A Storm Is Brewing: U.S. Is Facing A Demographic Nightmare, UK Economy Is Stagnating, Inflation Surges In All The Wrong Places In Japan, China’s New Year Data Disappoint, And ‘Hedge Funds Are Fully Invested’ While The World Is Accelerating Into An Ever-Deepening Recession!

These numbers tell an unsettling story about the U.S. economy

From Global Economic Policy Journal:

In the last 5 years:

•  The Civilian Institutional Population rose 9.9 Million

•  The Labor Force rose 0.9 Million

•  Those Not in the Labor Force rose 9.8 Million

•  Employment fell by 2.3 Million

•  Full-Time Employment fell by 5.3 Million

•  Part-Time Employment rose by 0.9 Million

•  Unemployment rose by 4.5 Million

•  Food Stamp usage rose by 20.3 Million


Non-Workers to Workers

Let’s consider the ratio of workers to non-workers. Workers are those employed, non-workers are everyone else (the unemployed + those not in the labor force).

In the last five years, the number of non-workers rose by 14.3 million while the number of workers fell by 5.3 million.

In 2008, there were 144.6 million workers supporting 88.3 million not working.

There are now roughly 142.2 million workers supporting 102.6 million not working.

… In the year 2000, there were 1.78 workers for every non-worker. Now there are only 1.39 workers for every non-worker. Meanwhile, food stamp usage is up from 17.2 million to 46.6 million, and medical costs are soaring…

An economy of peak food stamp usage, peak Dow, and peak Debt: What does it say about our economy that at the same time the Dow Jones hits a peak, we have the highest percentage of Americans on food stamps?

The Top Story On The Financial Times Front Page Says The UK Faces One Of The Scariest Situations In Economics

That’s the dismal situation being used to characterize the UK in the top story of Wednesday’s FT.






Japan To Hike Utility Prices By 14-19% As Inflation Surges In All The Wrong Places

First it was gas prices, then it was food prices, and now it is the turn of basic utilities to see costs surge by double digits. Dow Jones reports that “Japanese utilities, forced to idle their nuclear power plants over the past two years and facing higher fuel costs due to a weak yen, are now looking to push through double-digit rate hikes for their commercial customers.” This means less disposable income, less corporate profits, less monetary velocity, less growth and ultimately less “inflation” in other things such as the much desired stock market, which was supposed to be the wealth effect offset to all staples price increases. At least on paper. Of course we explained on various occasions, most recently here, why in Japan a US-style of wealth effect price substitution would never work. Surely nobody could possibly see this coming – “The action comes at a bad time for some Japanese companies that were hoping the fall in the yen and much-trumpeted efforts by the government to turn round the economy would help improve their prospects.” Ah hope – the only strategy left.

More on the mainstream press catching up with what we said over two months ago:

While the government has raised some concerns about the raising of power rates, the move seems inevitable given the prior deregulation of electricity prices.


Eight of the nation’s nine utilities with nuclear power plants have been posting losses due to the higher cost of buying imported fossil fuels in the wake of the Fukushima nuclear disaster and the subsequent shutting down of reactors amid safety concerns.

And the biggest catalyst for what is set to be a major inflationary spike, but not in discretionary prices, but in staples – the same one every other time: cash runs out.

The utilities managed to keep prices at low levels over the past two years despite the higher fuels costs by drawing on cash reserves. But some of them are now running low on reserves, and see price hikes as the only way to avoid possible bankruptcy.

On paper, the government has no power to intervene in pricing issues between corporate customers and utilities because of the liberalization of these markets. But that price deregulation left the utilities in full control of the power grid, ultimately stymieing attempts by outside firms to grab a larger share of the market.

Article Continues Below


China’s New Year Data Disappoint 

The numbers on China’s growth and inflation in the first two months of the year make for sobering reading.

Consumer prices rose 3.2% year on year in February, up from 2% in January and the highest level since April last year. That partly reflects the impact of the Lunar New Year holiday, also known as Chinese New Year, which caused a spike in food prices. But the figure is also higher than expected, and points to a bumpy ride for inflation. Industrial output growth fell back to 9.9% from 10.3% at the end of 2012.

Rock-steady growth in retail sales showed signs of eroding. Growth of 12.3% year on year in January and February was down from 15.2% in December. Slower wage growth and a crackdown on official excess could both be factors. Either way, it is a bad sign for the current momentum of growth and efforts to rebalance the economy toward consumption.

At first sight, China’s trade data seem to suggest greater strength. Exports were up 23.6% year on year in the first two months of 2013. But that appears at odds with lackluster demand in major export destinations the U.S. and Europe. Supercharged growth in sales to Hong Kong—up 60% in the same period—suggests fake invoicing by exporters may be inflating the growth rate.


BofA: ‘Hedge Funds Are Fully Invested’

All in.

Below is the key section from the BAML report:

Based on the quarterly 13F filings and estimated short positions of the equity holdings of 895 funds, we estimate that hedge funds raised net exposure by 10% to $418 billion notional in 4Q12 – setting a new record. Percentage-wise, we put equity net exposure at 55% at the end of 4Q12, compared to the 2Q07 peak of 59%.

Gross exposure rose by 1.8% to $1150bn notional in 4Q12. Percentage-wise, gross exposure stayed at about 150%.

Meanwhile, cash holdings fell to 4.6% from 5.0%, below the historical average of 8-10% but above the 2007 trough of 4.3%.

The chart below shows cash holdings, which keep inching downward:


Mom-And-Pop Investors Are Dumping Stocks, But Hedge Funds Are Swooping In

Can loan deferments prevent defaults?
To lower their number of student-loan defaults, colleges are embracing a controversial tactic: Encouraging borrowers to put off payments.

Let’s Stop Fooling Ourselves: Americans Can’t Afford the Future

Unemployment, Taxes and Unfunded Retirement are Squeezing Each Generation


by Dwaine van Vuuren, Financial Sense:

Our prior post titled “World Recession Update” depicted the percentage of 41 countries tracked around the globe that were printing 1 or 2 consecutive negative quarters of GDP growth. It is easy to view the data presented and come to the alarming conclusion the world is accelerating into an ever-deepening recession and the U.S is bound to follow soon.

However there are two sides to this coin and when we inspect the Leading Economic Indicators (LEI’s) of the 41 countries in question we see that the Global LEI dipped below zero into recession territory in July 2011, bottomed in Dec 2011 and rose above zero in Sept 2012:

Also, the percentage of countries with positive LEI’s (black line in chart depicting expansion) seemingly bottomed in March 2012. However it is evident that unlike the prior recession, the black line has not zoomed up in tandem with the blue line implying that the global LEI rise only has a few large contributors such as U.S, Canada, Germany, Italy, Australia and U.K to thank for its recent rise. The LEI rebound therefore lacks broad-based participation at this point which is a cause for concern.




Gerald Celente – Trends In The News – “Interest Rate Rally!”


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