Near-term GDP is still fine

Despite all of the chatter about an allegedly imminent double-dip recession, GDP is holding up fine. Yes, GDP growth is currently semi-anemic and maybe too slow to encourage rapid job growth, but that is fine for this stage of the recovery. Today's GDP report showed that Q2 real GDP growth came in at an annualized rate of 2.4%. I hate to break it to the cynics and bears, but anything above zero really is fine and anything above 1% or so is perfectly acceptable. According to Macroeconomic Advisors, LLC, real annualized growth of GDP for Q3 is tracking at 2.8%. Not bad. It is still too soon to talk about anything other than guesstimates for Q4 and beyond, but the actual evidence is only for a slowing, not renewed recession.

-- Jack Krupansky

ECRI Weekly Leading Index recovers modestly, but annualized growth rate still negative

The Economic Cycle Research Institute (ECRI) Weekly Leading Index (WLI) rose modestly after being near flat for two weeks.

The WLI is well below its peak in April, and roughly at the same level as a year ago when the recovery was just getting underway in earnest.

The annualized growth rate for WLI is moderately below zero, modestly lower than a week ago. Some pundits view the growth rate (now -10.7%) as indicating a recession, but ECRI does not concur. The pace of decline appears to be decelerating, suggesting that the growth rate may be near stabilizing.

We had a massive bulge of stimulus, which peaked and dissipated. The big negative WLI growth rate is simply telling us that we are well down from that peak bulge. If the WLI were to deteriorate significantly further from here (the level of a year ago) for a couple more months, that would be a problem, but with a couple of flat weeks now a moderation looks more likely, to me.

The WLI suggests that the economic is likely to slow a bit further, but as of this week a double-dip recession is still not in the cards from the WLI perspective.

-- Jack Krupansky

Unemployment insurance initial claims remain semi-elevated, indicating job market is mixed

Although technically the economy is probably no longer in a formal recession, the job market is barely limping along. The latest weekly unemployment insurance report shows that both initial claims and continuing claims remain elevated, not at the level we saw in the recession, but still not back down to the levels expected in a normal, healthy economy.

I think the biggest issue on the jobs front is that state and local governments are struggling mightily, laying off workers, putting more workers on furloughs, and reducing spending which causes vendors to cut jobs on their side of the fence as well. The corporate job market is doing "okay", but the non-federal government "squeeze" is mostly offsetting the pockets of strength on the corporate side.

The bottom line is that companies have enough cash and excess capacity to grow the economy (the primary measure of whether we are in a recession or not) without necessarily needing to hire a lot more workers. Meanwhile, bloated non-federal governments still need to downsize to a more realistic view of the economic environment going forward. The job market will continue to slowly recover, but only very slowly.

-- Jack Krupansky

Near-term GDP is fine

Despite all of the chatter about an allegedly imminent double-dip recession, GDP is holding up fine. According to Macroeconomic Advisors, LLC, real annualized growth of GDP is tracking at 2.3% for Q2 and 2.8% for Q3. Not bad. It is still too soon to talk about anything other than guesstimates for Q4 and beyond, but the actual evidence is only for a slowing, not renewed recession.

-- Jack Krupansky

ECRI Weekly Leading Index flat for a second week

The Economic Cycle Research Institute (ECRI) Weekly Leading Index (WLI) was flat compared to a week ago which was revised upwards slightly from a week ago.

The WLI is well below its peak in April, and roughly at the same level as a year ago when the recovery was just getting underway in earnest.

The annualized growth rate for WLI is moderately below zero, moderately lower than a week ago. Some pundits view the growth rate (now -10.5%) as indicating a recession, but ECRI does not concur.

We had a massive bulge of stimulus, which peaked and dissipated. The big negative WLI growth rate is simply telling us that we are well down from that peak bulge. If the WLI were to deteriorate significantly further from here (the level of a year ago) for a couple more months, that would be a problem, but with a couple of flat weeks now a moderation looks more likely, to me.

The WLI suggests that the economic is likely to slow a bit further, but as of this week a double-dip recession is still not in the cards from the WLI perspective.

-- Jack Krupansky

We are still in a mini-depression

I believe that there is very little chance that the economy will slip into an outright depression, but that we are indeed in a mini-depression. I used that term back in March in a post entitled "Are we in a mini-depression?" and I believe that we are still mired in a mini-depression and unlikely to escape any time soon. Just today, in testimony before Congress, Federal Reserve Chairman Bernanke basically admitted that most of those 8 million people who lost jobs in the recent recession are not going to get jobs any time soon, telling Congress that "In all likelihood, a significant amount of time will be required to restore the nearly 8-1/2 million jobs that were lost over 2008 and 2009." He elaborated:

After two years of job losses, private payrolls expanded at an average of about 100,000 per month during the first half of this year, a pace insufficient to reduce the unemployment rate materially. In all likelihood, a significant amount of time will be required to restore the nearly 8-1/2 million jobs that were lost over 2008 and 2009. Moreover, nearly half of the unemployed have been out of work for longer than six months. Long-term unemployment not only imposes exceptional near-term hardships on workers and their families, it also erodes skills and may have long-lasting effects on workers' employment and earnings prospects.

Yes, that is gloomy, but not really as gloomy as it may superficially sound. As I wrote back in March, my hunch is that most of those 8 million will be back to work within five to seven years. Sure, that will be depressing for those people during the interim period and a drag on government budgets, but from here on out the overall trend in economic activity and labor employment will be up.

-- Jack Krupansky

Great news: Increase in FDIC insurance is retroactive to January 1, 2008

In addition to permanently raising the FDIC insurance limit $250,000 from $100,000, the financial reform legislation today makes that higher limit retroactive to all of 2008. The FDIC will mail checks to people whose banks failed during the first nine months of 2008 but had deposit balances between $100,000 and $250,000. From the FDIC press release:

The Dodd-Frank Wall Street Reform and Consumer Protection Act signed into law by President Barack Obama today permanently raised the maximum deposit insurance amount to $250,000. In addition, the Act made this increase retroactive to January 1, 2008.

The provision making the law retroactive means that the $250,000 deposit insurance amount applies to banks that failed between January 1 and October 3, 2008. These insured institutions are:

• Hume Bank, Hume, MO
• ANB Financial, N.A., Bentonville, AR
• IndyMac Bank, F.S.B., Pasadena, CA
• First Priority Bank, Bradenton, FL
• The Columbian Bank and Trust Company, Topeka, KS
• Silver State Bank, Henderson, NV

This retroactive increase has reduced the number of uninsured depositors at these failed institutions from more than 10,000 to approximately 500.

The FDIC will mail checks to uninsured depositors tomorrow, July 22, 2010..

That is real, cold hard cash relief to 9,500 Americans and their families.

October 3, 2008 is the date that the limit was temporarily raised from $100,000 to $250,000.

-- Jack Krupansky

Basic FDIC Insurance Coverage Permanently Increased to $250,000 Per Depositor

Despite all of the confusion, distortion, hype, and disappointment over the massive financial reform legislation, one clear bright spot is that the FDIC insurance limit is now permanently raised to $250,000 from $100,000. Before today the limit was temporarily raised, but now that change is permanent. From the FDIC press release:

On July 21, 2010, President Barack Obama signed the Dodd-Frank Wall Street Reform and Consumer Protection Act, which, in part, permanently raises the current standard maximum deposit insurance amount to $250,000. The standard maximum insurance amount of $100,000 had been temporarily raised to $250,000 until December 31, 2013. The FDIC insurance coverage limit applies per depositor, per insured depository institution for each account ownership category.

The temporary increase from $100,000 to $250,000 was effective from October 3, 2008, through December 31, 2010. On May 20, 2009, the temporary increase was extended through December 31, 2013.

-- Jack Krupansky

ECRI Weekly Leading Index flat

The Economic Cycle Research Institute (ECRI) Weekly Leading Index (WLI) was flat compared to a week ago.

The WLI is well below its peak in April, and roughly at the same level as a year ago when the recovery was just getting underway in earnest.

The annualized growth rate for WLI is moderately below zero, modestly lower than a week ago.

This suggests that the economy is likely to slow a bit further, but as of this week a double-dip recession is still not in the cards from the WLI perspective.

-- Jack Krupansky

What is the ECRI Weekly Leading Index telling us about the economy?

Most people and economists seem willing to acknowledge that the U.S. economy is going to slow to some extent for the rest of the year and even well into 2011, but whether it will slow enough to constitute a double-dip recession is a different matter. The truth is... unknown and a matter of debate, but as of July 9, 2010, the Economic Cycle Research Institute (ECRI) has said that "a slowdown in U.S. economic growth is imminent, but a new recession is not." In other words, even ECRI does not believe that their Weekly Leading Index (WLI) is forecasting a double-dip recession. ECRI is forecasting a slowdown, but no recession. End of story, for now. Of course, the data will continue to unfold on a weekly basis.

Usually the media and market commentators pay little attention to ECRI and its Weekly Leading Index (WLI), but lately a number of Wall Street pundits have been touting the WLI as indicating that a recession is imminent. In response, others on Wall Street are disparaging such leading indicators. As is to be expected whenever two extremes are being loudly promoted, the truth is somewhere in the middle.

The battles over the ECRI WLI became so extreme that ECRI posted an essay on July 1, 2010 entitled "WLI Widely Misunderstood" closes with:

Bottom line, neither the "experts" predicting that the sky is falling based on the WLI, nor the other "experts" indulging in misinformed WLI-bashing in an effort to discredit the super-bears, have a real clue to what the WLI is all about. We created the WLI not to be an infallible, stand-alone recession-forecasting machine, but as one small part of a much larger array of leading indexes (each made up of many economic indicators) -- like the especially prescient U.S. Long Leading Index. This array amounts to a sophisticated sequential signaling system of the economy's cyclical turning points. The WLI is designed to be interpreted in this broader context, and its message today is quite simple: a slowdown in U.S. economic growth is imminent, but a new recession is not.

How much clearer do they have to get? Well, Wall street hates clarity since it interferes with their ability to spin up stories that enable them to con you out of as much of your money as they can.

Again, just to confirm, the current ECRI view is:

a slowdown in U.S. economic growth is imminent, but a new recession is not.

-- Jack Krupansky

Made my seventh payment to pay down the public debt of the U.S. government

I just made my seventh monthly payment to pay down the public debt of the U.S. government. Not much, just another $25, but it is a matter of principle, albeit mostly symbolic. It may take me another 44 billion years to pay it all down all by myself at this rate, but, as I said, it is matter of principle.

According to the U.S. Treasury web site, the total public debt outstanding was $13,199,290,856,204.30, as of July 13, 2010. It was $13,038,877,263,966.78, as of June 17, 2010, for an increase of about $160 billion over a four-week period, about $6.2 billion a day.

What I wrote back in January when I made my first donation/gift/contribution/payment:

Everybody is whining and complaining about the ballooning debt of the U.S. government, but who is actually doing anything about it? Well, for starters, ME! Yes, that's right, I, Jack Krupansky, just did something to reduce the U.S. government debt. Really. No kidding. I actually paid down a small slice of this debt. Granted, it was a rather small slice, but a slice nonetheless. Okay, sure, it was only $20, but the point is that at least I am one of the very few people willing to stand up and DO something about the problem, rather than be one of the whiners and complainers who refuse to acknowledge that it is their debt and their problem, not just the fault of mindless politicians in Washington, D.C. After all, every politician ultimately answers to voters and most of the so-called wasteful spending of the U.S. government is simply politicians responding to the demands of their consistituents (voters.) Maybe my one small contribution to paying down the debt won't really make any difference to any of those whiners and complainers, but for me it is a matter of principle. I consciously choose action rather than the inaction and lack of responsibility of the whiners and complainers.

If you have any sense of principle, you too can pay down a slice of the U.S. government debt yourself at Pay.gov. You can pay via credit card or debit transfer from a bank account.

So do the right thing and show all those whiners and complainers (including so-called "tax protesters") how mindless and spineless they really are. PAY DOWN THE DEBT! And that has to start at the grass roots with us individuals before politicians will ever pick up the lead.

For the record, the only real way out of the deficit is not to merely cut expenditures or raise taxes or some combination of the two, but through economic growth, which includes a healthy amount of immigration. Sure, we need to manage the federal budget more carefully as well, but the big focus has to be on achieving sustainable economic growth.

-- Jack Krupansky

Great stock market advice

Charles Lahr, a portfolio manager at PIMCO has this comment on the stock market:

Market volatility could make investors uneasy, but this is a great time to be a value investor, because volatility tends to beget opportunities over the long run. Many companies get sold for the wrong reasons, and if you have the ability to go in and identify individual names that are being undervalued by the market and make prudent investments, you're likely to find some very attractive opportunities.

I could not have stated it better.

In short, try to avoid chasing the latest fad being promoted by Wall Street and focus on deep value.

The byline for that piece tells us that:

Charles Lahr and Anne Gudefin are portfolio managers heading the recently launched PIMCO Pathfinder(TM) Strategy, an actively managed global deep value equity approach focused on steeply discounted stocks of fundamentally strong companies.

That is a good business to be in these days.

That said, I am not making any specific recommendation of any stock or fund.

-- Jack Krupansky