Sooo…Another Downgrade Coming?


Inquiring minds are trying to not to…inquire. It is easier that way as America, under the leadership(?) of President Obama, looks to begin circling the drain of the economic-life drain.

Remember last summer when the President and all his minions attempted to explain the Standard & Poor’s downgrading of US Treasury Debt away as all political theater without any basis in fact? Well, Bank of America’s Ethan Harris just announced that there will most likely be another downgrade either in late November or early December and told why:

We expect a moderate slowdown in the beginning of next year, as two small policy shocks—another debt downgrade and fiscal tightening—hit the economy. The “not-so-super” Deficit Commission is very unlikely to come up with a credible deficit-reduction plan. The committee is more divided than the overall Congress. Since the fall-back plan is sharp cuts in discretionary spending, the whole point of the Committee is to put taxes and entitlements on the table. However, all the Republican members have signed the Norquist “no taxes” pledge and with taxes off the table it is hard to imagine the liberal Democrats on the Committee agreeing to significant entitlement cuts. The credit rating agencies have strongly suggested that further rating cuts are likely if Congress does not come up with a credible long-run plan. Hence, we expect at least one credit downgrade in late November or early December when the super Committee crashes.

Leadership…more important than most thought when they cast their vote last time.

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“There’s a Bad Moon a Rising!”


It looks to be a loooong cold winter on the Left Coast.

Within the last couple of days there have been two independent pieces of information indicating a massive storm is about to come ashore and swamp the state of California. The first of these showed that tax revenues have fallen over $700 million short in just the three (3) months since Governor Jerry “Moonbeam” Brown and the rest of the Democrats passed the the state budget:

California’s revenue for the fiscal year that began three months ago has fallen $705 million below what Governor Jerry Brown and Democrats projected, approaching a level that may trigger automatic university spending cuts and higher community college fees.
September revenue came in $301.6 million below estimates, Controller John Chiang, a Democrat, said in a report today. July was $538.8 million less than forecast, Chiang said Aug. 9. Revenue in August was $135 million more than expected.
The $86 billion general-fund spending plan Brown signed in June included a series of cuts activated if higher revenue doesn’t materialize. The first, if the shortfall is $1 billion, would trim University of California and California State University budgets each by $100 million and increase community- college fees by $10 million.
With a $2 billion gap, the contraction would mean a seven- day reduction in the public-school year to save $1.54 billion and an end to $248 million in home-to-school busing subsidies. Brown’s finance department will determine in December if the cuts are needed based on revenue projections for the remainder of the fiscal year.

Think about this for a moment…three months created a 705 Million shortfall; then for the fiscal year, California is looking at approximately a $3 Billion shortfall.

The second piece of information showed up in the new port traffic numbers. In a nutshell, they cratered by an historic amount, creating a picture for a terrible holiday season for retailers. What makes this worse is that analysts had actually been raising their predictions for holiday spending ever since the back-to-school shopping season was stronger than most had expected.

But the people who work at the companies that ship and transport retailers’ goods are not nearly as optimistic about holiday sales.

When retailers expect that Americans will be crowding into their stores, their orders pile into the nation’s ports in August and September for delivery to stores by late October. But logistics companies say that is not happening this year.

“We’re concerned, because usually at this time, you see this peak,” said Richard D. Steinke, the executive director of the Port of Long Beach in California. “We haven’t seen it.”

In fact, the five busiest container ports in the United States said that imports in August 2011 were lower than or even with 2010 volumes.

In Long Beach, the second-busiest container port by volume, August imports fell by 14.2 percent from August 2010. While the port has not yet released September volumes, a spokesman, Art Wong, said it expected about a 15 percent drop from September 2010.

And its not just local either:

The reports from the remaining container ports in the top five were equally gloomy. In New York-New Jersey, the number of incoming containers in August was about flat with last year. In Savannah, Ga., imports in August fell by 4 percent. Oakland reported that August imports were down 0.9 percent from a year earlier. And Los Angeles, the nation’s highest-volume container port, counted 5.75 percent fewer containers in August than a year earlier.

When in conflict between a trade group and actual verifiable industry numbers, I have found that the latter is the course of truth.

Look on the bright side…there should be quite a bit of good merchandise through Mid-January

U.S. Economy Tipping into Recession


Early last week, Economic Cycle Research Institute (ECRI) notified clients that the U.S. economy is indeed tipping into a new recession. And there’s nothing that policy makers can do to head it off.

Just WHY is this important news?

Well, primarily, they haven’t been wrong.

as The Economist has noted, we’ve correctly called three recessions without any false alarms in-between. In contrast, most of those who’ve accurately predicted a recession or two have also been guilty of crying wolf – in 2010, 2005, 2003, 1998, 1995, or 1987.

Secondly, ECRI’s recession call isn’t based on just one or two leading indexes, but on dozens of specialized leading indexes, including the U.S. Long Leading Index, the Weekly Leading Index, and other shorter-leading indexes. The U.S. Long Leading Index, which was the first to turn down, before the Arab Spring and Japanese earthquake.

What is very troubling is that the most reliable forward-looking indicators are now collectively behaving as they did on the cusp of full-blown recessions, not “soft landings.”

November 6, 2012, is such a long time to come.

It’s important to understand that recession doesn’t mean “a bad economy”. We’ve had that for years now. The term ‘recession’ means an economy that keeps worsening. The academic reason given for the end of the ‘last’ recession’ was due to the economy not contracting anymore but seemingly treading water.

But because there is a new recession the economy is locked into a vicious cycle. This means that the jobless rate, already at 9+%, will go much higher…and the (annual) federal budget deficit, already above a trillion dollars, will soar.

Remember what Betty Davis’ character Margo Channing in “All About Eve” said:

“Fasten your seatbelts—it’s gonna be a bumpy night!”

Let us all pray that there will be a new morning in America on November 7, 2012.

And You Wonder How CA Got Into This Mess?!?!?


The proper way to view Governor Jerry "Moonbeam" Brown. Some people just don't 'get' life.

Good God! Does anybody with more than a cerebral cortex need another example showing just why California is in the mess it is? Governor Moonbeam is continuing in his loony ways. Over the weekend the dizzy governor signed several bills and two explain everything with the incredible clarity:

Bill #1: California is the first state in the nation to ban minors from using tanning beds. This legislation bans minors under the age of 14 from using tanning beds. Totally understandable position considering the possible longterm effects on an underage person since we as a culture do not feel minors are able to make ‘informed’ decisions. Notice the praise Gov. Loony-Tunes gets:

“I praise Gov. Brown for his courage in taking this much-needed step to protect some of California’s most vulnerable residents — our kids — from what the ‘House of Medicine’ has conclusively shown is lethally dangerous: ultraviolet-emitting radiation from tanning beds,” the bill’s sponsor, state Senator Ted Lieu, said in a statement.

“If everyone knew the true dangers of tanning beds, they’d be shocked. Skin cancer is a rising epidemic and the leading cause of cancer death for women between 25 and 29.”

Bill #2: California Gov. Jerry Brown Sunday signed legislation giving children 12 or older the power to consent to medical care involving the prevention of sexually transmitted disease. ‘Nuff said.

Sooooo…

The logic” put forth by Governor Brainless is that a 12 year old girl can make an informed decision regards their sexual life without parental consent; yet, her 17 year old sister can’t get into a tanning bed (even with her parents permission) for a few minutes in preparation for her winter formal.

This kind of ‘logic’ explains perfectly how liberals can say that what the economy needs is just more deficit spending…that we just haven’t ‘spent enough’. A real deficit of $130+ Trillion is just not enough. We need to spend MORE!