The Employment Report

I woke up today and flipped on the TV. I wanted to know how bad the employment situation was. That's all I wanted to know.

I flipped back and forth between CNBC and Bloomberg. All I managed to find out was that it was "miserable".

Insanity: doing the same thing over and over again and expecting different results. - Albert Einstein

At the five minute mark I started to question my sanity but I kept flipping anyway. Surely they would tell me. It is such an important report. Another few minutes elapsed. A cost benefit analysis was going on inside my head. I'd invested a good seven minutes and that time is permenantly gone. I'll never get it back.

You don't have to make money back the same way you lost it. - Warren Buffett

That also works with time apparently. At about the ten minute mark I finally capitulated. I gave up and turned on my computer. It was and continues to be the top news story. Go figure.

U.S. job losses accelerate

"The economy is just falling into oblivion and it will get worse," said Greg Salvaggio, vice president for trading at Tempus Consulting in Washington.

I did hear a lot of commentary on TV about the stock market and reasons why it might be rallying though. The common theory seemed to be that the employment report was SO bad that Congress MUST do something immediately. Nobody wanted to be short the market heading into what looks to be a very busy weekend for our leaders.

598,000 jobs lost in January. December's losses were revised upwards to 577,000. November's losses were revised upwards to 597,000. That's nearly 1.8 million jobs in just three months. Funny that the financial news on TV didn't wish to repeatedly show me the gory details. Had it been an actual train wreck the cameras would have never turned away. I'm quite certain of that.

Dire Signs (Revisited)

April 11, 2008
GE Then and Now

From July, 2004 headlines...

The glass is half-full for Jeffrey Immelt. And then some. The General Electric (nyse: GE - news - people ) chairman and chief executive crowed, "This is the best economy we've seen in years."

We feel like this is a great point in time for the company, and again, we're feeling good about the economy, but more importantly we're feeling good about the strategy and the positioning of the company.

Stock price then: $32.17

...

Stock price now: $32.05

Lookin' good!

For what it is worth, I sold my GE stock in July of 2004 (a week after Immelt told us how good things were). That's when I first turned stagflationary (bearish). Since then, the stock has truly stagnated. Bulls did not make money. Bears did not make money. That has been my worst case scenario all along. The average investment stagnates while inflation robs the purchasing power. I expect more of the same.

The stock now trades at $10.87. No joke. History once again shows that I was too optimistic.

April 20, 2008
Dire Signs

This is why I am sympathetic to the short-term deflationary argument.

...

Oil just hit $117 a barrel. This parabolic rise is most likely not sustainable. If nothing else, something is bound to break.

...

For what it is worth, it was the debt bubble that originally turned me bearish in 2004. Oil was an afterthought.

...

There's that 1974 word again. Go figure. If Harl is right, then we've got a few more years left before things really implode. It would also explain why Soros thinks the commodity bubble is still in the growth phase. That being said, investing in bubbles once they are bubbles might not be the best plan. In my opinion, the low lying fruit has already been picked. You've got to have nerves of steel to go reaching for the fruit towards the top of the pyramid (scheme), um, I mean tree.

This was definitely one of my better calls, using the power of hindsight. That brings us to today's headlines.

February 5, 2009
U.S. economy worst since 1970s: GE's Immelt

"Once you break through '74-'75, you don't stop 'til you get to 1929," he said. "Unlike the other downturns that I've been a part of, this one is faced with limited liquidity. If liquidity exists, it's not coming back readily. That's why the government's role in this cycle is so gosh-darned important."

I think I found the video.



I've watched that video quite a few times so far. I honestly can't stop laughing. Can't you just picture Immelt telling us how the government's role in this cycle is so "gosh-darned" important while simultaneously having his cheeks squeezed as much as his liquidity is? I sure can!

You can either be depressed or you can get a good laugh. The choice is yours. Choose wisely though. Laughter is better than any medicine the government can provide. I truly believe that. It doesn't even cost us so much as a penny either. Embrace it!

Stimulus Package Proposal #2 (Heavier Sarcasm)

It was brought to my attention by OriginalFrank that my first stimulus package proposal was unable to top the "real life" satire of the current plan. Upon further reflection, I have to agree.

I am therefore making another attempt. Call me stubborn.

Illusion of Prosperity's Proposed Weimar Germany Style Stimulus Package

1. Each American will receive a lump sum payment of $1,000,000. This will cost roughly $300 trillion.

2. The money won't be borrowed. We'll simply print extra.

3. The money will use collector's edition technology. There will be fifty versions of twenty dollar bills distributed. Each American will therefore receive one thousand twenty dollar bills for each state.

Here are some frequently asked questions about my plan.

Q: Why a million dollars?
A: It will allow most Americans to retire early. The employment picture will improve dramatically.

Q: Why will the money be printed instead of borrowed?
A: We've already borrowed too much from our grandchildren. It is time to ease their burden.

Q: How long will it be before we need another stimulus package?
A: Using simple back of envelope calculations, one million dollars should easily last each person a good 25 years ($40,000 per year).

Q: What about inflation?
A: This is a simple plan. Inflation is a complex issue. Critics have stated that prices may go up once this money enters circulation. That's why the money will be using collector's edition technology. If people bury the money instead of spending all of it, then prices won't rise as fast as one might expect.

Q: What about exponential economic growth?
A: All American babies will each receive one million dollars. Do the math.

Q: Has something like this been done before?
A: We send money to China every single day on the hopes that they'll never spend it. It's time to start investing in America again, and in a much bigger way.

Stimulus Package Proposal (Heavy Sarcasm)

I have been running this blog for over a year and I've yet to offer one serious solution to any of our problems. I'm just not much of a risk taker and I felt that it was riskier to bet on the solutions than it was to bet on the problems (especially with SO many problems to choose from).

It's sort of like what Warren Buffett once said about the auto industry in its early days. The bet wasn't which car maker would survive. That was a risky bet. The safer bet was simply to short horses.

Things changed today though. I feel that I can finally offer a stimulus package idea. I'm not claiming that it is a great stimulus package, or even a good one. I am simply claiming that it is a better one.

Summers Warns Deflation Is ‘Real Risk’ for Economy (Update1)

White House economics director Lawrence Summers urged swift passage of a stimulus bill and pledged further taxpayer funds for major banks, warning that the economy is in danger of sustained declines in consumer prices.

The solution is SO obvious I'm surprised nobody else has thought it up. I can do it for just $450 billion. That's less than at least some of the other proposals. Further, my plan is simple and transparent. It will provide 5 million jobs instantly and also provide immediate relief from deflationary pressures. It also has a mechanism in place to eventually pay for itself. I offer you the full details below.

Illusion of Prosperity's Proposed Shock and Awe Stimulus Package

1. Provide 5 million workers with jobs for six months. Each worker will receive $20,000 cash (that's $40,000 annualized) and will work directly for our government. The actual job assignment for each worker is estimated to be far shorter than six months (see below), but they will be paid for the entire period anyway. Any remaining time can be allocated to vacation time should a worker so desire it. As the money goes directly to the workers, there will be no Wall Street middle man taking a cut. This will cost $100 billion.

2. Each of the 5 million workers will be provided with $20,000 in discretionary spending cash as an additional lump sum payment. This will cost an additional $100 billion.

3. Each of the 5 million workers will be provided with coupons worth $40,000 towards the purchase of random goods and services (chosen using a lottery system). Canned goods, ammunition, gasoline, and toilet paper coupons will not be provided. It is estimated that the general public will more than pick up the slack. This will cost $200 billion.

4. Each worker will be released into the general population at random locations nationwide precisely at midnight on March 1, 2009. They have but one goal, and that is to buy goods and services before their counterparts do. A sign will be installed in outer space prior to this event that will be visible by all Americans. It will show a countdown timer to properly motivate the public on the importance of shopping before these workers are released. Once the event occurs, the sign will provide additional real-time information showing where goods and services may still be available. This sign and the technology to control it are estimated to cost $50 billion.

5. On April 1, 2009 (April Fool's Day) all coupons issued will expire. This will prevent the hoarding of stimulus coupons.

6. On the first of every month, starting on April 1, 2009, a 25% permanent sales tax will be imposed on three random goods and services (chosen using a lottery system). This should further inspire consumers to shop early and often. The proceeds of the tax will be used to eventually pay off this stimulus package over time.

I must say, I am very proud of this plan. It will do MUCH more than just stimulate. I'm quite confident of that!

The real beauty of the plan, at least in my opinion anyway, is that even if it only partially works, then there's nothing to stop us from doing it again (and again, and again, and so on). But then again, I guess that's the real beauty of all of these stimulus plans, isn't it?

Special thanks to mab for offering the link and the relevant quote.

The Gambler (Musical Tribute)

May 3, 2006
New Study Finds Similarities Between Monkey Business And Human Business

"Our results suggest that loss-averse behavior is a very general feature of economic choice," explain the authors. "Given our capuchins' inexperience with trade and gambles, these results suggest that loss-aversion extends beyond humans, and may be innate rather than learned."

Fortunately, the U.S. taxpayers do not rely on inexperienced monkeys to do the trading and gambling on our behalf.

November 16, 2006
Citigroup gambling on China

KAI RYSSDAL: Here's a deal that's turning some heads. It's a a stake in a major banking operation. Never mind a history of mismanagement and corruption. Not to mention a mountain of loans that might never be collected. None of that seemed to matter in the bidding for a 20 percent share of China's Guangdong Development Bank.

Citigroup's Stock Price: $50.66

December 15, 2007
Citibank's new chief takes $49bn gamble

The new chief executive of the world's biggest bank, Citigroup, has opted to bail out $49bn (£24bn) of troublesome mortgage-related investment vehicles, in a fresh sign of the damage caused to the financial industry by the global credit crunch.

Citigroup's Stock Price: $34.58

November 27, 2008
Citigroup says gold could rise above $2,000 next year as world unravels

This gamble was likely to end in one of two extreme ways: with either a resurgence of inflation; or a downward spiral into depression, civil disorder, and possibly wars. Both outcomes will cause a rush for gold.

Citigroup's Stock Price: $7.05

So what will Citigroup do to earn money in such a harsh environment? Safely hoard toilet paper? Not exactly. They are going to gamble on mortgages again. That's the last thing the monkeys would expect! Genius!

February 3, 2009
Citgroup to deploy $36.5 billion to boost loans: report

Of the residential mortgage funds, $10 billion will go toward buying securities backed by mortgages that conform to Fannie Mae and Freddie Mac standards while $7.5 billion will be used to buy prime home mortgages in secondary markets.

Citigroup's Stock Price: $3.46



On a warm summers evenin' on a train bound for nowhere
I met up with the gambler; we were both too tired to sleep
So we took turns a starin' out the window at the darkness
Til boredom overtook us, and he began to speak

He said, son, I've made a life out of readin' peoples faces
And knowin' what their cards were by the way they held their eyes
So if you don't mind my sayin', I can see you're out of aces
For a taste of your whiskey I'll give you some advice

November 25, 2008
Citigroup rescue a gamble for taxpayers

Whether the government's rescue of Citigroup, announced late Sunday, will ultimately prove a good deal for taxpayers is hard to tell. In part, that's because no one seems sure what Citi's troubled assets are worth.

Walkin' away since 2004.
Runnin' away since 2007.

I sure hope 2010 doesn't become the year of the bunkerin'.

The Sarcasm Report v.25

Moving Targets

Investors expect their conservative target-date funds to protect their assets as they approach retirement.

Investors expect their conservative target-date funds to protect their assets?

So with 2010 funds—the first group of target-date funds—approaching their end dates, it's surprising to learn how poorly these funds performed in 2008. Losses at the four largest 2010 funds in 2008 through mid-December ranged from 23% to 33%.

It's surprising to learn how poorly these funds performed?

For workers expecting to retire soon, though, target-date funds haven't met Congressional expectations.

Haven't met Congressional expectations?

"An investor looking at a target-date fund for wealth preservation may have been disappointed," says Michael Herbst, an analyst at Morningstar.

May have been disappointed? May have?

What? You question my work ethic? Look, this is top-notch sarcasm. I did more than simply regurgitate quotes and add a question mark. Monkeys could not have done what I did. They would have no doubt picked different parts of the article to single out. Go ahead. Tell your supposedly trained monkeys to pick a sentence, any sentence. I dare you.

Despite the recent carnage, target-date funds are standing fast.

Damn those monkeys!

Contrary to popular opinion, I offered some serious sarcasm here. Please believe me. I wish you could have seen it in person. My eyes were rolling all over the place. Once the funds didn't meet Congressional expectations, it was all I could do to just keep them in their sockets.

High Tech Will Save Us! (Musical Tribute)

Hitachi, NEC Fall to Lowest in Decades on Forecasts (Update2)

Hitachi plunged a record 17 percent to close at a 28 1/2- year low of 244 yen on the Tokyo Stock Exchange, according to data compiled by Bloomberg stretching back to 1974. NEC, Japan’s largest maker of personal computers, fell 5.7 percent to 231 yen, a level not seen since September 1978. The benchmark Nikkei 225 Stock Average lost 1.5 percent.

1978? What a year!

Take a Chance on Me

The Crack Cocaine of Economics?

Fed's Fisher says protectionism equals "economic death"

"Protectionism is the crack cocaine of economics," Fisher told C-Span television in an interview for its "Washington Journal" program.

What? I thought that inflation was the crack cocaine of economics!

"It provides an immediate high that leads to economic death. We cannot afford to go down that route," said Fisher, who is not a voting member of the Fed's policy-setting committee this year.

Doesn't inflation provide an immediate high that leads to economic death? This is so confusing. After doing some more research I think I finally have it straight though.

Protectionism is the crack cocaine of economics.

Crack Cocaine

Crack cocaine is a substance that affects the brain chemistry of the user: causing euphoria, supreme confidence, loss of appetite, insomnia, alertness, increased energy, a craving for more cocaine, and potential paranoia (ending after use).

Inflation is the heroin of economics.

Heroin

Frequent and regular administration can quickly cause tolerance and dependence, and as such, heroin has a very high potential for addiction. If sustained use of heroin for as little as three days is stopped abruptly, withdrawal symptoms can appear.

Stimulus Packages are the methamphetamines of economics.

Methamphetamine

Over time, however, the effectiveness decreases, and users find that they need to take higher doses to get the same results; also that they have great difficulty functioning effectively without the drug.

So let's summarize where we are and where we are headed.

We were using economic heroin but then it was stopped abruptly. Oops! That's left us with some nasty withdrawal symptoms. We were then offered some economic metamphetamines and it did seem to help for a few months. Unfortunately, we had difficulty functioning without it. Therefore, we will be given much higher doses (to get the same results). If that doesn't make us feel better, we really don't want economic crack cocaine though. It will start with supreme confidence and deteriorate quickly into paranoia. We're in enough trouble already. We certainly don't need that to compound our problems.

This certainly makes a lot more sense now. That Dallas Federal Reserve President Richard Fisher sure knows his controlled economic substances. I'm sure glad he's in charge. I do have one question though. At what point do we enter rehab?

Drug rehabilitation

The general intent is to enable the patient to cease substance abuse, in order to avoid the psychological, legal, financial, social, and physical consequences that can be caused, especially by extreme abuse.