Telling the Tale

ZH preaches:

While the Achilles heel to the endless “economic data” BS coming out of China may be its electric production and demand, both of which show a vastly different picture than what the Beijing politburo’s very wide brush strokes paint, the US itself is not immune from indicators that confirm that anything the BEA dishes out should be taken with a grain of salt. One data set that we showed recently that paints a drastically different (read slowing) picture of the US economy which we noted recently is railcar loading of waste and scrap for the simple reason that “The more we demand, the more waste is generated by that production.” Of course, the propaganda manipulation machinery only focuses on the “entrance” of production, and completely ignore the “exit.” But an even far more important metric of the general health of the US economy may be none other than broad energy demand, in the form of petroleum deliveries and gasoline demand. If this is indeed the relevant metric to observe, then things are about to get far, far worse. As Dow Jones notes: “U.S. petroleum deliveries, a measure of demand, fell by 2.7% in July from a year earlier to the lowest level in any month since September 2008, the American Petroleum Institute, an industry group, said Friday.” It gets worse: “Demand in the world’s biggest oil consumer, at 18.062 million barrels a day, was the weakest for the month of July since 1995, the API said. Year-to-date demand is down 2.3% from the same period in 2011.

Macro factors make a difference. Showing, yet again, that the ‘miracle of China’ is so much bovine excrement.

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American Economic Indicators

Much like Atlanta, Knoxville seems to have suffered according to Tam:

Meanwhile, the TeeWee talking heads are cooing at the Dow passing 13,000 again. Investors, they say, are excited about yet another Greek bailout. Let me get this straight: Germany has taken out another cash advance on its maxed-out credit card and given it to its deadbeat cousin, Greece, who swears that this time they’ll use the money to get a haircut and a job, instead of wasting it on hookers and blow again, and investors take this as a good sign?

Every time I hear the words “Leading economic indicators are…” come out of a newscaster’s mouth these days, I expect them to be followed by “…from the planet Mars.”

To add to that, places that should be seeing some kind of uptick in revenue (people not eating steak, but shifting to cheap fast food) are not:

Get this: these deals are usually priced in multiples of EBITDA, that is, the earnings before interest, taxes, amortization and depreciation. For non-accountants like me, all that matters is that annual EBITDA  for this package at the time the sale contract was signed four months ago was roughly $900k, so a sale price of 3x EBITDA (a steal, BTW) would be $2.7 million.

So what happened while we were doing all the due diligence, licensing, and other legal crap to actually complete the sale? Well, in the last three months of 2011, yes food costs rose, but more importantly sales plummeted. I am not going to quote numbers because I can’t, but I can say the combination dropped annual EBITDA to roughly $500k. That means that sale price of $2.7 million was transformed to more than 5x EBITDA, taking this from a really good deal to being some of the most overpriced restaurants in the country.

That also means much more than just “oh one year was $400k worse than the other.” It means that just this past quarter alone was SO bad that it caused that kind of drop to the annual figure for this package of stores.

Something to ponder. Spooky indeed.

Political Observations

Not a political blog. Never will be, though I believe that the following will have drastic impact on FREFOR/OPFOR going forward.

A few predictions and opinions:

  • Romney will emerge as the clear Republican lead and get the nomination. This is based on my suspicion that he already has it sown up and this debate cycle with the rest of the crowd is merely theater to show the populace that they do indeed have some kind of say in big party politics.
  • Obama will win in 2012. Not by the same margin as before, but will eek out a victory and spin it as a crystal clear mandate that he is indeed the chosen one who will in the soon to be immortal words of Chris Rock, “Get his real gangster shit on…”.
  • #gunwalker, while horrible and infecting dotgov across the board, will fizzle and be replaced by something just as bad that will also be ignored by 99% of the Fourth Branch of Government.
  • To distract from the #depression, dotgov will launch some kind of offensive on Iran. This will happen in the next 12 months. Whether it will be initiated by the Israelis is of no consequence. The engagement will eventually become a US operation.

Merely opinions. YMMV.

Propaganda at Your Own Risk

This.

The nation’s economy is not growing. There is now a near-complete disconnect between the map and the territory. The debt-deflation monster has barely begun to tear apart the economy and already the BEA has devolved into a bizarre Orwellian MinEcon. This was inevitable, given the way Keynesians turned “animal spirits”, or as they are now known, “consumer confidence” into a fetish that articulated a concept of lying one’s way into prosperity.

No doubt future generations will look on the period from 1950 to 2010 as an age lost to deception, where growth was believed to be the result of debt and deceit, national prosperity the result of outsourcing jobs, and industrial growth through free trade. The observable fact is that there is another word for a “service economy” and that is “an unproductive economy with high unemployment”.

Once you realize that there is no spoon, you can go on and prosper.

Economic Collapse: The Next European Wave

From this Zerohedge post:

In my opinion, the epicenter of the “next wave” of the financial collapse is going to be in Europe.  But that does not mean that the United States is going to be okay.  The reality is that the United States never recovered from the last recession and there are already a lot of signs that we are getting ready to enter another major recession.  A major financial collapse in Europe would just accelerate our plunge into a new economic crisis.

My personal opinion is that we have an imminent collapse ahead of us in the Euro Zone. There will be some kind of marginal stick save to keep them from tumbling over the cliff, and maybe, if they are lucky, one after that to prolong the high. After that, it will be nosedive to the canyon floor.

This will allow for some kind of US holdout, but inevitably, the schemes will stop working.

The truth is, we are in a global depression. We have essentially been in this since 2008, and the last few years of upward trending has been future demand pulled into the present by massive state based subsidies and inflationary spending. As this unwinds, we will see what could have been less suckage in 2008 had we as a nation let the financial and banking industries go through a bankruptcy and reorganization.

We will at some point have to suffer the consequences of our actions.

I believe the tipping point to this is Europe. I believe that tipping point event is only a short time in the future.

An Interview with Doug Casey

Via John Robb.

Read.

Your first slice of doom:

Daily Bell: Will there be accompanying civil unrest – rioting, looting and assorted acts of criminal behavior?

Doug Casey: Almost certainly. I think the riots we have seen recently in London, the various flash mobs we have seen around the US, and even the rioting that happened in Vancouver, are just an overture. When people don’t have jobs – and actual unemployment in the US is running at over 20% if it is calculated the same way it was 30 years ago – they become very unhappy, while they have lots of time on their hands. Combine that with the fact a vastly higher number of people live in cities than was the case in the ’30s – trouble always arises from cities. Combine that with skyrocketing inflation and a generally collectivist/statist psychology on the part of all segments of the population, and the result is inevitable. Living in a big city, or even a suburb, impresses me as a mistake.

On the Fed, monetary policy, & QE3:

Daily Bell: Recently, Alan Greenspan said on NBC that the US would never default because the Fed can always print more money. (Watch that video here.) Isn’t that default by devaluation? Who does it hurt the most?

Doug Casey: Yes, that’s exactly what they are going to do – print – and it’s going to devastate the middle classes, the people that save. That is in fact what they are going to do. As I said before, it would be far better if they defaulted overtly – that would punish those who lent the government money, it would ruin the government’s credit, it would force the government to cut back radically and would likely save the dollar. But they’ll do none of those things. Greenspan and Bernanke should both be hung by their heels from a lamp post as an example, although it probably wouldn’t do any good in that they’re both just stooges, caught up in a tide of events far beyond their control at this point.

Daily Bell: Was Bernanke’s announcement to keep Fed rates low for at least the next two years surprising to you? Is it going to help the economy?

Doug Casey: Bernanke is an utter fool, an academic with no experience in the real world, operating on totally fallacious and destructive theories. Holding rates to arbitrary and artificial low levels is exactly the opposite of what should be done. Interest rates have to go up to stop people from borrowing and get them to save. It’s one of the things that ensures they are going to destroy the dollar.

Daily Bell: What do you think about QE3? Will it happen? Will it help?

Doug Casey: It’s happening now. It has to happen because how else are they going to finance a trillion and a half dollar federal deficit? And that deficit is going to go higher. It’s happening as we speak. Foreign central banks can see what’s going on. Nobody wants to buy treasuries; the Fed is the only buyer at the low interest rates that they have engineered. The Fed should be abolished. The only good thing about what they’re doing is that they’re going to destroy themselves. But the government will just replace them with a new central bank.

Now, they wander into some pretty fringe territory a bit further down, but in all, it’s worth your time. I pulled out the two bits above because they shed some light on two key points I talk about often.