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Thread: weekend commentary - 'Off the Grid' economic indicators

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    Default weekend commentary - 'Off the Grid' economic indicators

    hmmmm ....

    (snip) the one item that should be highlighted is that, as we have suspected for a while, the social undertow of fear, skepticism and anger is coming to a boil, as Google queries of the "Buy A Gun" search querry have just hit an all time high. How much of this is due to the recent events from Tucson, AZ is unclear. What is clear is that the trend is most certainly not your friend (unless you are of course the CEO of Smith and Wesson).





    We'll leave the interpretation of this chart to our very erudite politicians.

    As for other must read observations on the topic of derivative economic indicators, we present Nicholas Colas' must read latest: "Off The Grid” Economic Indicators – Q410 Edition

    There are a lot of economic indicators out there, and we pay attention to all of them because government decision makers have told us they shape economic policy. But there’s a wealth of independently developed economic and statistical data available as well, and much of it provides much-needed color on the real state of the U.S. economy. Our collection of anecdotal datapoints, which we have dubbed the “Off The Grid” indicators, paint a more nuanced picture of a slow growth U.S. economy that is still struggling with the aftermath of the Financial Crisis. Bullish points include demand for pickup trucks, used cars and an increasing number of people who leave their jobs voluntarily instead of through layoff. Bearish points are headlined by still-rising food stamp participation, with gun sales and rampant buying of silver coins underpinning continued popular concerns over personal security and the soundness of the dollar. Food inflation also features on this list. Neutral points: mutual fund inflows (but potentially turning positive) and Gallup poll consumer spending. (snip)

    (snip)The various indicators that inform this view are all included in the attachments to this note , and we’ll touch on a few of the important ones here:

    Food Stamps – This program, originally created to sell surplus produce to starving Americans in the Depression, has morphed over the decades into a foodpurchase grant to low income households. The growth rates for SNAP (the modern name for Food Stamps – Supplemental Nutrition Assistance Program) have been stratospheric for the last two years at +15% year-on-year growth. Part of this was a change to eligibility requirements in 2009, but a lot more was the impact on the recession among low income households. The program now helps over 43 million Americans feed themselves, about 14% of the U.S. population.

    The good news, if one can call it that, is that the growth rates are slowing. Last month one of our one strategy team members went to several public assistance offices outside New York to speak to people waiting for a consultation and those interviews shed some light on this trend. The bottom line is that such facilities were simply overwhelmed over the past two years. People who qualified for public assistance needed to visit such centers several times, as the paperwork needed to complete the application process is lengthy and convoluted. So growth rates rose steadily as these individuals finally cleared the hurdles required to receive benefits. One other data point that supports that the growth in the SNAP program may have peaked: Google searches for the term “Food Stamps” are no higher than mid-year 2010.

    The deeper question is what the widespread adoption of SNAP will do to the society over the coming years. This is actually not a budget discussion – SNAP is very efficient and costs less than $100 billion a year to help +40 million Americans. Rather, it is a question of the effects of long term reliance on government support to economic issues such as labor participation rates and employment levels. We are in uncharted waters here, to be sure.

    Durable Goods Purchases – The most upbeat news from our indicators is the degree to which consumers are snapping up used cars and pickups. Yes, the economic data focuses on all light vehicles, but the “Off the Grid” indicators dance to a different drummer. Used car prices are a great leading indicator for new car and truck demand, and the Manheim Auto Auction data keeps hitting new highs. Pickup trucks are work vehicles, primarily purchased by small businesses. After a steep selloff from the bursting of the housing bubble, pickup truck demand is now positive again, to the tune of +20% year on year for several months in a row.

    Guns, Ammunition, and Silver Coins – Whether you are “pro-“ or “anti-“ gun, the sale of firearms should be on your radar screen as a heuristic measurement of something I will call “consumer security.” There is a baseline of organic firearm demand in the U.S. – for years it was about 8 million units, as measured by the FBI’s instant background check request data. With the 2008 recession that number spiked to first 10 million and now 14 million background checks a year. At first observers chalked that up to a Democratic President, but it has been years since Obama’s inauguration and the numbers keep climbing. I attribute that to a deeper sense of unease in the population – perhaps about government controls, perhaps about crime. Hard to say how much of each. But it is easy to say that an unsure society is not one ready to resume a carefree spending profile. And keep in mind that guns are not cheap – a basic rifle or shotgun will run $300 or more.

    Much of the same point applies to the recent surge in demand for silver coins. From a monthly sales run rate of less than 1 million coins, the U.S. Mint now pushes out close to 3 million coins a month, and dealers would clearly like to have more. As with guns, silver coins are not cheap - +$30/piece, or +$600 for a roll of 20. I suspect much of this demand stems from gold’s steady price move higher and the fact that the Mint is not producing as many fractional ounce gold coins as it once did. That means people with less than $1,400 to spend on precious metals coins migrate to silver. That is born out in the decline in Google searches for “Gold Coins” as prices there spiked in 2010. Bottom line – there is a fundamental lack of confidence among enough people in the population as to the long term soundness of the dollar.

    We’ll close out on a few positive points and one real problem.

    •Workers are quitting more often now, according to the underappreciated but highly useful BLS JOLTS data. Almost half of all separations from an employer are now the employee’s idea, rather than a layoff. That dovetails with the recent rise in consumer confidence, as the attached chart highlights.

    •Mutual fund flows into U.S. stock funds had a positive week, ending 1/12/11. It has been a long dry spell here – ever since May 2010 – so perhaps investors are finally reengaging with domestic equities as they start contributing to 401(k)s in the New Year.

    •Food inflation could be a very large, very nasty problem. The Dept of Agriculture’s “Prices Received” data shows that “All Farm” prices are back to where they were in 2007.(snip)

    from


    the obvious point being made by both authors is that there is an apparent world of difference between what Washington and Wall St. officially think is happening, versus what's really happening on 'main street' .

    ~
    Last edited by Melonie; 01-24-2011 at 05:13 AM.

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