Retail Apocalypse: Why Are Major Retail Chains All Over America Collapsing?
Sunday, February 17, 2013 17:50
Activist Post
If the economy is improving, then why are many of the largest retail chains in America closing hundreds of stores? When I was growing up, Sears, J.C. Penney, Best Buy and RadioShack were all considered to be unstoppable retail powerhouses. But now it is being projected that all of them will close hundreds of stores before the end of 2013. Even Wal-Mart is running into problems. A recent internal Wal-Mart memo that was leaked to Bloomberg described February sales as a "total disaster". So why is this happening? Why are major retail chains all over America collapsing? Is the "retail apocalypse" upon us?
Well, the truth is that this is just another sign that the U.S. economy is falling apart right in front of our eyes. Incomes are declining, taxes are going up, government dependence is at an all-time high, and according to the Bureau of Labor Statistics the percentage of the U.S. labor force that is employed has been steadily falling since 2006. The top 10% of all income earners in the U.S. are still doing very well, but most U.S. consumers are either flat broke or are drowning in debt. The large disposable incomes that the big retail chains have depended upon in the past simply are not there anymore. So retail chains all over the United States are now closing up unprofitable stores. This is especially true in low-income areas.
When you step back and take a look at the bigger picture, the rapid decline of some of our largest retail chains really is stunning.
It is happening already in some areas, but soon half empty malls and boarded up storefronts will litter the landscapes of cities all over America.
Just check out some of these store closing numbers for 2013. These numbers are from a recent Yahoo Finance article...
But the truth is that those store closings are not the entire story. When you dig deeper you find a lot more retailers that are in trouble.
For example, Blockbuster recently announced that this year they will be closing about 300 stores and eliminating about 3,000 jobs.
Toy manufacturer Hasbro recently announced that they will be reducing the size of their workforce by about 10 percent.
Even Wal-Mart is going through a tough stretch right now. According to documents that were leaked to Bloomberg, Wal-Mart is having an absolutely disastrous February...
The mainstream media continues to proclaim that we are experiencing a robust "economic recovery", but at the same time there are a whole host of indications that things are continually getting worse.
Even global cell phone sales actually declined slightly in 2012. That was the first time that has happened since the last recession.
Perhaps it is time that we faced the truth. The middle class is shrinking, incomes are declining and there are not nearly as many jobs as there used to be.
Mort Zuckerman pointed this out in a recent article in the Wall Street Journal...
And sadly, things may soon be getting a lot worse. If Congress does not do anything about the "sequester", millions of federal workers may shortly be facing some very painful furloughs according toCNN...
I often write about the stunning economic decline of major cities such as Detroit, but there are huge sections of rural America that are in even worse shape than Detroit in many ways.
For example, many Indian reservations all over America have been shamefully neglected by the federal government and have become hotbeds for crime, drugs and poverty.
Business Insider recently profiled the Wind River Indian reservation in western Wyoming. The following is a brief excerpt from that outstanding article...
It is hard to believe that there are places like that in America, but the truth is that conditions like that are spreading to more U.S. communities with each passing day.
We are a nation that is in an advanced state of decline. But as long as the financial markets are okay, our leaders don't seem too concerned about the suffering that everyone else is going through.
In fact, former Federal Reserve Chairman Alan Greenspan essentially admitted as much during a recent interview with CNBC. The following is how a Zero Hedge article summarized that interview...
As long as the stock market is moving higher they think that everything is just fine and dandy.
And the Obama administration?
They continue to pursue the same policies that got us into this mess.
Their idea of "economic reform" is to threaten to sue businesses that do not hire ex-convicts.
And of course now that Obama has been re-elected he is putting a tremendous amount of effort into "stimulating the economy".
For example, he spent this weekend golfing in Florida, and the Obamas recently spent about 20 million taxpayer dollars vacationing in Hawaii.
Meanwhile, the U.S. economy is getting worse with each passing day.
If you doubt that economic conditions are getting worse, please read this article: "Show This To Anyone That Believes That 'Things Are Getting Better' In America".
When you look at the cold, hard numbers, it is undeniable what is happening to America.
And our leaders are not doing anything to fix our problems. In fact, most of the time they are just making things worse.
So buckle up and get prepared. We are in for very bumpy ride, and this is only just the beginning.
This article first appeared here at the Economic Collapse Blog. Michael Snyder is a writer, speaker and activist who writes and edits his own blogs The American Dream and Economic Collapse Blog. Follow him on Twitter here.When you step back and take a look at the bigger picture, the rapid decline of some of our largest retail chains really is stunning.
It is happening already in some areas, but soon half empty malls and boarded up storefronts will litter the landscapes of cities all over America.
Just check out some of these store closing numbers for 2013. These numbers are from a recent Yahoo Finance article...
Best Buy
Forecast store closings: 200 to 250
Sears Holding Corp.
Forecast store closings: Kmart 175 to 225, Sears 100 to 125
J.C. Penney
Forecast store closings: 300 to 350
Office Depot
Forecast store closings: 125 to 150
Barnes & Noble
Forecast store closings: 190 to 240, per company comments
Gamestop
Forecast store closings: 500 to 600
OfficeMax
Forecast store closings: 150 to 175
RadioShackThe RadioShack in a nearby town just closed up where I live. This is all happening so fast that it is hard to believe.
Forecast store closings: 450 to 550
But the truth is that those store closings are not the entire story. When you dig deeper you find a lot more retailers that are in trouble.
For example, Blockbuster recently announced that this year they will be closing about 300 stores and eliminating about 3,000 jobs.
Toy manufacturer Hasbro recently announced that they will be reducing the size of their workforce by about 10 percent.
Even Wal-Mart is going through a tough stretch right now. According to documents that were leaked to Bloomberg, Wal-Mart is having an absolutely disastrous February...
Wal-Mart Stores Inc. had the worst sales start to a month in seven years as payroll-tax increases hit shoppers already battling a slow economy, according to internal e-mails obtained by Bloomberg News.
“In case you haven’t seen a sales report these days, February MTD sales are a total disaster,” Jerry Murray, Wal- Mart’s vice president of finance and logistics, said in a Feb. 12 e-mail to other executives, referring to month-to-date sales. “The worst start to a month I have seen in my (more than) 7 years with the company.”So what in the world is going on here?
The mainstream media continues to proclaim that we are experiencing a robust "economic recovery", but at the same time there are a whole host of indications that things are continually getting worse.
Even global cell phone sales actually declined slightly in 2012. That was the first time that has happened since the last recession.
Perhaps it is time that we faced the truth. The middle class is shrinking, incomes are declining and there are not nearly as many jobs as there used to be.
Mort Zuckerman pointed this out in a recent article in the Wall Street Journal...
The U.S. labor market, which peaked in November 2007 when there were 139,143,000 jobs, now encompasses only 132,705,000 workers, a drop of 6.4 million jobs from the peak. The only work that has increased is part-time, and that is because it allows employers to reduce costs through a diminished benefit package or none at all.So how can the mainstream media be talking about how "good" things are if we still have 6.4 million fewer jobs than we had back in November 2007?
And sadly, things may soon be getting a lot worse. If Congress does not do anything about the "sequester", millions of federal workers may shortly be facing some very painful furloughs according toCNN...
Federal workers could start facing furloughs as early as April, according to federal agencies trying to prepare for the worst.
Unless Congress steps in, some $85 billion in massive spending reductions will hit the federal government, doling out furloughs to much of the nation's 2.1 million federal workforce, experts say.If you still live in an area of the country where the stores and the restaurants are booming, you should be very thankful because that is not the reality for most of the country.
I often write about the stunning economic decline of major cities such as Detroit, but there are huge sections of rural America that are in even worse shape than Detroit in many ways.
For example, many Indian reservations all over America have been shamefully neglected by the federal government and have become hotbeds for crime, drugs and poverty.
Business Insider recently profiled the Wind River Indian reservation in western Wyoming. The following is a brief excerpt from that outstanding article...
The Wind River Indian Reservation is not an easy place to get to, but I had to see it for myself.
Thirty-five-hundred square miles of prairie and mountains in western Wyoming, the reservation is home to bitter ancestral enemies: the Eastern Shoshone and Northern Arapaho tribes.
Even among reservations, it's renowned for brutal crime, widespread drug use, and legal dumping of toxic waste.You can see some amazing photos of the Wind River Indian reservation right here.
It is hard to believe that there are places like that in America, but the truth is that conditions like that are spreading to more U.S. communities with each passing day.
We are a nation that is in an advanced state of decline. But as long as the financial markets are okay, our leaders don't seem too concerned about the suffering that everyone else is going through.
In fact, former Federal Reserve Chairman Alan Greenspan essentially admitted as much during a recent interview with CNBC. The following is how a Zero Hedge article summarized that interview...
Starting at around 1:50, Greenspan states the odds of sequester occurring are very high - in fact, the playdough-faced ex-Chair-head notes, "I find it very difficult to find a scenario in which [the sequester] doesn't happen" But when asked how this will affect the economy, Awkward Alan is unusually clearly spoken - "the issue is how does it affect the stock market."
While not so many of our leaders have taken the path to direct truthiness, Greenspan somewhat shocks a Botox'd and babbling Bartiromo when he admits "the stock market is the key player in the game of economic growth."
Bartiromo shifts uncomfortably in her seat, strokes her imaginary beard and stares blankly as Greenspan explains that while the sequester will have a real effect on the real economy, "if the stock market can hold up through this, then the effect will be rather minor."Do you see?
As long as the stock market is moving higher they think that everything is just fine and dandy.
And the Obama administration?
They continue to pursue the same policies that got us into this mess.
Their idea of "economic reform" is to threaten to sue businesses that do not hire ex-convicts.
And of course now that Obama has been re-elected he is putting a tremendous amount of effort into "stimulating the economy".
For example, he spent this weekend golfing in Florida, and the Obamas recently spent about 20 million taxpayer dollars vacationing in Hawaii.
Meanwhile, the U.S. economy is getting worse with each passing day.
If you doubt that economic conditions are getting worse, please read this article: "Show This To Anyone That Believes That 'Things Are Getting Better' In America".
When you look at the cold, hard numbers, it is undeniable what is happening to America.
And our leaders are not doing anything to fix our problems. In fact, most of the time they are just making things worse.
So buckle up and get prepared. We are in for very bumpy ride, and this is only just the beginning.
Replies
(Before It's News)
Sunday, February 17, 2013 by: J. D. Heyes
(NaturalNews) Is chronic, slow economic growth and rising poverty the new normal for America and Americans? Unfortunately, for an increasing number of people, the answer is yes.
According to recent reports, a large and growing portion of American workers who are having trouble making ends meet because of rising costs are being forced to raid their retirement accounts for non-retirement needs, "raising broad questions about the effectiveness of one of the most important savings vehicles for old age," The Boston Globe said.
In fact, more than one in four - a staggering 25 percent of workers - with 401(k) and similar retirement savings accounts are now using them to pay current bills, new data indicates.
The monetary figure is alarming: A quarter of the $293 billion deposited in such accounts each year is now being drained via loans, withdrawals and out-right cash-outs, "undermining already shaky retirement security for millions of Americans," the paper said.
The new normal - Faltering finances
What's worse is that the federal government is broke, too; the country is already trillions of dollars in debt and tens of trillions in the hole for unfunded promises made over the years by pandering politicians who have mortgaged the future of generations of Americans to buy votes today.
Because of their irresponsibility, policymakers will now have to cut the Social Security and Medicare benefits at some point - benefits that millions of Americans who paid into both systems were counting on to make it through retirement. Couple this eventuality with sustained low economic growth, poor employment prospects, stagnating pay scales and rising costs of food, fuel and utilities, and it is easy to see how more Americans will eventually be forced to mortgage their future.
"We're going from bad to worse," Diane Oakley, executive director of the National Institute on Retirement Security, told the Globe. "Already, fewer private-sector workers have access to stable pension plans. And the savings in individual retirement savings accounts like 401(k) plans - which already are severely underfunded - continue to leak out at a high rate."
MORE HERE
We keep hearing over and over that the economy is improving,everything is OK, that is another huge lie.Recovery?The proof is in the pudding ,the fact that so many people have to dig into their 401(k)just to make ends meet is painting the real picture.
Governments have refused to accept the necessity of a period of economic re-adjustment following the credit-bubble. The bubble burst about five years ago and economic progress has been effectively suspended ever since. The consequences of this refusal to accept reality are at a minimum to make this adjustment unnecessarily drawn out and needlessly painful, without offering a better eventual outcome.
Reduced to its bare bones, the choice has been either to accept that unviable businesses and over-extended banks must go bust, or to ignore the problem and hope it goes away. We are familiar with this dilemma as investors: a business that refuses to adapt to new realities will eventually fail. Before it does, its investors have the chance either to sell their shares and perhaps reinvest their money more profitably, or to refuse to accept an early loss on their investment. Most of us, being human, take the latter course and usually regret it.
The lesson, if we care to learn it, is that the product of time and money is more valuable than the desire to avoid a book loss. In economic terms, it is better for resources to be deployed efficiently than to tie them up in inefficient or unwanted activity. This is a decision for markets, not governments, which brings us back to the necessity for economic re-adjustment. Governments have simply not faced up to the reality that we are in a post-credit-bubble mess: they still hope the problem will be resolved by time.
At this point we must dismiss objections that you cannot compare national accounts with those of a business. Such platitudes display wishful thinking more than a grasp of reality. However, wishful thinkers have a minor point in that governments have the wherewithal to put off the inevitable for longer than failing businesses; but the result is the zombie-like economy we face today.
Governments are refusing to let markets clear: prices have not been permitted to fall to a clearing level. They put it off because the American economist Irving Fisher came up with a plausible theory about financial deflation in the 1930s, and they don’t want to face the bankruptcies of the over-indebted, the businesses that rely on the state for their survival, and the banks that have foolishly lent them too much money.
Reality is now catching up with western governments. Their underlying financial position is rapidly deteriorating, with welfare costs spiralling out of control and governments already heavily in debt. They cannot realistically underwrite the global banking system, which is insolvent and considerably larger than the governments themselves. The economic recovery which is the governments’ get-out-of-jail card will not occur without that economic readjustment.
We are long past the point of no return: that was probably when the Federal Reserve Board under Greenspan decided to rescue the stock market by cutting interest rates to 1% in 2003/04. It has been crisis management by the state ever since. We have progressed to the point where governments have chosen to protect themselves, in preference to looking after the true interests of their electorates.
Governments are now reduced to screwing their electorates for their own survival, which is their last refuge from reality.
THE COLLAPSE OF THE DOLLAR
HOW REALLY BAD ARE THE ECONOMIC FUNDAMENTALS?
The economic situation looks under control currently, that’s because we are now in the eye of the storm. The longer this unbalanced situation goes on, the faster and more severe the eventual collapse will play out.
The main theme is that governments in the US and Europe have lost complete control over their spending and borrowing, which must ultimately result in a catastrophic crisis. Soaring debt accumulation, along with Europe Japan and USA race to devalue will continue until some kind of crisis arises; either internally or globally and when the markets blowup, it will bring about an abrupt END to this charade. The 2008 crisis was not the final collapse. The final chapter of the 2008 – 2009 meltdowns is still ahead of us. The same trend is forecasted for the rest of the world and up until now it is playing out almost exactly the way I have expected it to. Worldwide debt stands at $220 trillion, a figure that when compared with world GDP of $62 trillion, shows a debt to GDP ratio of 350% and still growing exponentially. Common sense should tell you that it is not sustainable.
THE CARDS HAVE BEEN DEALT
There is no stopping the Euro’s demise - are you protected? History tells us that "Nationalism will emerge. Healthier countries will not see fit to spend ALL their hard earned RESERVES to bail out their less responsible neighbors who to this day refuse to make any adjustments to their spending." And money will flow out of paper assets into gold and silver as debt creation continues to gain momentum and spread to the public. (Gold and silver are the only forms of money that governments cannot debase by creating additional units of it.)
Treasury Bonds: They have always been and for the time being, still are functions of a general flight to safety. An ever shrinking part of the world is still looking at US Dollar denominated assets as safe havens even though the US government is taking on an ever increasing amount of debt. However, it is imperative to understand that the purchasers in the treasury market are mostly the central banks themselves. Their intention is to prop up fiat currencies by buying sovereign debt. What this really means is that governments are taking on too much debt and turning it into currency. Most people don’t see this process; it also remains unreported by the mainstream media. This process, historically, is the final stage of a country destroying its currency. Unfortunately, it is taking place on a global scale, so it will undoubtedly result in an implosion of the whole fiat currency concept.
Unfortunately I cannot tell you the exact timing of the coming debacle.
Where do we stand today? The number of people with jobs (actually working) as reported by the Government is up 2%, while the number of people on disability is up by 15%. And yet the percentage of the population with jobs is fast approaching the lowest figure in history: People living on food stamps are up 44%, standing at 46 million currently. One in four households lives on less than $25,000 a year.
Total debt has gone from 1.5 times GDP in 1980 to 3.5 times GDP today and climbing. 2012 was the 4th consecutive year in which the US ran trillion dollar plus deficits, with over $1.5 trillion projected for 2013 and continuing as far as the eye can see: When unfunded liabilities are included in the calculation (Medicare, Medicaid, Social Security which are nonetheless debt), the debt per family stands at over $2 million. The Government and the “Don’t Ask Don’t Tell” Media are trying to convince us that things are improving. The path to the final collapse has been slowed down by human nature. It takes a long time for people to change their beliefs on something. Our global society still believes that paper currencies still hold their value over time as they keep on accumulating and saving fiat based money.
A stanch Left Wing compliant media is a phenomenal tool for fooling people. Governments seem to be able to create as much currency as they want. But COMMON SENSE tells us that there are limitations. Yes, they can set interest rates at levels that signal to the market that economic conditions are fine: Even when underlying conditions are deteriorating. Lending at a very low interest rate gives the impression of a good creditworthiness. But that is a false premise. Nobody in their right mind lends money at ¼% to 0 % interest.
WE ARE IN A GOVERNMENT DEBT / BOND BUBBLE
Markets and people tend to go with the flow during a bubble. However, history has shown that as awareness slowly but surely sinks in; people suddenly wake up (usually triggered by a Black Swan event and move extremely quickly (witness the LEMAN BROS. affair). We also saw this in the last two bubbles. One year before the tech stock bubble imploded, everyone expected the future to be better than the past, but in the blink of an eye, the world was staring at a global depression. The same thing happened with the housing boom in 2008. Everyone was convinced that housing prices could only go up in 2007, yet one year later, the whole global financial system was on the verge of collapse. But the world still had full faith in the US Dollar and its Bond Market. Today, everyone believes in the safety of government bonds and they are parking their money there, even though they are not receiving any interest. Go figure. It is unknown when exactly the coming crash will take place (but it will) and the world will wake up suddenly, as their dreams become a nightmare… again!
HOW THE NEXT COLLAPSE WILL PLAY OUT
The structure of our financial system is a fascinating topic to explore. It gives us insights to describe the anatomy of the coming collapse. The best analytical framework explaining today’s system is described in “Currency Wars” by Jim Rickards, published in 2011. The author explains how complexity in our system has risen to the point where it shows unique characteristics, the most important one being that the propensity for catastrophic failure is an exponential function of complexity. In simple terms, it means that, when the system doubles in size, the instability goes up tenfold. It means as well that it requires exponentially increasing amounts of money (debt) to keep the system growing. The framework is revolutionary in that it perfectly describes today’s reality. Today, governments need more and more debt to generate the same amount of GDP. We need to borrow more only to stay in place but at the cost of a huge (almost certain) collapse of the system. But more importantly, the problems have become so huge that there is no longer a Lender of Last Resort big enough to bail anybody out.
The longer this process goes on, the faster and more severe the collapse will be. Suppose the final collapse strikes in 2013/15. By then, the system will have grown so complex, and the amounts of debt will be so huge that there will be no way to control it - the crash will take on a life on its own.
THOSE DEADLY DERIVITIVES
As early as February 2005, I warned about both the size and the exponential growth of derivatives, growing without any collateral. In fact, they are the “complexity story”. What most people do not realize is that banks report their net derivatives position (their long versus short positions) and only the net position is shown as their risk. However, the gross position is the real relevant number. To put things into perspective, the earlier mentioned $62 trillion global GDP should be compared with the gross derivatives figure which stands at more than a Quadrillion dollars of notional value. (How much is a Quadrillion?)
A derivatives meltdown will play out almost instantaneously, which is why they keep pouring money into Greece because a default of even one small insignificant country, no matter how small, could be the Black Swan ( Lehman Bros.) that everyone fears, because it sets off a chain reaction of defaults. When one big bank faces some kind of trouble and fails, the banks with the largest exposure to derivatives (think JP Morgan, Citigroup, Goldman Sachs etc.) will realize that the bank on the other side of the derivatives trade (the counterparty) is no longer good for any of their obligations. All of a sudden their hedged positions become naked positions. The gross position becomes their net positions. The risk explodes instantaneously. Markets realize that all hedged positions are in reality not hedged anymore, and all market participants start bailing almost simultaneously. (Bail to where or to whom?) The whole banking and financial system freezes up. It might start in Asia or Europe, in which case Americans will wake up in the morning to find out that their markets are not functioning anymore; stock markets remain closed, money at the banks become inaccessible, etc.
It is really impossible to forecast the exact trigger that will cause the bubble to burst. What we clearly see today is that the fixed income (bond) market will be the epicenter of the coming shock. A lot of derivatives are hedges against bond portfolios, but most are against Sovereign Debt so the crack could start with trouble in Treasury Bond markets for example as US interest rates start rising or as no one except the Fed shows up for the next Bond Auction. The first reaction will be the Fed buying up all bonds that the US government is issuing, which would spook the markets instead of calm them down. This would set off a chain reaction as all bond holders try to dump their bonds.
Complex systems do not allow us (me) to determine things ahead of time. One of the few things we know, however, is that the mother of all bubbles will burst and that we created the conditions for this catastrophic failure.
You will then thank your lucky stars (and maybe me) that you have been accumulating Gold Eagles and Maple leafs for the last 12 years..
TRENDS FOR 2013 & POTENTIAL TRIGGERS FOR A TRUST CRISIS
POSSIBLE TRIGGERS:
In recent years, a high degree of economic, financial, and political uncertainty has resulted in acute volatility in stocks, real estate, commodities and precious metals. I believe that another aggravating factor has been the increasing skepticism through which the investing public views government statistics and statements.
To make prudent decisions, investors need to know key economic indicators such as economic growth, inflation rates, unemployment levels and the real cost and value of money. For the past 20 years or so, the key assumptions behind the calculation of these figures have been changed, or more accurately distorted, in favor of government image.
Perhaps the most important government statistic for investors is the inflation rate. The precise degree to which money is depreciating is the bedrock upon which all other financial determinations rest. The inflation rate is the prime input that determines the discount rate used for calculating the real present value of investment returns.
The basic U.S. inflation rate is published in the form of the Consumer Price Index (CPI). This purports to represent items selected to represent the spending of the average U.S. citizen. But a closer look reveals some troubling distortions. For example, health care expenditures are weighting at just one percent of spending. Americans who are struggling with obscenely high medical costs will recognize this as absurd on its face.
In addition to weightings, the actual price increases are largely arbitrary. For example, if the price of an automobile rises by 20 percent, but is 'assumed' to have added technology that equated to three quarters of the higher price, the price is deemed to have risen by only 5 rather than 20 percent. (See Peter Schiff's mid January article that shows, among other things, that the government reported newspaper and magazine prices to have risen just 35 percent over the past 12 years while actual prices rose by more than 130 percent.)
For the past few years, the Fed has maintained that the U.S. inflation rate, which is represented by the Consumer Price Index, or CPI, has hovered around two percent. Most consumers who buy food, goods and services such as health in the real world, will find this figure derisory.
However, Shadow Government Statistics (SGS), an independent data service published by John Williams, calculates key U.S. Government statistics according to the methodology used during the years before the election of President Clinton. Using those yardsticks, SGS shows the U.S inflation rate over the past few years has hovered around six percent, or three times the declared Government rate.
The inflation rate is key also to calculating the key economic growth rate, or GDP. By deflating the nominal GDP by the Government's 'official' 2 percent inflation rate, the U.S. economy shrank by some 0.5 percent in the last quarter of 2012. But if a higher,and I believe more accurate 4 percent inflation rate had been used, the U.S. economy would have been seen to regress by 2.5 percent. At that rate of inflation the paltry yields paid on bank deposits, and by 10-year U.S. Treasury bonds, are currently in deeply negative territory.
Regarding stock markets, the Dow passed 14,000 last week, to great acclaim. However, if discounted by the 'official' CPI of approximately two percent per year the Dow would have to reach about 15,400 to equal its October 9, 2007 high of 14,165. But discounted at a 4 percent per year inflation rate, the Dow would have to stand at more than 17,500 to pass its all time high in real terms.
Of course, the low inflation rate also provides the government with breathing room on the fiscal side. Low inflation keeps a limit on the increases that federal agencies are required to pay out to beneficiaries of programs such as Social Security. With the budget so tightly constrained by huge deficits, the low inflation data is essential to government planners.
More chicanery can be seen on the unemployment front. The government currently claims the unemployment rate to be at just 7.9 percent. But when calculating unemployment using the pre-Clinton methodology, SGS finds it to be around 22 percent. SGS does not exclude, as the government does now, all those who have left the workforce out of despair of finding a job, or those who who have accepted part time jobs in lieu of full time employment.
A world of politically manipulated 'official' statistics and misleading Government statements makes investment decisions more difficult. The result is that, despite falsely negative 'real' short-term interest rates and an abundance of debased cash, consumers and corporations continue to hoard cash. While the Dow has in fact surged in nominal terms, the leading U.S. equity funds continue to show significant outflows of investment funds. Rising stock prices have not convinced many Americans to get into the game. This should provide needed perspective on the current media euphoria.
This looks like a long consolidation, with a range trade of 1550 to 1800.
If we do get down as low as 1570 one might be inclined to step in and buy, adding to longer term holdings and for a trade, with an eye to that 1550 as a low and an upside target north of 1700.
I am sure most traders on the Street are seeing/thinking the same thing. So it might take some agility, and scaling in. And of course if too many specs pile on there, the bullion banks will deliver a short term smacking on general principle. That's what they do. It is tough playing against the house, especially when they get to deal your cards face up.
But I will also be keeping an eye on the stock markets, to see if they correlate with the metals, or if not, and how the VIX fares.