U.S. Economy Grew 2% as Consumer Spending Rises
(Bloomberg) The U.S. economy grew at a 2 percent annual rate in the third quarter as consumer spending climbed the most in almost four years, a sign the expansion is developing staying power.
The increase in gross domestic product matched the median forecast of economists surveyed by Bloomberg News and followed a 1.7 percent gain the prior three months, Commerce Department figures showed today in Washington. Household purchases, about 70 percent of the economy, rose at a 2.6 percent pace, the best quarter of the recovery that began in June 2009.
(ZeroHedge) The underlying data is not good, as the meet was driven by inventories, which increased by $115.5 billion in the third quarter, following increases of $68.8 billion in the second quarter and $44.1 billion in the first. This is a forward growth "draw" because as Goldman noted a higher than expected inventory number "becomes a negative risk factor for Q4 or Q1."
UMichigan Consumer Confidence Misses, Comes At 67.7 On Expectations Of 68.2
(ZeroHedge) And with that the economic data barrage for the day is over and we can enjoy the calm before next week's storm: UMich consumer confidence comes at 67.7, missing expectations of a slight pick up to the prior 67.9. But what is most important is that the Hopium is finally wearing off: the Expectations component came at 61.9a large miss to both consensus and previous. Traditionally the "hope" component of confidence is what had consumers going. Not so much anymore. And indeed, the Conditions component rose from both expectations of 73.5 and the previous print of 73 to 76.6. Consumers no longer have much confidence in the future.
Where Is the Money Coming From?
-- The Investment Company Institute has just reported the 25th consecutive outflow of cash out of domestic stock funds. Since July 1, stock mutual funds have witnessed 16 weeks of negative flows totaling $51 billion. YTD mutual fund redemptions are now at $81 billion. In summary, mutual funds are not buying, pensions are not buying, retail is saying “no thank you” to stocks... is there something going on here that we can’t put our finger on?
Treasuries Gets a New Trend Line as it Settles Lower
-- Treasury 30-year bonds rose as a report showing the Federal Reserve’s preferred inflation measure increased less than forecast added to speculation that policy makers will boost purchases of longer-term assets.
The long bonds erased earlier losses after Goldman Sachs Group Inc. predicted that the Fed may include them in a purchase effort called quantitative easing.
Will Gold Recover From Its Decline?
--Gold futures rose, heading for a third straight monthly gain, on speculation that the Federal Reserve will increase debt purchases, weakening the dollar and boosting the metal’s appeal as an alternative investment.
Gold is up 2.9 percent this month while the dollar has fallen 1.9 percent against a basket of six major currencies on bets that policy makers meeting on Nov. 2-3 will announce another round of so-called quantitative easing to bolster the economy.
Japan’s Stocks Are Fading...
-- Japanese stocks fell, sending the Topix index to its longest losing streak in more than three months, as a strengthening yen added to concern about earnings growth and some companies missed their profit estimates.
The Nikkei 225 Stock Average fell 1.8 percent to 9,202.45 at in Tokyo, the lowest close since Sept. 9. For the month, the Nikkei lost 1.8 percent while the Topix index was down 2.2 percent.
Did Chinese Investors Speculate Too Much In October?
-- China’s stocks, the best performer among global markets in October, fell today on the prospect the government will intensify measures to curb inflation and property speculation. The losses narrowed the biggest monthly gain since July 2009 for the Shanghai Composite Index. Today’s losses pared gains for the month to 12 percent, the most among the 88 global indexes tracked by Bloomberg.
The Dollar May Be Building a Base
-- The dollar dropped against most of its major counterparts as slowing inflation added to speculation the Federal Reserve will have greater latitude to expand asset purchases next week to support the economic recovery. The dollar has fallen 1.9 percent versus the euro this month on speculation the central bank will debase the greenback by increasing purchases of government debt.
Most Americans Worry About Ability to Pay Mortgage or Rent
-- A majority of Americans now say they are worried about making their mortgage or rent payments, underscoring the extent of economic anxiety in the country heading into midterm elections. In all, 53 percent said they are "very concerned" or "somewhat concerned" about having the money to make their monthly payment. Worries are the most intense among those with lower incomes and among African Americans.
Retail Gasoline Prices May Be Easing
--The Energy Information Agency weekly report observes, “After three weeks of upward movement, the U.S. average retail price for a gallon of gasoline fell last week, decreasing more than a penny to .82 per gallon. The average was __spamspan_img_placeholder__.14 per gallon higher than last year at this time. Prices dropped the most in the Midwest, where they were four cents lower than last week.”
Natural Gas Prices Bounce From a New Low
-- The U.S. Energy Information Administration reports, “This report week provided no exception to this fall’s general trend of falling prices amid moderate weather, high storage levels, and a lack of tropical storm activity. However, decreases during the report week were generally less than 20 cents per MMBtu, or less than about 5 percent, as price increases late in the report week nearly removed a steep price decline that occurred before last weekend.”
Foreclose on the Foreclosure Fraudsters, Part 1: Put Bank of America in Receivership
(Huffington Post) After a quick review of its procedures, Bank of America this week announced that it will resume its foreclosures in 23 lucky states next Monday. While the evidence is overwhelming that the entire foreclosure process is riddled with fraud, President Obama refuses to support a national moratorium. Indeed, his spokesmen on the issue told reporters three key things. As the Los Angeles Times reported:
A government review of botched foreclosure paperwork so far has found that the problems do not pose a "systemic" threat to the financial system, a top Obama administration official said Wednesday.
Yes, that's right. HUD reviewed the "paperwork" problem to see whether it threatened the banks -- not the homeowners who were the victims of foreclosure fraud. But it got worse, for the second point was how the government would respond to the epidemic of foreclosure fraud.
Halloween/"1929 Crash" Anniversary Thoughts From Art Cashin
(ZeroHedge) Ghoulies And Ghosties And Tax Sales That Go Bump In The Night – Sunday is Halloween and that means next week the “sell in May and go away” cycle is replaced by its bullish opposite.
Traders, however, will also note that it marks the beginning of a new tax sale fiscal year for mutual funds. Traditionally, trading profits taken by mutual funds before Halloween result in a taxable event for the fund holder in the same year. Profits taken after Halloween are not taxed until the following year.
So, are mutual funds sitting on a batch of profit-taking sales starting next week? There may be more to think about than elections and QE2.
Currency Wars: Debase, Default, Deny!
(Gordon T. Long) In September 2008 the US came to a fork in the road. The Public Policy decision to not seize the banks, to not place them in bankruptcy court with the government acting as the Debtor-in-Possession (DIP), to not split them up by selling off the assets to successful and solvent entities, set the world on the path to global currency wars.
By lowering interest rates and effectively guaranteeing a weak dollar through undisciplined fiscal policy, the US ignited an almost riskless global US$ Carry Trade and triggered an uncontrolled Currency War with the mercantilist, export driven Asian economies. We are now debasing the US dollar with reckless spending and money printing with the policies of Quantitative Easing (QE) and the expectations of QE II. Both are nothing more than effectively defaulting on our obligations to sound money policy and a “strong US$”. Meanwhile with a straight face we deny that this is our intention.
The Fed Will Be Dissolved Within Five Years
(ZeroHedge) How’s that for an announcement?
In case you missed it, the #1 news story for this week (and the year) was the Fed’s decision to ask its Primary Dealers (PDs) for suggestions on how large and how long QE 2 should run.
The implications of this are vast. But the biggest ones are:
1) The PDs OWN the Fed (not the other way round)
2) QE 2 is a definite, not a “maybe”
3) The Fed doesn’t know what it’s doing
4) The Fed will be dismantled within five years
I’ve long asserted that the US’s money system was in fact controlled by the Big Banks, not the Federal Reserve. The Fed’s decision to ask THEM for suggestions reveals confirms this. It tells us in plain terms WHO decides monetary policy in this country and WHO is responsible for financial markets being where they are.
This statement alone should send chills down everyone’s spines. Think about it, the folks in charge of maintaining our currency policy and consequently the quality of living standards in the US take their orders FROM the banks: the same group responsible for destroying our financial system.
Traders Alert:
The Practical Investor is currently offering the daily Inner Circle Newsletter to new subscribers. Contact us at [email protected] or click on “Contact us” at www.thepracticalinvestor.com for a free sample newsletter and subscription information.
Our Investment Advisor Registration is on the Web.
We are in the process of updating our website at www.thepracticalinvestor.com to have more information on our services. Log on and click on Advisor Registration to get more details.
If you are a client or wish to become one, please make an appointment to discuss our investment strategies by calling Connie or Tony at (517) 699-1554, ext 10 or 11. Or e-mail us at tpi[at]thepracticalinvestor[dot]com.
Regards,
Anthony M. Cherniawski, Manager
Disclaimer: It is not possible to invest directly into any index.
The use of web-linked articles is meant to be informational in nature. It is not intended as an endorsement of their content and does not necessarily reflect the opinion of Anthony M. Cherniawski or The Practical Investor, LLC.
