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.

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We Need More of This

Full of win here. Simply full of win.

‘We had nothing to pursue him with,’ said Newport Chief Deputy Philip Brooks, who went outside to see seven of his fleet’s 11 vehicles destroyed.

Denninger’s take on this is really good. He drives the ultimate point home – and no, it’s not about the ‘war on (some) drugs’…

Government — and laws — exist only with the consent of the governed.  This man withdrew his consent.  Yes, he will be punished for that act, and he should be — destruction of property (unless it’s your own) is a crime.  Nonetheless the fact remains that at some point the cost of telling people what to do with their own bodies simply overwhelms the nanny state’s ability to cover it through taxation, if the people decide that the line has been drawn in the wrong place.

We need more of this – and on this level.

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.

Denninger Sends

From one of yesterday’s tickers:

Take a look at the FVX (5yr Treasury Yield) and you see a materially-more-frightening thing.  Yields have backed up from 0.7% to 0.97%.  Sounds trivial.  It’s not — it’s a huge move, close to 40% on yield since the end of January!

Yep.

This matters because the Federal Government’s deficit spending in February is what has been driving the “improving” economic numbers, just as it has been for the last three years.  This is a pincer move; while yields have to normalize if and when they start to move in this direction that move will also choke off federal deficit spending capacity.

The Depression featured this sort of attempt at “repression” by The Fed and government and it was unsuccessful.  It looked successful for a while, but eventually the math caught up with them and we slumped back into the morass.  Our “exit” was war; we blew up all of our industrial competitor’s output capacity and by doing so rejiggered demand.  That’s a rather bleak way of looking at what was “death by all forms” for the common man, but from an economic perspective that’s what happened.  But “war as a solution” since that time hasn’t “worked” (and in fact can’t) since small-ball wars run into the broken-window fallacy; you can’t “win” by breaking windows as the economic damage from a war exceeds the benefit.  For war to be a “winning” strategy you have to literally flatten your economic competitors so that even with the economic damage you wind up with a net benefit.

Wall cloud indeed.

Economics: Ponzi Schemes & You

A few things before we get started:

  1. Lack of regular (and good) posting bothers me too. I’ve taken on a second day gig because it’s an opportunity that cannot be ignored. I guess I will sleep when I’m dead.
  2. Regular day gig is still in transition.
  3. Family outranks all of this.

So, I wanted to talk about this Zerohedge post from yesterday afternoon.

Here’s the summary:

Foreign, central banks are directly investing into US stocks with their reserves.

Now, under the Fed’s mandate, this in itself is not only unethical, but illegal based upon the explicit wording in it’s own charter. Not that it matters as the Fed has gone so far past it’s mandate at this point, that actually adhering to the rules set would be laughable. BTW, never throw out a complicated conspiracy when you can just chalk it up to shocking levels of incompetence.

Denninger covers it here as well.

Extend. Pretend.

There is no evidence that this trend will cease. Based on previous history, it is only a matter of time before this comes to an end. I stand behind the statement that at some point they will run out of places to blow these bubbles.

From the Zerohedge piece:

In other words, while the Fed’s charter forbids it from buying US equities outright, it certainly can promise that it will bail out such bosom friends as the Bank of Israel, the Swiss National Bank, and soon everyone else, if and when their investment in Apple should sour.

Luckily, this means that the exponential phase in risk is approaching as everyone will now scramble to frontrun central bank purchases no longer in bonds, but in stocks outright, leading to epic surges in everything risk related, then collapse and force the Fed to print tens of trillions to bail everyone out all over again, rinse repeat, until this chart becomes asymptotic. We say luckily, because it means that the long overdue systemic reset is finally approaching.

Do you see the trend/ What did the Dow close at yesterday? 12,900?

Harkening back to a discussion I had in 2005 with John Dvorak, I believe we have one hell of a ramp up, but when you start to approach 20,000, it’s time to run for the hills.

BTW, on another note, expect a run on ammo and guns sooner rather than later – meaning prior to the election. I’m starting to see incremental price increases based upon demand alone. My favorite vendors are running low on bulk, but doing ok on the premium stuff. If you are inclined to spend some cash on ammo stocks, I would advise that now is a good time.

I still think we have a long way to go. However, the darkness approaches, and at a steady pace. Keep your wits about you. Watch your six & keep your powder dry.