Bill Bonner (The Daily Reckoning, UK):

Leading economists have a one-stop solution for just about everything: stimulate consumer spending.

When the price of oil hit $150 a barrel, the first major alarm sounded. Something was wrong. Now we have a clearer idea of what it was.

To make a long story short, leading economists have a one-stop solution for just about everything: stimulate consumer spending. But $150 oil warned us: continue down that road and you will run out of gas. There isn’t enough oil in the world to allow US-style consumption for everyone.

Two weeks ago, Dubai gave us another wake-up call. Thought to be risk- free, since it was implicitly backed by all the oil in the Middle East, Dubai World nevertheless stopped paying its debts. And last week yet another bell banged our eyes open. Greece announced first that it would not try to reduce its deficits… then, that it would. Hearing the news, the financial world rolled over and went back to sleep. But The Wall Street Journal offered a hint of trouble to come: “Markets force Greek promise to slash deficit,” said its page one headline.

If markets could force the Greeks to trim their deficit – about 13% of GDP… not far from the US level – could they not force Britain and America too? Coming right to the point, the fixers face not just one crisis, but many. They have a growth model that no longer works. They have aging populations and social welfare obligations that can’t be met. They have limits on available resources, including the most basic ones – land, water, and energy. They have a money system headed for a crack-up, and an economic theory that was only effective when it wasn’t necessary. Now that it is needed, the Keynesian fix is useless. If a recovery depends on borrowed money, what do you do when lenders won’t give you any?

But let us backtrack to a smaller insight. Then we will stretch for a bigger one. Americans are supposed to be insatiable shoppers. For at least three decades, the world counted on it. It was the growth model for almost all the Asian manufacturing economies… and for resource producers everywhere. But as we approach the biggest shopping season of the year, a survey of consumers signals an earthquake. Americans plan to spend an average of 15% less during this holiday season than the year before. Only 35% say they will take advantage of post-Christmas sales, traditionally when the stores unload unwanted inventory. They seem to be satiable after all.

Push come to shove, Americans react like everyone else. Now, they are being shoved into a new world, very different from the one they have come to know. In 1973, the American working stiff went into a decline. His weekly earnings, in real terms, went down for the next 36 years. The typical worker earned the equivalent of $325 a week in 1973… adjusted to constant 1982 dollars. By US official accounting he was down to $275 a week in 2009. Unofficial estimates put the loss as high as two-thirds of his purchasing power.

Yet, his spending increased anyway. How? He squeezed the rest of the world. The US trade gap began to go seriously negative in 1992. By 2006-2007, foreigners were shipping to America nearly $900 billion more per year in goods and services than they received in exchange. This gave the typical American a standard of living few people could afford; too bad, he wasn’t one of them.

Now he’s up against billions of Patels and Hus. They work for less. They save more. They want more stuff too. And they’re suspicious of the dollar.

Their economies are growing faster…

Click here for the rest of Mr. Bonner’s commentary at The Daily Reckoning, UK Edition.

A majority of those polled by Bloomberg think it’s great; 61% said they thought they economy had taken off and was flying high. Stocks are up. Commodities are up. And here’s another Bloomberg headline: “Global investors give Federal Reserve Chairman Ben S. Bernanke top marks…”

The recovery has won the approval of economists and the public. It has almost everything going for it. It just won’t fly!

Comes news this morning that the US economy is still on the runway. This report from the AP explains why:

“WASHINGTON (AP) – Consumers slashed their borrowing in July by the largest amount on record as job losses and uncertainty about the economic recovery prompted Americans to rein in their debt.

“Economists expect consumers will continue to spend less, save more and trim debt to get household finances decimated by the recession into better shape. Such behavior, though, is a recipe for a lethargic revival, because consumer spending accounts for 70 percent of economic activity.

“The Federal Reserve reported Tuesday that consumers in July ratcheted back their credit by a larger-than-anticipated $21.6 billion from June, the most on records dating to 1943. Economists had expected credit to drop by $4 billion.”

Hey, not bad… economists were only off by 440%. Consumers are paying down debt more than 4 times faster than they thought. Partly because they want to. And partly because they have to. They don’t want to borrow… and banks don’t want to lend to them anyway. Consumer credit is falling at a 10% annual rate, based on July figures. Credit card debt is going down at an 8% rate.

When they pay down a dollar’s worth of debt that is one dollar less in the consumer economy. But it’s also a dollar that is not borrowed. Where the consumer spent all his income two years ago… and borrowed more so that he could increase his consumption even further… now, he doesn’t borrow… and he doesn’t spend all his income either. Now, the money that used to pour into consumer spending leaks out.

As we reported yesterday, personal spending is dropping… the figures were down in 4 of the last 6 quarters – something that has never happened before, since they began keeping records in 1947. And the level of consumer spending is down 33% from a year ago – with discretionary spending now down to a level it hasn’t seen in 50 years.

Of course, that’s just what we’ve been saying. The great credit expansion began in 1945. It ended in 2007. Credit will contract for many years. One study, also reported here, suggested that consumers would spend 14% less – even after the economy was back on its feet. We estimate that the total level of debt must go down below 200% of GDP. If that’s correct, we need to pay down about $25 trillion of debt. That won’t be easy and it won’t be quick.

And it will mean high levels of joblessness for a long time. Already, two out of five working-age Californians are unemployed. The other three are working the shortest workweeks in history. No wonder; with spending dropping, sales are falling. So businesses don’t need so many people to make, ship, sell and service their products. Then, of course, when they lay off workers to cut expenses, the unemployed workers have to cut spending!

How is it possible for a consumer economy to grow when consumers are spending less money? Of course, it’s not. This is not a genuine recovery… it’s an imposter. A fraud. A recovery impersonator.

While the private sector is paying down debt, the public sector is adding debt at a ferocious pace – about $150 billion per month. Public spending isn’t the same as private spending. It is usually spending for things that people wouldn’t buy if they had a choice. And it comes with a whole new risk attached – the risk that the feds will inflate their way out of debt rather than pay it off.

Government spending does not bring a durable, real prosperity. (If it did… think how easy it would be to make people rich; governments love to spend money!) It may look like a recovery. It may have shiny wings and spiffy-looking stewardesses. But it won’t fly.

*** The World Economic Forum has taken the US down from the number one position. America is no longer the world’s ‘most competitive’ economy. That title goes to Switzerland.

Meanwhile, the US banking system is rated #109 in the world – just below Tanzania. US banks became leveraged casinos during the bubble years. They’ve still got a lot of leverage… and are still trying to relive those glory days when players lined up to spin the wheel… and free drinks flowed by Niagara Falls.

*** “Keeping up with children is a full-time job,” said Elizabeth last night. “There is always at least one of them who needs help. Sometimes more than one.

“Sometimes I wonder if we shouldn’t devote ourselves more fully to helping them. That’s our main project, isn’t it? It’s the thing that is most important, isn’t it?

“So… shouldn’t we go to where they are… and give them advice… help them get their careers and families established? I mean, we’re in Europe. Our children are mostly in the US. Shouldn’t we go back so we would be available to help them? Maybe we should rent a house in Los Angeles and stay there until Maria’s acting career is on a more solid footing, for example. At least, she’d have somewhere to go for Thanksgiving…

“The prevailing view in America is that children leave the nest when they are 18 or 21… and then, they’re on their own. But that’s not the view here in Europe. In Paris, I know lots of parents who stick with their children all their lives. They spend their vacations together. The parents buy an apartment for the children. They direct their careers… and pass judgment on marriage prospects. Not that the children always listen, but one generation is not left to its own devices. That’s why inheritance is such a touchy issue in France. People aren’t expected to make it on their own… they’re expected to get as much support from the family as possible…

“Sometimes I think we should take the same attitude. And we do to some extent… Still, I’m not sure the children would appreciate our help. I’m not even sure our help would really be much use. Sometimes they just need to make their own mistakes…

“Besides, we have our own projects… our own lives. I just don’t know what is best…”

Source: A Recovery Impersonator

The FTSEurofirst 300 <.FTEU3> index of top European shares rose 1 percent to 978.34 points. Over the week, the index climbed 1.2 percent, its sixth weekly gain in the last seven weeks.

The European benchmark index is up more than 51 percent from its lifetime low of March 9, as investors have become more confident on the prospects of economic recovery.

“Things look good for the time being, but the higher we go the more we could be setting ourselves up for a disappointment,” said Andy Lynch, a fund manager at Schroders.

“The world economy is doing well, French and German GDP are positive, but that’s not surprising given the amount of stimulus being pumped into the market. I have a concern about what happens when the sugar rush is withdrawn, though that may be a problem for 2010, rather than now.”

Nokia rose 3.1 percent, taking its gain in the last three sessions to 9.9 percent, with traders citing positive momentum following the announcement of its first Linux phone to compete with Apple’s iPhone.

STMicroelectronics rose 12.4 percent after a bullish note on the chipmaker from Banc of America-Merrill Lynch, which raised its price target for the stock by 17 percent to 7 euros, and retained its “buy” rating.

The sector was further boosted by upbeat statements from U.S. bellwethers. Intel raised its third-quarter outlook and results at Dell were ahead of forecasts.

Macroeconomic news was also mostly positive. U.S. consumer spending rose as expected in July, lifted by the government’s “cash-for-clunkers” programme that fuelled demand for autos. The Commerce Department said spending rose 0.2 percent after rising by a revised 0.6 percent in June, previously reported as a 0.4 percent gain.

The European benchmark had risen to a 10-month high of 986.59 before gains were tempered by Reuters/University of Michigan surveys showing U.S. consumer confidence falling to its lowest level in four months in August on worries over high unemployment and dismal personal finances.

L’OREAL RISES

Among other individual movers, L’Oreal advanced 7.4 percent to a 10-month high after the French beauty products giant posted better-than-expected first-half profit.

French conglomerate Bouygues surged 9.1 percent after raising its full-year sales target and posting better-than-expected first-half results.

Commerzbank jumped 7.2 percent on talk Germany might be seeking to reduce its stake in the country’s second-largest bank. A spokesman for the finance ministry denied the speculation.

Intesa Sanpaolo SpA , Italy’s biggest retail bank, rose 2.4 percent as second-quarter profit beat analysts’ forecast and it confirmed its outlook for the full year.

Other banks to rise in the heavyweight sector included Barclays , HSBC , Lloyds , Societe Generale and UBS , up between 1.3 and 6.3 percent.

Miners rose as copper touched 11-month highs. BHP Billiton , Anglo American , Rio Tinto and Xstrata rose between 1.7 and 4.4 percent.

A slew of macroeconomic data also signalled improving conditions in Europe. Britain’s economy shrank a smaller-than-expected 0.7 percent in the second quarter. Euro zone economic sentiment, too, improved more than expected in August.

Britain’s FTSE 100 <.FTSE> index closed 0.8 percent higher. It has gained 6.5 percent in August. The London market will be closed on Monday for a holiday.

Germany’s DAX <.GDAXI> and France’s CAC 40 <.FCHI> rose 0.9 and 1.2 percent, respectively.

“There is only one clear trend in the market and that’s on the upside. People are coming back with a lot of inflows in favour of equities and outflows are coming from the money market,” said Romain Boscher, head of equity management at Groupama Asset Management, in Paris.

Aug 28 (Reuters)

U.S. gross domestic product (GDP) shrank 1% in the second quarter, following the first quarter’s 6.4% drop. The $787 billion Obama stimulus package, smaller decreases in business spending and slowing erosion of the housing market all helped to slow GDP contraction, according to the Bureau of Economic Analysis. A poll of 78 economists surveyed byBloomberg News showed a median estimate of a 1.5% decline in GDP.

“The recession is slowing but we still need to get households and businesses to start spending again,” said Joel Naroff, president of Naroff Economic Advisors, Inc.

With such a dramatic drop in the rate of contraction, the third quarter could sport the first expansion in more than a year. The last time the GDP grew was the second quarter of last year, thanks in large part to the $112.4 billion in stimulus payments to taxpayers.

Despite rising unemployment and a looming jobless recovery, Naroff is optimistic about consumer spending.

“Vehicle sales were actually up from the first quarter and are likely to be even better this quarter, so consumer weakness should not be a major concern,” Naroff said, adding that he’s optimistic that strong growth isn’t far off. “[GDP growth] could be either the third or fourth quarter and could approach 5%.”

Still, until there is real growth in consumer spending, any recovery will be difficult to sustain.

“We’ll get more support from government programs in the second half, but if you want a strong recovery, you need a strong consumer, and we are not seeing that,” Nigel Gault, chief U.S. economist at IHS Global Insight Inc. told Bloomberg.

A recovery may have to rely on business and government spending. Business investments, while still falling, slowed to a rate of 8.9% in the second quarter, a far cry from the first quarter’s 40% drop. The decline equipment and software purchases also slowed, falling a modest 9% compared to 36.4% in the previous quarter.

On the government side, federal officials – including U.S. President Barack Obama – say less than a quarter of the stimulus package has been spent so far.

“You just can’t push [funding] out that quickly, partly, not just because the federal government has to process applications but also because states and local governments have to gear up to get these projects going,” President Obama said in an interview with Fox News earlier this month.

Without consumer spending, which makes up more than two-thirds of the economy, any recovery will likely be agonizingly slow.

“We’re going from recession to recovery, but at least early on, it’s not going to feel like one,” said the chief economist at Moody’s Economy.com, Mark Zandi in an interview with The New York Times. “For economists, this is a seminal part in the business cycle, but for most Americans, it won’t mean much.”

Indeed, the unemployed or the underemployed struggling to make ends meet it’s hard to be optimistic, even as the markets, corporate profits and other economic data show improvement.

“At some point it becomes Obama’s economy, not Bush’s economy anymore,” said Dean Baker, co-director of the liberal research group Center for Economic and Policy Research told The Times. “He made a big mistake in overselling the first stimulus, and then in celebrating all the ‘green shoots.’ That just opens the door for people to say, ‘Where are my green shoots? I still don’t have a job.’ ”

Source: U.S. GDP Contraction Slows, but the Road to Recovery Will Be Rocky

That prompted investors to shun risk and weighed on U.S. stock futures. The euro also pared gains versus the dollar after the report.

The U.S. economy contracted at a 1.0 percent rate in the second quarter, according to government data on Friday. Analysts polled by Reuters had forecast GDP falling at a 1.5 percent rate.

Despite the fact GDP fell less than expected, investors focused on the consumer spending component, which showed a 1.2 percent drop after a 0.6 percent rise the previous quarter.

Consumer spending accounts for over two-thirds of U.S. economic activity.

“The better-than-expected number seems to be offset by a renewed decline in consumer spending,” said Ashraf Laidi, chief market strategist at CMC Markets in London.

“This report has written all over it the continued divergence between consumers and businesses. Consumers are still struggling. I don’t expect this to be a big boost for risk appetite.”

In early New York trading, the dollar fell 0.2 percent against the yen at 95.28 yen compared with 95.75 before the GDP report.

The euro was at $1.4112, up 0.3 percent on the day, but was down from $1.4135 before the data.

NEW YORK, July 31 (Reuters)

U.S. light crude fell 95 cents to $65.99 a barrel by 1325 GMT, pulling back from its gains ahead of the release of the economic data.

London Brent crude dropped by $1.43 to $68.68.

U.S. gross domestic product fell 1.0 percent in the second quarter, with consumer spending falling 1.2 percent, the U.S. Commerce Department said.

Although the contraction was smaller than expected the January-March GDP was revised down to a 6.4 precent drop from the previously reported 5.5 percent fall.

With the contraction in the second quarter, U.S. GDP has fallen for four straight quarters for the first time since government records started in 1947.

“The GDP reading did come better than expected, but the stabilisation is coming off a downward revised first quarter number,” Harry Tchilinguirian, oil analyst with BNP Paribas, said.

“Spending is worse than expected so economic activity in the U.S. is still not supportive for oil demand.”

European shares turned negative after the data and U.S. stocks opened weaker.

Oil prices were poised to mark their first monthly fall since January, which is likely to be about 4 percent.

In the United States, the world’s largest energy consumer, crude inventories have risen and oil refinery utilisation rates have remained lower than normal as economics for refining have been poor and fuel demand has been weak.

U.S. crude oil imports in May fell to the lowest level for the month in 12 years. In Japan, the world’s third largest oil consumer, fuel sales fell in June, dropping for the 13th consecutive month.

LONDON, July 31 (Reuters)

The good news came in spite of a small jump in initial applications for state unemployment insurance, which rose by a more-than-expected 3,000 to 608,000 in the week ended June 13. Analysts polled byReuters were expecting claims to dip to 600,000 from a previously reported 601,000.

But analysts were largely focused on a trend in continuing claims, which tracks jobless workers who stayed on government benefit rolls.

Those claims plunged by 148,000 to a smaller-than-anticipated 6.69 million in the week ended June 6, the latest week for which data was available. That is the lowest number since May 9, and the largest one-week drop since November 2001, Reuters reported.

And in another sign the labor market may be thawing, the closely watched four-week moving average for new claims, which smoothes out short-term volatility, shrank to 615,750, the least since February 14.

The drop also halts a streak of 21 straight increases in continuing claims, including 19 that were records.

“The labor market remains weak but it’s starting to stabilize,” Maxwell Clarke, chief U.S. economist at IDEAglobal in New York told Bloomberg News. “An improvement in employment conditions and improvement in confidence go hand in hand with an improvement in consumer spending.”

Still others heralded the news as a harbinger of a recovery in the overall economy.

“Overall, we judge this report as another among a growing number of signs [however tentative] that the economy is beginning to stabilize,” Nomura Holdings Inc. (NYSE: NMR) economist Zach Pandl, wrote in a research note to investors, The Wall Street Journal reported.

After companies made deep job cuts earlier this year, the drop in claims is a welcome change for weary jobseekers battered by the recession.  Companies have slashed more than 6 million jobs since the recession began in December 2007.

Of course, the statistics don’t reveal whether workers on government rolls are successfully finding new jobs or dropping off because their benefits have simply run out after the normal allotment of 26 weeks.

Any drop in continuing jobless claims might be reflecting only the drop in initial claims, as fewer people join the rolls.

“It is unlikely that new hiring has picked up in any meaningful fashion,” Joshua Shapiro, chief economist with MFR Inc., a consulting firm, wrote in a note to clients, the Associated Press reported. “More probable is that long-term unemployed are starting to fall off the rolls.”

And the likelihood of significant hiring as the economy recovers remains in doubt.

As reported in Money Morning last week, U.S. Federal Reserve Bank Chairman Ben S. Bernanke threw cold water on hope for a full-blown economic rebound when he hinted recently that the U.S. labor market could well be facing a jobless recovery – an upturn in which the economy and corporate profits advance, but virtually no new jobs are created to compensate for years of layoffs.

The bankruptcies of General Motors Corp. (OTC: GMGMQ) and Chrysler LLC are likely to directly throw at least 32,000 more workers out of work in the coming summer months. And countless others at parts supply companies and other auto-related businesses may soon follow.

Nevertheless, a further reduction in continuing claims might be enough for some economists to call the recession over.

Bruce Kasman, chief economist at JPMorgan Chase & Co. (NYSE: JPM), said that a drop in the four-week average to 580,000 by next month would be sufficient to declare the recession over, according to theAssociated Press.

Kasman is chairman of the American Bankers Association’s economic advisory committee, a group of economists for large banks that this week predicted the economy will recover in the third quarter.

Source: Drop in Continuing Unemployment Claims Could Signal Onset of Recovery

Hmmm… Is this the beginning of the end for the “sucker’s rally”?

Mr. Market’s suffered two rough days in a row. Since Monday, the S&P 500’s down 3.5%. The Dow has fallen two days in a row as well — its worst two-day streak since the March bottom, in fact.
Best Buy — of all places — currently offers the best look into the market’s mood. The purveyor of plasma TVs and other adult toys revealed a 15% drop in quarterly profits yesterday. While the loss wasn’t as bad as Wall Street expected, Best Buy refused to brighten forward guidance, admitting “limited visibility to consumer spending in the back half of the year.”

Traders punshied Best Buy’s realistic approach with a 7% sell-off.
“A recovery requires rising, not stagnant, retail sales,”notes our macroeconomic sage, Rob Parenteau. “Flat sales revenue is not going to get retailers to expand — in fact, to make promised earnings targets, they will have to keep cutting costs, which reduces household incomes.

“We suspect the fiscal stimulus is just offsetting the deflationary pressures that were unleashed in the second half of last year and have subsequently left nominal retail sales at 2005 levels. Stabilization is not yet apparent in some of the most cyclical parts of retail sales — big-ticket items like furniture, home furnishings, electronic and appliance stores — and we suspect private debt deleveraging is still taking priority over consumer durable spending. Even realizing financial asset prices anticipate the future, we find it hard to step into consumer discretionary stocks knowing dollar sales revenue in this category has been deflating for a year and a half — that is, falling in nominal dollar value terms — to the point the sales level in this category is below where it was in 2004!

“Stagnant sales can, indeed, stick around for months on end, as this was the case in the last recession from Q1 2000 into Q3 2001. This time around, the fiscal impulse is larger, but so too is the damage to household balance sheets. Not an easy situation to evaluate, but we believe equity investors need to see something better than stable retail sales if they are to take equity indexes appreciably higher.”

(BTW, The Richebacher Society is currently accepting new member applications. Rob has been doing a great job carrying the late Dr. Richebacher’s torch… see how you too can be a part of his legacy,here.)
“Japan’s Nikkei 225 index rallied more than 40% on 10 different occasions during the last two decades,” The Rude Awakening’s Eric Fry is quick to remind us. “And yet, the Nikkei remains more than 50% below the all-time high it established in 1989.

“Could a version of this sorry scenario unfold here United States? Sure. Why not?

“The nearby charts place the recent rally on Wall Street in a “Japanese context.” The chart above compares the first 20 months of our current American bear market to the first 20 months of the Nikkei’s bear market. The chart below places this 20-month period in a 20-year context. If the American stock market were to have the misfortune of mimicking the Nikkei, the road ahead would be long and painful.

“Your California editor is not predicting such a scenario. But neither does he believe that ‘Happy days are here again.’ The road ahead — both for the economy and for the stock market — is likely to be long and painful. How long and how painful is anyone’s guess. Our guess would be: Not as bad as Japan’s experience, but much worse than most Americans currently expect.”
“People talk about green shoots, I see many yellow weeds instead,” the famously bearish (and famously right) Nouriel Roubini told Reuters yesterday, taking the popular cliché to the next level. “ When I look at the data… I see [problems with] consumption, retail sales, production, investment, housing, employment conditions, etc.

“So I expect the recession is going to last at least another six months… given the imbalance of the economy — the weak position of households, consumers, banks, financial institutions, corporates — they all have too much debt… I see a period of two years of low economic growth in the U.S.”
When the recession is over, how will we know? Last month, we explored the idea of peaking initial unemployment claims being the canary in the coal mine for economic recovery. While it’s worked in the past… we’re not convinced.

Today, check out this D-list data point — Capacity Utilization.

It’s a simple concept that’s hard to track. Capacity utilization measures what percent businesses are using existing capabilities. 100% marks an economy “firing on all cylinders,” as the corporate catchphrase goes. When consumer demand drops, so too does capacity utilization… and since 1970, it hasn’t picked up until the worst is over.

Yesterday, capacity utilization in the U.S. found a record low of 68.3%. The Federal Reserve said utilization fell another 0.7 percentage points from April to May, to the lowest score since at least 1967, when they started keeping track. Factory output is down 13.4% over the last year, the biggest drop since 1946.
The return of market pessimism has given the bond bubble a stay of execution. After skimming 4% this time last week, the yield on a 10-year note is all the way back down to 3.65% today. Traders are using the same playbook from late 2008 — sell stocks and commodities, buy Treasuries and dollars.
But despite the bond bust’s reprieve, mainstream media are finally cluing into our nearly bottomless pit of debt.Exhibit A, this week’s Economist cover:

Exhibit B: “America’s Sea of Red Ink Was Years in the Making,” headlines a recent New York Times article. “This debt,” reads the Old Gray Lady, “will constrain the country’s choices for years and could end up doing serious economic damage if foreign lenders become unwilling to finance it.

“The solution, though, is no mystery. It will involve some combination of tax increases and spending cuts. And it won’t be limited to pay-as-you-go rules, tax increases on somebody else or a crackdown on waste, fraud and abuse. Your taxes will probably go up, and some government programs you favor will become less generous.

“That is the legacy of our trillion-dollar deficits. Erasing them will be one of the great political issues of the coming decade.”

“Who would have thought?” asks Addison Wiggin, clearly trying his hardest to stifle a cynical rant. “That’s practically the verbatim conclusion of our film, which finished shooting over a year ago. Funny, it’s also the core thesis of a book called Empire of Debt, which we published in 2006.

“For our efforts, we endured years of being called ‘gloom and doomers’… alarmists not connected with the reality that ‘deficits don’t matter.’ And now these two rags think they’re breaking news about how debt grows over time and will one day cripple our economy? Heh… really?
“There’s no doubt that we’ve got a serious problem in terms of our long-term deficits and debt,” President Obama added yesterday. Very good, Mr. President… admitting you have a problem is the first step.

“I am concerned about the long-term issue of our structural deficit and our long-term debt,” he added in a separate interview, “because if we don’t get a handle on that, then there’s no doubt that at some point, whether it’s the Chinese, the Koreans, the Japanese, whoever else has been snatching up Treasuries are going to decide that this is too much of a risk.”

Yet the president is sticking to his guns… just like those before him: “I make no apologies for having acted short term to deal with our recession.” Once his agenda is accomplished, he assured CNBC, “we’re going to have to close that gap between the amount of money coming in and the amount of money going out.” Right… save that crisis for another day.
Consumer inflation fell 1.3% over the last 12 months,claims the government today, the biggest decline since 1950. According to Commerce Department data, energy costs are leading the way, down 27.3% annually. Like yesterday’s PPI, the consumer price index actually inched up last month, by 0.1%. That was still notably less than the 0.3% the Street anticipated.

Thus Uncle Sam can still claim inflation is out of the picture… and the printing presses can keep rollin’.
Last today, an opportunity:

“Phones and mobile devices are still growing explosively,” notes our breakthrough tech analyst Patrick Cox. “About half the world hasn’t even got phones yet. Those that do have mobile phones will be upgrading regularly as more functionality becomes available. In the process, personal computing and the Web will come to most people first through their phones.

“Rather than ‘phones,’ perhaps I ought to use the term used in tech circles: ‘mobile devices.’ In fact, the word ‘phone’ seriously understates the functionality of new mobile devices like the iPhone; Google’s Android; and my favorite, the multi-tasking fully Web-integrated Palm Pre. These devices incorporate powerful multimedia players with room for more video and music than I would even want to have cluttering my house on physical discs. More importantly, they are platforms capable of running increasingly sophisticated software, ranging from productivity to GPS devices.

“We know, pretty much, where this is leading. We will carry, in a mobile device, the computer processing chips that run and integrate all our electronics. This includes phones, computers and televisions, as well as various appliances like home security systems and Kindles. Eventually, your robotic business and domestic assistants will also be part of this system.

“Accelerating efficiency in chip performance, of course, will make this possible. As I wrote recently, that acceleration is not slowing with the overall economy. Chip makers are forging ahead, realizing that the downturn will end. They well know that those who are not prepared for renewed growth will fall behind and fail. This is also true, by the way, for investors. You need to be prepared for the recovery. Even if the debt drag prevents optimum economic growth, there will still be sectors that do spectacularly well.”

Patrick’s Breakthrough Technology Alert readers are aptly prepared… are you? Check out his latest special report, here.

Source:  Death of the Sucker’s Rally, Spotting the Recession’s End, A Rapidly Growing Sector and More!