Monday, May 25, 2015

Wither Spain?

CONTRA NEWS AND VIEWS

Spanish People To Rajoy And His Thieving Hypocrites—–Take A Hike!

by Contributor • May 25, 2015

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BY JULIEN TOYER AND SARAH WHITE at Reuters

Spain’s ruling People’s Party (PP) took a battering in regional and local elections on Sunday after voters punished Prime Minister Mariano Rajoy for four years of severe spending cuts and a string of corruption scandals.

In a test of the national mood ahead of general elections expected in November, the PP suffered its worst result in more than 20 years to herald an uncertain era of coalition as new parties rose to fragment the vote.

Spaniards rejected the stability offered by the PP and rival Socialists which have alternated in power since the end of dictatorship 40 years ago and opted for change in the shape of new parties – market-friendly Ciudadanos (‘Citizens’) and anti-austerity Podemos (‘We Can’).

Rajoy’s future looked bleak as his strategy to bet on an accelerating economic rebound to win a second term later this year was seriously undermined by his party’s poor showing.

“It’s a drubbing for the PP. The fear factor did not come into play and people voted for Podemos and Ciudadanos,” said Jose Pablo Ferrandiz of leading pollster Metroscopia.

Although the PP got more votes than any other party, it and the rival Socialists fell short of overall majorities in most areas. The two parties will have to negotiate coalitions with minority parties in the 13 of Spain’s 17 regions that voted on Sunday alongside more than 8,000 towns and cities.

Spain has virtually no tradition of compromise politics and the fragmented vote is likely to result in weeks of pact-building in the regions which hold substantial devolved power and determine spending in key areas like education and health.”Market sentiment towards Spain may be favorable but the political scene is becoming a lot more fragmented, boding ill for the formation of a stable and strong government after the parliamentary vote later this year,” said Nicholas Spiro, analyst at Spiro Sovereign Strategy.

“BURNT OUT”

The PP got its worst result in countrywide municipal elections since 1991 and lost its absolute majority in regional bastions Madrid and Valencia, where potential left-wing coalitions could send the party into opposition for the first time in 20 years.

“I used to vote for the PP but they are burnt out, they have been in power for too long. It’s time to clean the slate,” said Nacho, a 56-year-old doctor in Valencia who voted for Ciudadanos.

At the PP headquarters in Valencia, dozens of shell-shocked supporters, many of them young activists, fought back tears as they received the news their party would also likely lose control of the city to a left-wing coalition.

In Madrid city, where there has been a PP mayor since 1991, Rajoy’s party marginally beat a leftist platform backed by Podemos and headed by 71-year-old retired judge Manuela Carmena. But there as well the Podemos-backed alliance is likely to team up with the Socialists to win power.

Source: Spain’s ruling PP gets worst local election result in 20 years | Reuters

More From Stockman

STOCKMAN'S CORNER

Pray For Graccident—–It Will Trigger The Demise Of The ECB And The World’s Toxic Regime Of Keynesian Central Banking

by David Stockman • May 25, 2015

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It is not surprising that in a few short months Yanis Varoufakis has proven himself to be a thoroughgoing Keynesian statist. After all, what would you expect from an economics PhD who co-authored books with Jamie Galbraith? The latter never saw an economic malady that could not be cured with bigger deficits, prodigious printing press “stimulus” and ever more intrusive state intervention and redistribution.

In what is apparently a last desperate game theory ploy, however, Varoufakis has done his countrymen, Europe and the world a favor. By informing his Brussels paymasters that they must continue to subsidize his bankrupt Greek state because it is the only way to preserve the European Project and vouchsafe the Euro, the Greek Finance minister blurted out the truth of the matter, albeit perhaps not intentionally:

“It would be a disaster for everyone involved, it would be a disaster primarily for the Greek social economy, but it would also be the beginning of the end for the common currency project in Europe,” he said.

Whatever some analysts are saying about firewalls, these firewalls won’t last long once you put and infuse into people’s minds, into investors’ minds, that the eurozone is not indivisible,” he added.

He sure got that right. People who believe in democracy and economic liberty anywhere in the world should pray for a Graccident. During the next several weeks, when $1.8 billion in IMF loans come due that Greece cannot possibly pay, there will occur a glorious moment of irony for Syriza.

If it holds firm to its leftwing statist agenda and takes Greek democracy back from the clutches of the EU/IMF apparatchiks, Syriza will strike a blow for democracy and capitalism in one great historic go-round. That is to say, defiance of the Germans and the troika would amount to a modern monetary Marathon; it would trigger a thundering collapse of the ECB and the cancerous superstate regime built upon it in Frankfurt and Brussels—–and, along with it, cast a mortal blow upon the worldwide Keynesian central banking regime, too.

The hour comes none to soon. In a few short years under Draghi and in the context of Europe’s fiscal and economic enfeeblement, the ECB has been transformed into a hideous reverse Robin Hood machine. So doing, it has gifted financial gamblers and front-runners with hundreds of billions of ill-gotten gains in the euro debt markets.

In the days shortly before Draghi issued his “whatever it takes” ukase, for example, the Italian 10-year bond was trading at 7.1%. So speculators who bought it then have made a cool 350% gain if they were old-fashioned enough to actually buy the bonds with cash. And they are laughing all the way to their estates in the South of France if their friendly prime broker had arranged to hock these deadbeat Italian bonds in the repo market even before payment was due. In that case, Mario’s front-runners are in the 1000% club and just plain giddy.

While it is extremely difficult to think of a reason that would justify such wanton redistribution to financial gamblers, the ECB rationale is so astoundingly threadbare as to be laughable. In a word, Draghi and his minions claims that Europe’s economic torpor stems from too little inflation and too little borrowing by private households and businesses. Hence, they have no choice except to drastically falsify prices in Europe’s entire $20 trillion bond market in order to rekindle 2% inflation and get economic growth off the flat line.

Oh, puleeze. The Eurozone economies have had no problem whatsoever in generating an ample quotient of inflation ever since the inception of the single currency—-as if that had anything to do with the growth of real production and wealth anyway.

In fact, the european CPI has gained an average of 2.1% per annum during the last decade and one-half. Self-evidently, the temporary flattening of the inflation curve in the last year is a consequence of the plunge of oil and other commodity prices, not anything that could possibly account for Europe’s languishing growth rate.

Historical Data Chart

In fact, the euro area core CPI is up by nearly 1% during the last year, and has gained about 1.5% per annum during the past eight years during which time the global oil prices have soared and collapsed twice. Quite simply, low-flation is just a myth.

Historical Data Chart

So there is really nothing behind the low-flation mantra except the spurious argument that consumers will defer purchases if they are not assured that prices will continue to rise and eat away at their paychecks. No, Mario, European consumers are not spending because their incomes are not growing; and because their take home pay is being eviscerated by taxes and their balance sheets are already saturated with more debt than they can sustain.

Indeed, private sector borrowing nearly tripled during the decade before the financial crisis. That it has flattened out since then only means that the supply of credit worthy borrowers has been exhausted, not that there exists some mysterious economic malady that can be cured by the ECB’s printing press.

Stated differently, private sector loan growth since 1997 still amounts to 6.0% per annum compared to 3.3% average growth of nominal GDP. At some point, every debt addicted economy runs out of balance sheet runway——a condition that Europe attained long ago.

Historical Data Chart

The good thing is that this whole misbegotten euro project cannot survive the impending Greek default. The ECB is now on the hook for $138 billion of Greek liabilities—–an amount that is equal to the remaining deposits in its entire banking system. Needless to say, when the impending “Graccident” explodes onto the front pages, there will be pandemonium at the ECB, and in Brussels and capitals throughout the 19-nation Eurozone.

Did the German politicians and voters really understand that their Bundesbank representatives in Frankfurt were not the watchdogs of monetary rectitude after all; and that in crab-like fashion they backed their national central bank into $35 trillion of liabilities——–debts that are owed by a Greek banking system and central bank that is hopelessly insolvent?

No, the Greek banking system is actually such a complete financial zombie as to make the US savings and loan industry of the late 1980s look like a paragon of financial health in comparison. Yet week-by-week the clueless apparatchiks in Frankfurt have been metering out a couple of billions of ELA funding to keep the Greek banking zombie alive. When the scam finally blows, there will be a witch-hunt in the halls of the ECB’s grandiose new $2 billion palace like Europe hasn’t seen in generations.

Source: @FGoria

The fact is, the ECB can’t survive the coming Graccident. It will not only be technically insolvent, but, more importantly, it will also be stripped of every vestige of credibility. How in the world, it will be demanded, did Draghi and his clueless posse loan $138 billion to the massively insolvent banking system of a bankrupt economy which is on the verge of economic and civic anarchy?

Moreover, it will also become swiftly evident that there was no Draghi miracle at all—-just a giant, preposterous con job. Accordingly, the front runners parade of the last three years will turn into a panicked selling route among the fast money gamblers who have made a killing on paper, and the dim-witted bond managers and European bank investors which went along for the ride.

The truth is, Europe is a socialist fiscal time bomb waiting to explode. There is not one honest price left in the European sovereign debt market, including the 10-year German bund trading at 70 bps. Its all been an illusion conjured by the foolish Mario Draghi, who had no clue that all that soaring peripheral debt about which he was taking endless victory laps was actually being rented by the day by heavily leveraged speculators with their fingers on the sell button.

In short, when the taxpayers of Europe wake up to the 331 billion euros they have loaned the bankrupt state of Greece, and when the feckless politicians of Spain, Italy, Portugal, France and much of central Europe discover they can’t fund their bloated state budgets with 1% money after all, the financial furies will be unleashed throughout the continent.

Nor is there any hope for escape. The euro-19 area is now close to having a 100% debt to GDP ratio, and that’s flattered by German surpluses from its export boom that is rapidly cooling, and the fact the for a few quarters Mario’s printing press has conferred huge interest rate subsidies on their depleted fiscal accounts.Historical Data ChartThe pending Graccident will puncture that illusion, tipping most of Europe into acute fiscal crisis and political upheaval of the type that has already roiled Greece and was starkly evident in Spain during the weekend elections. The odds that the European superstate and the ECB’s Keynesian monetary regime will survive the resulting upheaval are, thankfully, somewhere between slim and none.

And there is a silver-lining, too.  Someday the historians will point to the image below and say that the end game of Keynesian central banking started here. It could not commence too soon.

Sunday, May 24, 2015

2% Inflation Target Stupid

STOCKMAN'S BEST OF THE WEEK, STOCKMAN'S CORNER

Today’s CPI Lesson: The Fed’s 2% Inflation Target Is Completely Stupid

by David Stockman • May 22, 2015

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The madness of the Fed’s pending 81 month run of zero interest rates comes down to an inflation subterfuge that has no logical or empirical grounding in real world economics. Essentially, the Keynesians who currently inhabit the Eccles Building have turned all of central banking’s anti-inflation history on its head, saying, instead, that there is not enough of it to create optimum economic growth and wealth; and, besides, the CPI is running below the 2% target—so prolonging the free money gravy train can’t do much harm.

Every part of that proposition is dead wrong. To wit, free money does immense harm by fueling rampant carry trade speculation; there is zero evidence that 2% inflation results in any more growth than 1% or even 0% inflation; and, as an empirical matter, there is plenty of inflation in the US economy and has been during the entire past 15 years of rampant money printing designed to stimulate more growth.

Still, real final sales in the US economy have grown at only a 1.8% rate since the year 2000, or by just half of the 3.5% rate recorded for the prior 46 years. But that downshift is not in any way attributable to inflation missing the allegedly optimum 2% target. In fact, during the last 15 years the CPI has increased at an average rate of exactly 2.18%.

So where’s the beef or rather the allegedly missing beef? Well, the monetary high priests hold that the PCE deflator, not the CPI, is the correct measure of inflation because it takes better account of changing consumer preferences or weighting shifts in the market basket of what people buy. That is, it captures their shifting to chicken, tuna or spam when they can’t afford steak.

Yet its hard to believe that the scant daylight shown in the chart below accounts for the drastic deterioration of economic growth during the last 15 years. In other words, we have had 2% inflation on the most commonly used measuring stick—-so what’s wrong with the ruler?

After all, even the Fed’s own preferred inflation ruler has clocked in at 1.84% per year since the year 2000.  Presumably no adult would argue that a shortfall of 16bps per year from the magic 2.0% target would account for the 50% plunge in real economic growth during the last decade and one-half.

And this gets us to today’s report on the April CPI. Normally, Fed heads prefer the PCE deflator less food and energy on the grounds that the later elements are too volatile to properly measure the actual inflation trend.  Alrighty then. The April index for people who prefer to starve and shiver in the dark came in at a 3.6% rate for the month and was 1.8% higher than last April.

Unless you are some kind of monetary monk counting bps of inflation on the head of a pin, therefore, you might say “mission accomplished”. Inflation is running close enough to the magic 2.0% threshold for government work.

But you would be wrong. Yellen issued another cloud of pettifoggery today and practically said that money market interest rates will be pinned to the zero bound for at least another three months. Worse still, our befuddled school marm said that the Fed’s monumental money printing campaign is working just swell, and that after the Q1 weather aberration, the US economy will reaccelerate along the Fed’s intended path toward full employment.

How was she so sure? Why, real consumer incomes have made a significant upward move in recent months, meaning, apparently, that households will be spending themselves silly any day now.

Say again. Did she say that after six years of stagnation, real wages have actually started growing again?

Well, yes they have if you deflate nominal wages by the year-over-year change in the CPI. Thus, during the year ending in April average weekly wages rose from $840 to $858, whereas the CPI came in at zero on a year over year basis.

So go knock yourself out with that $18 gain, said Yellen. Your paycheck is up by 2.1% in something called “real dollars”( if you can find a place that takes them).

Then again, last April the price of oil was $115 per barrel versus its $60 level today. And since that thundering collapse in the global oil patch accounts for all of the CPI deceleration from the prior year gain of 2.0%, the implication of the real wage pick-up theory is quite clear. Namely, that this will keep happening year after year—–so we get $30 oil by year-end 2015 and $15 oil in 2016!

Here’s the point. The Fed is always trumpeting the PCE deflator less food and energy when they want to chastise the gold bugs and hard money advocates and prove that massive money printing has not caused a worrisome flare-up of inflation.

Except now that their entire post-crisis money printing spree is being called into question by an economy that is visibly faltering, they have opportunistically seized on the real wage theme by using a CPI based calculation of real wages—–even though the 0% CPI reading is truly a transient consequence of the oil bust and will disappear from the numbers in a matter of months.

In fact, they have been favoring the PCE deflator less food and energy for most of this century because it conveniently clocked in at a slightly lower rate than the full PCE deflator. But since that gauge is no longer convenient, it is apparently being chucked overboard.

Even then, however, the difference is so small over time as to reveal an important truth. These folks are just playing stupid numbers games to justify a policy of massive intervention in the financial markets that makes them rulers of the economic universe. Can any rational person believe that there is any difference over a 15 year period between the PCE deflator at 1.96% per annum and the PCE deflator less food and energy at 1.72% per annum.

It’s all noise and rounding errors, as shown below. There is absolutely nothing in the inflation data that justifies the Fed’s virtual destruction of price discovery in the financial markets, and the massive fraud it has introduced into the American economy by purchasing $3.6 billion of government debt over the past 7 years with credits conjured out of nothing.

Indeed, this morning’s 1.8% year over-year gain in the CPI less food and energy was an inflection point. It’s virtually identical to the inflation rate that foodless and heatless households have experienced over the last 15 years; and it’s so close to 2.0% as to invalidate the Fed’s entire inflation targeting policy regime.

The truth is, there has been plenty of inflation during the current century, as Doug Short vivified in the charts below. Indeed, on all the basics that consume most of the weekly pay- or benefit-check for upwards of 80% of American households there has been inflation aplenty. Food and beverage prices, for example, have risen at a 2.7% annual rate since the year 2000.

Likewise, medical care costs have risen at a 3.8% annual rate; housing costs at a 2.5% annual rate; and heavens forbid if you had to absorb college tuition and fees: They have by rising at a 6.0% annual rate.

Indeed, the whole chart is a rebuke to the money printers. When stuff goes up by 40% or better during the course of a decade and one-half, it suggest that too little inflation is most definitely not the problem.

What is the problem is massive financial inflation. The value of corporate equities (at market) and total debt outstanding in the US economy has exploded from $7 trillion to $92 trillion since 1981. And that’s not because it morning again in America. Growth has stalled to a 1.1% rate since 2007, and real household income is barely at levels first achieved in 1989.

No, the financial economy has ballooned from 2X national income (its historic level) in 1981 to 5X today for one reason alone: Namely, owing to the massive borrowing spree and asset inflation generated by the Fed’s destruction of honest price discovery and discipline in the nation’s financial markets.

Stated differently, the $92 trillion number for equities and credit market debt shown below would be about $35 trillion under the traditional monetary regime that had supported steady growth of the US economy and household real incomes for nearly a century prior to 1971.

The US economy is thus imperiled by a $50-60 trillion financial bubble. Yet the Keynesian Klowns who inhabit the Eccles Building are still counting inflation bps on the head of a monetary pin.

Total Marketable Securities and GDP - Click to enlarge

Total Marketable Securities and GDP – Click to enlarge

Total Marketable Securities % of GDP - Click to enlarge

Total Marketable Securities % of GDP – Click to enlarge

Nice to See CDS Quotes (Credit Default Swaps) On Bloomberg.com

Nice to See CDS Quotes (Credit Default Swaps) On Bloomberg.com

Germany's Hyperinflation in 1923, the Great Depression, and Austerity Led to an "Ugly Deleveraging" and Hitler's Rise to Power (Chart, Ray Dalio Video)

Germany's Hyperinflation in 1923, the Great Depression, and Austerity Led to an "Ugly Deleveraging" and Hitler's Rise to Power (Chart, Ray Dalio Video)

Wednesday, May 20, 2015

Second Great Depression

Contra News and Views

For Caterpillar, This Is What The “Second Great Depression” Looks Like

by ZeroHedge • May 20, 2015

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According to the latest CAT retail sales data, Caterpillar has now reported an unprecedented 29 months of declining global retail sales, with the month of April seeing a 16% Y/Y collapse in China (after a 25% plunge in 2014 and a 20% plunge the year before), while Latin America just suffered an epic 44% Y/Y crash, the biggest going back to 2009, after a 28% drop the year before.

Or as far as the industrial and heavy equipment bellwether is concerned, the emerging markets (or BRICS) are in an unprecedented economic collapse.

To put Caterpillar’s ongoing second great depression in context, during the Great Financial Crisis, CAT suffered “only” 19 months of consecutive retail sales declines. As of April 2015, this number is now 29, and there is no hope in sight of seeing an annual rebounce any time soon.

Source: For Caterpillar, This Is What The “Second Great Depression” Looks Like | Zero Hedge

Bigger Perspective by Doug Short

S&P 500 Snapshot: The FOMC Mini-Drama Ends with Another Fractional Loss

May 20, 2015
by Doug Short

The S&P 500 sank to its modest -0.25% intraday low shortly after the opening bell. With no economic news on tap, the focus of the day would be the afternoon release of the FOMC minutes. Sure enough we got a typical 2 PM fast-money trade, with the index rising to its 0.32% intraday high (a record one at that). But the minutes contained nothing to sustain the rally. The 500 then sold off to its fractional -0.09% close.

The official yield on the 10-year note closed at 2.26%, down one bp from the previous close.

Here is a 15-minute chart of the past five sessions.

Volume was unremarkable.

A Perspective on Drawdowns

Here's a snapshot of selloffs since the 2009 trough.

Click to View
Click for a larger image

For a longer-term perspective, here is a charts base on daily closes since the all-time high prior to the Great Recession.

Click to View
Click for a larger image

A Major Test Coming Up?

A Major Test Coming Up?

How soon the crash?

Stocks and Bonds Are Due for a Generational Crash of 75%

oftwominds-Charles Hugh Smith by Charles Hugh Smith 

From the point of view of history, a reversion to generational lows is inevitable, and a valuation level around 50% of GDP for stocks is a fair target.


If we look back to 1981 valuations of stocks and bonds as a guide to valuations at the next generational low, we find stocks and bonds are due for a 75% drop. The Great Bull market in bonds and equities took off after 1981, and has run higher for 34 years (notwithstanding a spot of bother in 2000-02 and 2008-09).

Before credit bubbles became the New Normal, the stock market was valued at less than 50% of GDP. Now stocks are valued at over 200% of GDP, as are bonds. Together, the total securities valuation is over 400% of GDP:


Data courtesy of Doug Noland


The GDP (gross domestic product) of the U.S. was around $17 trillion in 2014. If valuations returned to pre-bubble levels of 50% of GDP, stocks would have to drop from $36 trillion to around $8 trillion--a decline of 75%.

Bonds would have to experience a similar decline to reach pre-credit-bubble levels.

A drop back to the rich valuations of 100% of GDP would require a decline of 50% from current levels. In other words, the S&P 500 would be around 1,000, not 2,000.

To provide some context for the extreme valuations of present -day stocks and bonds, I have shown what the stock and bond markets would be worth in current dollars if they had simply tracked inflation since 1981. According to the Bureau of Labor Statistics Inflation Calculator, $1 in 1981 is now worth $2.60 in 2014 dollars.

If stocks had risen only with official inflation, the S&P 500 would be worth 10% of its current valuation: $3.6 trillion versus $36 trillion.

The bond market (Treasury, corporate and Municipal bonds and agency securities) would be worth 15% of the bond market's current valuations.

Measuring the valuations of bonds and equities in terms of GDP bypasses the debate over inflation.GDP has risen smartly in the past 34 years, and so the expansion of securities at the same rate is to be expected--never mind what official inflation registers.

Measured in GDP, stocks and bonds have reached extremes that make no sense except as the result of an unprecedented global credit bubble. Credit bubbles have a history of not being as permanent and durable as those living in the peak of the bubble expect.

By any reasonable measure, the current credit-bubble boom in stocks and bonds is getting long in tooth after 34 years of relentless expansion, and the rise of securities to 400% of GDP is reaching extremes that are increasingly difficult to support, much less push higher.

From the point of view of history, a reversion to generational lows is inevitable, and a valuation level around 50% of GDP for stocks is a fair target. This implies a 75% decline in both stocks and bonds within the next decade, if not sooner. 

The “Junkie” Economy and Impotent Fed

Our "Junkie Economy" Will Soon Hit Rock Bottom

Submitted by Bill Bonner via Bonner & Partners

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Addicted to Debt

Yesterday, U.S. stocks continued their climb, with a 26-point step-up to yet another all-time high for the Dow. Treasurys, meanwhile, continued to sell off. The yield on the 10-year T-note – which moves in the opposite direction to prices – rose 8 basis points to 2.2%. This follows last week’s turbulent action in the bond market, which saw Treasury yields hit a six-month high.

We have our eye on the U.S. bond market. Prices have been going up – and yields have been going down – for 32 years. And as prices have risen to the highest levels ever recorded, so has the amount of debt.

It is as though the world couldn’t get enough of the stuff. It got to be like heroin: The more debt the world took on, the more it wanted… and the bigger the dose it needed to get a buzz on.

But after the 2008 credit crisis, it is as though the major developed economies are immune to the stuff.

The Fed, the Bank of England, the Bank of Japan, and now the European Central Bank, have been buying it on the street corners. In the largest quantities ever.

But nothing much happens. At least, not in the real economy.

Sooner or later (a phrase we can’t seem to avoid), the entire economy is bound to get the shakes.

But we don’t know when sooner, or later, will come.

If it comes now, it will be a source of great satisfaction here at the Diary. “Finally,” we will say to no one in particular. “We knew it couldn’t last!”

A Healthy End to the Bond Bull?

There is an alternative explanation for falling bond prices. Bond prices should fall, and yields should rise, when economic growth picks up. As economic growth rates speed up, wages tend to rise… and people open up their wallets. Demand starts to outstrip the supply of goods and services. This drives up consumer prices. And interest rates start to rise. As rates go up, that raises bond yields and drives down bond prices.

This would be a healthy end to the epic bull market in bonds. A robust economy would allow central banks to raise rates and still allow debts to be paid down.

But that is not what is happening. And it won’t happen. Junkies rarely go out and get a job... and gradually “taper off” their habit. No. They have to crash... hit bottom... and sink into such misery that they have no choice but to go cold turkey.

Now, major central banks are committed to QE and ZIRP forever. They have created an economy that is addicted to EZ money. It will have to be smashed to smithereens before the feds change their policies.

An Impotent Fed

As colleague Chris Hunter reported yesterday to paid-up Bonner & Partners subscribers in The B&P Briefing:

In April, industrial production fell for the fifth straight month. And in May, consumer sentiment fell to a seven-month low.

And now GDP growth is flat-lining… Following the 0.1% annualized growth rate in the first quarter, the Atlanta Fed’s “real-time” GDP Now forecasting model is predicting 0.7% growth for the second quarter.

The U.S. economy may not be in an official recession – often measured by two back-to-back quarters of negative GDP growth – but it’s not far off…

Oh, but what about the big boost the economy was supposed to get from lower oil prices? What happened to that? Didn’t happen. Americans didn’t spend their gasoline savings; they saved them instead.

After adjusting for inflation, the median household income is down 10% since 2000. So it’s no wonder most Americans aren’t feeling very expansive.

And now, the price of oil is going back up. After hitting a low of $44 in March, today a barrel of U.S. crude oil sells for just under $59.

That leaves the Fed’s “stimulus” just as impotent as it has been for the last six years.

Interest rates remain ultra low. But the real economy remains as flat and dull as a joint session of Congress.

And the markets shudder...