Daily Archives: May 9, 2013 @ 10:53 am (Thursday)

Wholesale sales

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Though a bit old, this March release is yet another indicator that shows signs of rolling over.

With the tax hikes and spending cuts, it’s up to private sector credit expansion to rise to the occasion. Should the lost income and lost jobs cause it instead to roll over, we’re looking at negative GDP.

How well do stocks forecast this risk?
Note, for example, the last time private sector credit expansion went into reverse, the S&P rallied to an interim peak of over 1,400 mid May of 2008, in front of a 50%+ sell off.

Not at all that it will happen again, but that markets aren’t all that good at forecasting private sector credit acceleration going into reverse.


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Fannie Mae to send $59.4 billion to U.S. Treasury

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Profits turned over to Tsy are a tax/demand leakage, just like $ from the Fed.

Fannie Mae to send $59.4 billion to Treasury

May 9 (Reuters) — Fannie Mae, the nation’s biggest mortgage finance company, said on Thursday it will pay $59.4 billion in dividends to the U.S. Treasury after a record profit in the first quarter that reflecting a multibillion dollar gain from reversing an earlier writedown of tax benefits.

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A word on jobless claims

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For example, unemployment could be 10% with no employees being dismissed and filing for new claims, and 150,000 new hire just in line with workforce growth so as to keep unemployment at 10%, and Thursday’s claims number would be 0.

Point is a falling claims number can refect ‘quietness’ and ‘stability’ and not ‘improvement’ and therefore not be forecasting increased growth and employment. Once ‘quiet times’ are achieved, it’s just a measure of turnover.

However/likewise, rising claims indicate ‘less quiet times’ with active dismissals on the rise. With a lag, a breakdown in the private sector credit accelerator due to the proactive austerity measures
should be evidenced (again with a lag) by a slowdown in the growth of credit/slowdown in sales/output/employment. This generally gets reversed by the automatic fiscal stabilizers of rising unemployment comp and falling tax revenues that increase the federal deficit to the point where the demand leakages are sufficiently offset.

Support could also come from a reduction of the demand leakages, including a reduction in net imports, but in the case of the US those are highly unlikely to change anything near term.

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