An economic canary

Not Denninger, but what he posted about this morning. Karl’s link here. Reuters link here.

Shares in Orlando, Florida-based Darden fell almost 9 percent in premarket trading.

The company now expects earnings from continuing operations of 25 cents to 26 cents per share for the second quarter ended November 25. Costs associated with its purchase of Yard House USA Inc would cut earnings by 5 cents per share, while Hurricane Sandy would reduce EPS by about 1 cent.

Analysts, on average, expected fiscal second-quarter earnings, excluding items, of 47 cents per share, according to Thomson Reuters I/B/E/S.

Darden expects same-restaurant sales to be down 3.2 percent at Olive Garden, off 2.7 percent at Red Lobster and down 0.8 percent at LongHorn Steakhouse during the second quarter.

This is an economic canary in a coal mine. Here’s why…

No one in my immediate AO cooks anymore. They Kroger/Publix on an almost meal to meal basis, and most of that is pre-packaged & processed junk. No one cooks. When they go out, the frequent the places mentioned above. This is the land of Chili’s, Longhorn, bad Mexican, and QSR.

The next ones you will see is the fast food chains saying much that same, followed shortly by Dot Gov saying that they have struck a deal with McD’s & BK to accept EBT funds.

Seriously folks, it hasn’t even gotten bad yet.

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.

Macro Warnings

From ZH. Been expecting something akin to this for a while now:

8 – Based on the reasons set out earlier and also covered in my two prior notes, over the August to November period I am looking for the S&P500 to trade off down from around 1400 to 1100/1000 – in other words, I expect over the next four months to see global equity markets fall by 20% to 25% from current levels and to trade at or below the lows of 2011! US equity markets, along with parts of the EM spectrum, will I think underperform eurozone equity markets, where already very little hope resides. For iTraxx crossover, this equates to a spread wide for 2012 of – in my view – 800/1000bp. NOTE however that investment grade cash corporate (non-financial) bonds remain a core (relative!) safe-haven. This four-month coming major risk-off phase will, in my view, also be very USD bullish (my expectation of Fed USD1trn QE in December should eventually alter the bullish USD trend of course) and bullish core government bonds (USTs, Gilts, Bunds) – perhaps we could see 10yr Bunds at 50bp all-in yields, with USTs and Gilts at/close to 1%. By late 2012, based on my Fed December QE view, my tactical call will likely turn bullish/risk-on – let us see about that closer to the time. And of course I still see a very clear path to 800 on the S&P500 at some point in 2013/2014, driven by market revulsion against pump-priming money printing central bankers, but this discussion is also for nearer the time.

You have been warned!

The system is backed up and needs an adjustment. Has for a long time now.

Can Kicking

From Denninger, “It didn’t work (again)”.

This:

There’s a not-so-silent bank run in Greece.  This will spread.

Indeed it will. Will it spread here? Probably not this time. However, dear readers, you do realize that it is only a matter of time until something, some event of this magnitude impacts your local (see local) AO.

If you look back on many of my posts over the last two years, you will see the occasional flag raised in this manner. Again, we are talking probability and causality, not a known quantity. I talk about these things as a warning and predictors of future events. Watching the way things trend is valuable, even at the local level.

Heads up. This week will be incredibly bumpy…

Something to consider

Before I go get fondled by the TSA today, I though I would throw this one from Denninger out there.

Rest assured this will not happen. The once great republic is on a different trajectory, though it does warm your heart a bit to see something work the way it should.

It’s not about fixing the system. It’s about maintaining control and getting more. Fixing the economy doesn’t fulfill that need or want.

Think about that.

On Dangerous Environments

Staying with ZH for a bit longer:

This is an extremely dangerous environment: one in which the primary prop for the markets (central bank intervention) is becoming both less effective and politically toxic. Indeed, it’s clear at this point that the EU isbeyond intervention since neither the ECB, IMF, nor the ESM have the firepower to hold things together.

Dangerous indeed. Pair this with Denninger’s statements the other day and you have the blueprint for the coming weeks & months.

Apocalypse? Nope. Radical change in your day to day? Probably.

The powers that be, conspiratorial or not, typically solve big stuff like this with all out war & devastation on a grand scale.