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Retailers May Still Be In The Red After Black Friday – Ep. 120

  • Tomorrow is Thanksgiving Day, one day before Black Friday
  • The one day of the year where Americans make their annual pilgrimmage there they stampede to the nearest mall to buy stuff they really don'[t need and can’t afford
  • It’s almost like a black and blue weekend
  • I believe that this will be a pretty weak holiday weekend; by the time we get the sales numbers next week, it’s going to be pretty dismal
  • The news that brought the euro down this morning was rhetoric coming from Mario Draghi , head of the ECB
  • He’s talking about expanding the QE program to a 2-tiered system
  • Why is Draghi so determined to talk down the euro and talk up inflation?
  • He is in pursuit of Keynesian economics’ holy grail – inflation
  • If only we can succeed in getting prices to go up faster then we would have economic growth and prosperity
  • Believing that a rising cost of living is the secret sauce of economic growth
  • If you search the internet, you see that no one is critical of this
  • If rising prices are so important, why not just raise the VAT?
  • You could obtain the exact amount of inflation desired if the real goal is to rais prices
  • But that’s not really the goal, because they would just raise the VAT
  • The real goal is to wipe out government debt and to mitigate the effects of wage hikes imposed by the government
  • Academia and the press all give them a pass on the idea that rising prices create prosperity
  • The truth is the reverse: prosperity comes from reducing costs
  • As things get cheaper, more people can afford them – I use the example of cell phones
  • Now even poor people can afford a cell phone
  • Falling prices lift standards of living and falling prices result from a productive economy
  • Inflation results from government interference and it doesn’t make things better
  • Let’s go over the economic data this week
  • It’s been a mixed bag
  • On Monday we did get the manufacturing PMI number, expected to come in at 54.5 which would have been an improvement
  • Instead, we got 52.6, the lowest number in 2 years
  • I’ve been talking about this for a long time on this podcast – the manufacturing recession is already here
  • The mainstream media dismisses this because manufacturing is so small it doesn’t really matter
  • That statement says so much
  • A downturn in manufacturing will preclude a downturn in the service sector
  • We also got existing home sales that came out on Monday – they were below estimates
  • There’s plenty of evidence that the housing market has already rolled over, and if the Fed were to raise interest rates, it would push it even further down that hill.
  • The big number that came out yesterday was the revision to Q3 GDP
  • Initially the government reported that the GDP was up 1.5%
  • Everybody expected an upward revision and that’s exactly what we got – a revision to 2.1
  • The problem was, the number was due to a big build in inventory
  • I have been talking about this for months on this podcast; we have huge amounts of unsold inventory
  • Businesses have been more optimistic than they should have been based on the Fed’s recovery rhetoric
  • This mistake shows up as a positive in the GDP
  • The other big factor is that the government assumes that inflation is just 1.3%
  • I don’t believe that for a second
  • Health insurance alone is costing the average American’s cost of living more than 2%
  • Today the Atlanta Fed just reduced their Q4 GDP estimate from 2.3% down to 1.8%
  • What the third quarter giveth, the fourth quarter taketh away
  • Buried in that GDP report are some other bad numbers
  • There was a 4.7% decline in corporate profits for the quarter – the biggest decline in corporate profits since 2009.
  • Think about this: corporate profits are declining and inventories are growing
  • Sales are down, profits are down; what does that tell you about employment?
  • Continuing unemployment claims are continuing to rise
  • If the Fed is really data dependent, then the fact that employment trends are starting to reverse could be significant
  • The weakness in corporate profits and consumer spending should be a pretty good indicator
  • The Consumer Confidence numbers came out yesterday and they were expecting 99.6 – instead we got 90.4
  • This was the lowest level for consumer confidence in 14 months
  • The Fed is just getting ready to raise rates because the economy is supposedly finally ready for it
  • Car dealers are now offering 15% cash back on car sales
  • It appears to be an advertisment for a loan, but to qualify for the loan, you have to buy a new car
  • What makes all this possible is that GMAC can turn around and flip this loan to the U.S. government that will buy the securitized loan with zero percent interest rates
  • How do the car dealers make money giving people 15% cash back? What are the margins?
  • A lot of it has to do with the value of the payment stream in a zero percent interest rate environment, they’re actually making money selling the loan
  • An economy is not people buying stuff
  • The real economy is the ability to make all the things that are being purchased
  • The economy is the output – the factories, the investment and the savings and the knowledge required to produce the things on the shelf
  • To define the American economy by the act of shopping illustrates how far economics has gone from science
  • I wanted to also mention that we have sone new offerings on schiffbooks.com
  • We had run out of “The Biggest Con” and “The Great Income Tax Hoax”
  • I was able to buy a few boxes of each from a friend of my father
  • You will find them on schiffbooks.com
  • I’ve also added to the store a limited quantity of “The Social Security Swindle
  • Also, for the first time, I am offering a limited number of the third edition of “The Federal Mafia”, my father’s last book and the only non-fiction book that was banned in America
  • As a special offer, I’m offering “The Kingdom of Moltz” for a special price of $15.00 when you buy any other of my father’s books.