrote in his classic, “Economics in One Lesson,” you can’t raise living standards by breaking windows so some people can get jobs repairing them.
In the category of all-time dumb ideas, cash for clunkers rivals the New Deal brainstorm to slaughter pigs to raise pork prices. The people who really belong in the junk yard are the wizards in Washington who peddled this economic malarkey.
I concur. What do you think?
Posted by Larry Doyle on August 4th, 2009 3:31 PM |
Instinctively, I am very suspicious of how $1 billion was spent on the ‘Cash for Clunkers’ program within such a short time frame. As such, is it unreasonable to ask for an audit of this program prior to allocating more funds? Who is to say that some degree of misappropriation, if not outright fraud, has occurred?
Whose money is being allocated? Yours and mine. I want an accounting. Who is supposed to protect our interests? Our elected representatives. They must be held accountable.
Perhaps there has been no fraud or misappropriation in the allocation of these funds. Perhaps administratively this program is overmatched by demand. If so, those administering the funds should swallow their pride and say as much.
I find it totally unacceptable, though, that upon request those in Washington overseeing this program can not give a timely and accurate accounting. As the Associated Press reports, Obama Administration Withhold Data on Clunkers:
The Obama administration is refusing to quickly release government records on its “cash-for-clunkers” rebate program that would substantiate — or undercut — White House claims of the program’s success, even as the president presses the Senate for a quick vote for $2 billion to boost car sales.
The Transportation Department said it will provide the data as soon as possible but did not specify a time frame or promise release of the data before the Senate votes whether to spend $2 billion more on the program.
We deserve so much better!!