How to Reconcile July’s Rising Markets with July’s Dismal Economic News Eugene Linden : endangered animals, rapid climate change, global deforestation, fragging

THE HAMMER OF THOR… AND LIZ AND BARBRA AND GEORGE AND KAMALA

Lately, I’ve returned to my roots in investigative journalism. I’m trying to get to the bottom to a recurrent episode of collective madness where every four years a marauding posse of celebrities, media figures, and supreme court justices go rampaging through the political landscape w...

How to Reconcile July’s Rising Markets with July’s Dismal Economic News

Thursday July 29, 2010

-Eugene Linden The question has been posed many times recently: Why are the markets rising when the economy seems to be heading back into the tank. Simple, the markets have been going up in part because the economy is going back into the tank. One major factor that has stalled the recovery – job losses – earlier provided a temporary boon for companies. Unit labor costs have been falling rapidly, roughly 5% since the fourth quarter of 2009. This has boosted productivity and earnings, but what is a cost for employers is livelihood for households. Yes, over 80% of reporting companies are beating earnings estimates, only 68% have been beating top-line estimates, which, notes David Rosenberg of Gluskin Sheff, is less than when the economy was free-falling in 2008. Companies have been making their numbers by cutting costs, not increasing sales. Martin Feldstein, President Emeritus of the National Bureau of Economic Research, the organization that officially calls recessions, pointed out during a Bloomberg interview that the group has not called the end of the recession in part because final sales have been lame at best: if first quarter GDP had been based on final sales, it would have risen 1.2% not the revised 3.7% (and Feldstein points out that the 1.2% is an annualized figure so that the final sales contribution to GDP in the quarter was negligible). This is not good news either for future S&P earnings or the future of the economy. Those laid off employees are going to be consuming less in the coming years. Jacob Hacker of Yale made news recently with a study sponsored by the Rockefeller Foundation and Yale University on economic security that argued that in the past year, one in five American households suffered income losses greater than 25%. After suffering this type of shock, it usually takes several years to get back to even, and during those years a household’s budget will be stretched to the breaking point, particularly since the typical American household has very little savings and diminishing access to credit. So while the market, or at least the infernal robots that now seem to constitute the market, embraced the earnings, these nice results are coming to some degree at the cost of future consumption which constitutes more than 70% of GDP. Question: how many times can that card be played?

THE LAWS OF PHYSICS FOR BABIES

Close observation of babies has led me to believe that the infant universe is characterized by its own physics, quite distinct from particle physics or the Newtonian laws of motion. I welcome and will periodically post suggestions about additional laws of the baby universe.

LAWS OF MOTION:

1) The Inflationary Universe: Obects tend to recede when you reach for them.

2) The Boomerang Effect: Once successfully grabbed, however, objects usually reappear after being thrown, with the special exception of objects made of glass or metal.

3) The Relativity of Gravity:

a) Gravity and Acoustics. Gravity can be temporarily reversed by generating noises, but only in the presence of other people. The speed of this reversal is directly proportional to the decibel level of the sounds generated.

b) Gravity and Context. Gravity spontaneously and unexpectedly reverses itself when approaching stairs, antiques, and the Thanksgiving dinner table.

FLUID DYNAMICS: 1) Animal Spirits: Fluids have a vital forces that causes them to splash and spill unless contained in bottles and sippy cups.

MATERIALS PHYSICS:

1) Conservation of Shape: Once broken or bent, objects tend to reappear in their original configutation.

2) Transformation: When reached for, shiny metal objects tend to recede and then become transformed into plastic or rubber.

GRAND UNIFYING CONSTANT: The Attractive Pull of Mommy: the one universal force.

THE HAMMER OF THOR… AND LIZ AND BARBRA AND GEORGE AND KAMALA

How to Reconcile July’s Rising Markets with July’s Dismal Economic News

The Laws of Physics for Babies

[I published this years ago, but with friends having babies, I thought it might be a useful resource]

THE LAWS OF PHYSICS FOR BABIES