Financial Armageddon

Financial Dissonance

Amid the euphoria in the equity market, the credit market continues to sing a rather more pessimistic tune.

You Know You're in Strange Economic Times When...

Rappers are giving financial advice

"'How To Survive In A Recession' With Slim Thug: 'Making It Rain? That's Stupid'" (MTV)

Rapper/boss/hustler Slim Thug just added another slash to his handle: author. After boasting this line: “Hard times got the whole United States stressin'/I'm writin' a book, how to survive in a recession” in his second verse on “I Run” from his second solo opus, Boss of All Bosses, the towering MC decided to deliver on his promise to teach the dos and don'ts to those trying to “stack bread” and those just trying to stay in their financial lane by penning the book, "How To Survive In A Recession."

“I said in the second verse of ‘I Run’ I was gonna write a book about how to survive in a recession, so then people began to ask when was the book coming out?” Slim told RapFix. “I was just playing, really. But when people began to inquire, asking and wanting me to write the book, I just started writing in my iPhone different tips you can use to stack up bread. Then I met a girl who was a publisher, so I told her what it was and we put it together. We made it happen.”

The 47-page e-book offers an entertaining prospective into the mind of an independent artist who managed to carve out his own very comfortable financial niche amongst hip-hop’s fiscal elite. The self-proclaimed Black Suze Orman offers sound financial advice in the humorous tone fans have come to recognize via Thugga’s lyrical wordplay and retweetable Twitter commentaries.

“I watch the Suze Orman Show,” Slim told RapFix. “That’s part of the reason I’m cheap. You’ll see regular 9 to 5 people and they’ll be like, 'we have a million in this, $600, 000 in that and this amount of liquid' and they just going to work every day. And I’m like, hold up, man, what are we doing wrong? How regular people gettin’ all this? It just opened my eyes and I started watching the show more and more and I learned. I always been cheap, but it made me more up on game and aware of what’s going on around me.”

For instance, Slim Orman advises one to never have Bentley bills with a Benz salary: "This goes back to one of the most basic rules; don’t live beyond your means. Don’t buy a big house when you don’t make big money. I always say if you can’t buy it THREE times over, you can’t afford it. Don’t drive a Bentley on a Benz income."

Criminals are choosing free room and board over freedom

"Inmate Population Spikes In Local Jail" (WCTV.tv)

Thomas County, Georgia- The Thomas County Jail has seen a 23% increase in inmate population over a three to four month period.

Sheriff's Deputies believe the poor economy could be a contributing factor.

"Some people that are coming to jail are not bonding out because of economics," said Thomas County Sheriff's Office spokesman Capt. Steve Jones. "It's cheaper to stay here and to sit for a couple weeks and then go to court."

State prisons are also trying to reduce their inmate populations, which results in more offenders being placed on probation.

"Work is difficult to find and when they're not working, they're not paying fines, and when they're not paying fines, they're not reporting to probation officers. Thus they revoke probation and when they revoke probation, they come to county jail," Capt. Jones added.

Adult toys are selling better than children's toys

"Sex Toy Market Booms Amid Recession" (RT)

Sex toys have been around for more than a century, and it turns out that the industry is impenetrable in the times of economic downtown.

For many industries across the United States, the economic downtown has resulted in many companies making fewer profits and devoting far fewer resources to innovation and development. One industry that’s not the case for is the sex toy industry.

“There’s three areas of the economy that tend to do okay in a recession: alcohol, make-up and sex toys,” said Jacq Jones, owner of Sugar Sex Toy Store in Baltimore, Maryland. Jones said her store has been open for five years and 2012 has been her best year ever, in terms of sales.

For some specific items, like Luna Balls, sales are through the roof.

“I used to sell one or two a month,” Jones said. “Now I’m selling ten a week.”

"Soft Game Sales Weigh on Hasbro's 2Q Earnings" (Associated Press)

PAWTUCKET, R.I. - Toy maker Hasbro Inc. said Monday its second-quarter net income dropped 25 percent on weak sales in most categories as revenue in major product categories including boys, girls and games declined.

But higher prices and cost-cutting helped the maker of Monopoly, Nerf and My Little Pony beat analysts' earnings expectations. Its shares rose 4 percent.

The second quarter is seasonally small for toy makers, which make the bulk of their sales during the second half of the year and the holiday season. But it can give indications about the strength or weakness of toy demand.

Revenue fell 11 percent in the latest quarter, missing Wall Street expectations. That drop reflected lower sales in Hasbro's boys, girls and games categories. Hasbro said that was partly planned, because the company is working to make inventory more in line with when people buy toys, later on in the year.

Consumers are trying to turn disposables into returnables

"CVS Discovers Used Enemas on Store Shelves"  (First Coast News)

JACKSONVILLE, Fla.  -- There's an empty shelf at the CVS store at 9509 San Jose Blvd.

No enemas; instead, a sign directed people who bought them to call a consumer hotline. Police are concerned that people unknowingly bought used enemas.

Police say a man began buying the enemas in March and started returning them in April.

On Tuesday, a CVS clerk thought it was strange the same man kept returning enemas. When they checked the enema boxes currently on the shelf, they discovered they were already used.

More testing confirmed the dirty truth: fecal matter on the enemas bottles ready for sale.

"I was just kinda shocked. But in today's economic times, like I said before, people are doing some strange things. This has got to rank up there with strange," said customer Bob Robbins.

Moving stairs are the new restrooms

"Human Waste Shuts Down BART Escalators" (SFGate)

When work crews pulled open a broken BART escalator at San Francisco's Civic Center Station last month, they found so much human excrement in its works they had to call a hazardous-materials team.

While the sheer volume of human waste was surprising, its presence was not. Once the stations close, the bottom of BART station stairwells in downtown San Francisco are often a prime location for homeless people to camp for the night or find a private place to relieve themselves.

All those biological excretions can gum up the wheels and gears of BART's escalators, shutting them down for long periods of extended repairs, increasing station cleaning costs and creating an unpleasant aroma for morning commuters.

Of course, that doesn't even include run-of-the-mill weirdness like Presiden't Barack Obama's claim that "the private sector is doing fine" or Republican challenger (and multimillionare) Mitt Romney's remark that "there were a couple of times I wondered whether I was going to get a pink slip."

To paraphrase the Grateful Dead, what a long strange trip it is nowadays.

 

Strange times

Consumers are trying to turn disposables into returnables

"CVS Discovers Used Enemas on Store Shelves"  (First Coast News)

http://www.ksdk.com/news/article/326830/9/CVS-discovers-used-enemas-on-store-shelves-

JACKSONVILLE, Fla.  -- There's an empty shelf at the CVS store at 9509 San Jose Blvd.

No enemas; instead, a sign directed people who bought them to call a consumer hotline. Police are concerned

that people unknowingly bought used enemas.

Police say a man began buying the enemas in March and started returning them in April.

On Tuesday, a CVS clerk thought it was strange the same man kept returning enemas. When they checked the

enema boxes currently on the shelf, they discovered they were already used.

More testing confirmed the dirty truth: fecal matter on the enemas bottles ready for sale.

"I was just kinda shocked. But in today's economic times, like I said before, people are doing some strange

things. This has got to rank up there with strange," said customer Bob Robbins.

Rappers are giving financial advice

"'How To Survive In A Recession' With Slim Thug: 'Making It Rain? That's Stupid'" (MTV)

http://rapfix.mtv.com/2012/07/24/slim-thug-how-to-survive-in-a-recession-ebook-tips/

Rapper/boss/hustler Slim Thug just added another slash to his handle: author. After boasting this line:

“Hard times got the whole United States stressin'/I'm writin' a book, how to survive in a recession” in his

second verse on “I Run” from his second solo opus, Boss of All Bosses, the towering MC decided to deliver on

his promise to teach the dos and don'ts to those trying to “stack bread” and those just trying to stay in

their financial lane by penning the book, "How To Survive In A Recession."

“I said in the second verse of ‘I Run’ I was gonna write a book about how to survive in a recession, so then

people began to ask when was the book coming out?” Slim told RapFix. “I was just playing, really. But when

people began to inquire, asking and wanting me to write the book, I just started writing in my iPhone

different tips you can use to stack up bread. Then I met a girl who was a publisher, so I told her what it

was and we put it together. We made it happen.”

The 47-page e-book offers an entertaining prospective into the mind of an independent artist who managed to

carve out his own very comfortable financial niche amongst hip-hop’s fiscal elite. The self-proclaimed Black

Suze Orman offers sound financial advice in the humorous tone fans have come to recognize via Thugga’s

lyrical wordplay and retweetable Twitter commentaries.

“I watch the Suze Orman Show,” Slim told RapFix. “That’s part of the reason I’m cheap. You’ll see regular 9

to 5 people and they’ll be like, 'we have a million in this, $600, 000 in that and this amount of liquid'

and they just going to work every day. And I’m like, hold up, man, what are we doing wrong? How regular

people gettin’ all this? It just opened my eyes and I started watching the show more and more and I learned.

I always been cheap, but it made me more up on game and aware of what’s going on around me.”

For instance, Slim Orman advises one to never have Bentley bills with a Benz salary: "This goes back to one

of the most basic rules; don’t live beyond your means. Don’t buy a big house when you don’t make big money.

I always say if you can’t buy it THREE times over, you can’t afford it. Don’t drive a Bentley on a Benz

income."

Criminals are choosing prison over freedom

http://www.wctv.tv/news/headlines/Local_Jail__162403936.html?ref=936

"Inmate Population Spikes In Local Jail" (WCTV.tv)

Thomas County, Georgia- The Thomas County Jail has seen a 23% increase in inmate population over a three to

four month period.

Sheriff's Deputies believe the poor economy could be a contributing factor.

"Some people that are coming to jail are not bonding out because of economics," said Thomas County Sheriff's

Office spokesman Capt. Steve Jones. "It's cheaper to stay here and to sit for a couple weeks and then go to

court."

State prisons are also trying to reduce their inmate populations, which results in more offenders being

placed on probation.

"Work is difficult to find and when they're not working, they're not paying fines, and when they're not

paying fines, they're not reporting to probation officers. Thus they revoke probation and when they revoke

probation, they come to county jail," Capt. Jones added.

Adult toys are selling better than children's toys

"Sex Toy Market Booms Amid Recession" (RT)

http://rt.com/usa/news/recession-sex-industry-toy-531/

Sex toys have been around for more than a century, and it turns out that the industry is impenetrable in the

times of economic downtown.

For many industries across the United States, the economic downtown has resulted in many companies making

fewer profits and devoting far fewer resources to innovation and development. One industry that’s not the

case for is the sex toy industry.

“There’s three areas of the economy that tend to do okay in a recession: alcohol, make-up and sex toys,”

said Jacq Jones, owner of Sugar Sex Toy Store in Baltimore, Maryland. Jones said her store has been open for

five years and 2012 has been her best year ever, in terms of sales.

For some specific items, like Luna Balls, sales are through the roof.

“I used to sell one or two a month,” Jones said. “Now I’m selling ten a week.”

"Soft Game Sales Weigh on Hasbro's 2Q Earnings" (Associated Press)

http://www.live5news.com/story/19086781/soft-game-sales-weigh-on-hasbros-2q-earnings

PAWTUCKET, R.I. - Toy maker Hasbro Inc. said Monday its second-quarter net income dropped 25 percent on weak

sales in most categories as revenue in major product categories including boys, girls and games declined.

But higher prices and cost-cutting helped the maker of Monopoly, Nerf and My Little Pony beat analysts'

earnings expectations. Its shares rose 4 percent.

The second quarter is seasonally small for toy makers, which make the bulk of their sales during the second

half of the year and the holiday season. But it can give indications about the strength or weakness of toy

demand.

Revenue fell 11 percent in the latest quarter, missing Wall Street expectations. That drop reflected lower

sales in Hasbro's boys, girls and games categories. Hasbro said that was partly planned, because the company

is working to make inventory more in line with when people buy toys, later on in the year.

Escalators are the new restrooms

"Human Waste Shuts Down BART Escalators" (SFGate)

http://www.sfgate.com/bayarea/article/Human-waste-shuts-down-BART-escalators-3735981.php

When work crews pulled open a broken BART escalator at San Francisco's Civic Center Station last month, they

found so much human excrement in its works they had to call a hazardous-materials team.

While the sheer volume of human waste was surprising, its presence was not. Once the stations close, the

bottom of BART station stairwells in downtown San Francisco are often a prime location for homeless people

to camp for the night or find a private place to relieve themselves.

All those biological excretions can gum up the wheels and gears of BART's escalators, shutting them down for

long periods of extended repairs, increasing station cleaning costs and creating an unpleasant aroma for

morning commuters.

Still At Odds

Today's data did little to change the fact that ordinary Americans' views of current economic conditions remain at the odds with what Washington and Wall Street keep telling us.

If the history of the past decade or so is any guide, either consumer sentiment is poised for significant improvement, or, more likely, the indicators that the so-called experts are so keenly focused on, including gross domestic product and the stock market, are set for a major downward adjustment.

 

In the Dumps

In "CHART OF THE DAY: The US Garbage Indicator Is Sending An Ominous Sign For The Economy," Business Insider points us to another piece of data that suggests the U.S. has fallen into line with Europe, China, and others in a synchronized global economic slowdown:

Among the 21 categories of items shipped by rail, none have a tighter correlation to GDP than waste.

According to a 2010 piece on Bloomberg, economists Michael McDonough and Carl Riccadonna note that waste has an 82 percent correlation to US economic growth.

This should be pretty intuitive.  The more you produce, the more you throw out.

McDonough, a Bloomberg BRIEF economist, tweeted out an update on the indicator.

And frankly, it stinks.  Waste carloads are way down.

Shouldn't We Be Doing the Same?

Three weeks ago, we learned that the CEOs of large companies are growing concerned about the outlook.

"Survey: CEO Confidence in Economy Drops Dramatically" (The Hill)

The confidence of the nation’s business leaders in the future of the economy has dropped dramatically, according to a new survey by the Conference Board.

More CEOs surveyed view the economy negatively than positively. Only 17 percent viewed the economy positively in the second quarter of 2012, compared to 67 percent in the first quarter.

Only 20 percent expect an improvement in six months, down from 59 percent.

Two weeks ago, we learned that the owners of small businesses are growing concerned about the outlook.

"Another Blow to the Economy: Small-Business Optimism Sours" (MarketBeat)

Small-business owners are getting less optimistic, adding another worrisome piece of evidence to the already troubled economy.

A monthly report released earlier this morning showed optimism among small-business owners last month fell to the lowest level since October. In particular, folks are concerned about future sales and earnings growth over the next six months. Hiring conditions also dropped sharply.

The National Federation of Independent Business’s small-business optimism index dropped 3 points to 91.4 last month. NFIB called the drop a “susbstantial decline” and proclaimed the current reading as “surely an indication of slow growth.”

“This is a blow,” says Ian Shepherdson, [former] chief U.S. economist at High Frequency Economics. “The scale of the decline is disheartening.”

And, today we learned that the top executives of mid-sized firms are growing concerned about the outlook.

"Mid-Sized Companies Holding Back Investment" (Real Time Economics)

Mid-sized companies are holding onto cash and pulling back on investments in response to mounting fears of a global economic slowdown.

Only 12% of executives at mid-size companies — those with annual revenues between $10 million and $1 billion — were “confident” about the state of the U.S. economy in the second quarter, down from 15% in the first quarter, according to a survey of 1,000 CEOs and other top executives conducted by the National Center for the Middle Market. Unsurprisingly, executives had an even gloomier view of the situation overseas; just 5% of them were “confident” in the global economy, and 44% weren’t confident at all.

If the leaders of businesses of all sizes are growing concerned, shouldn't we be doing the same?

Sorry...

...but I couldn't resist telling a few jokes:

The set-up

"Obama: Under Me 'People Have A New Attitude Toward America' And 'More Confidence'" (Real Clear Politics)

"Because we're leading around the world, people have a new attitude toward America. There’s more confidence in our leadership. We see it everywhere we go," President Obama said at the Veterans of Foreign Wars convention in Reno.

The punchline

The latest Chicago Booth/Kellogg School Financial Trust Index finds that only 21 percent of Americans trust the financial system, the lowest point on record since March 2009. According to the June 2012 report issued today, this decrease was largely driven by a drop in trust of national banks. 

~ ~ ~

The set-up

"Obama on the Economy: 'We Tried Our Plan — And It Worked'" (Washington Examiner)

Discussing his economic policies at a fundraiser in Oakland,  California, last night, President Obama, told supporters that "we tried our plan — and it worked."

The punchline

"More Americans Living Paycheck to Paycheck" (Atlanta Journal-Constitution)

More than a third of U.S. households say they live paycheck to paycheck.

Less than a third feel comfortable financially.

Only about a third think they can afford to retire by age 65.

 

And here's an oldie but goodie:

The set-up

"Oops: What Bernanke Said Five Years Ago Today" (Real Time Economics)

On the economic outlook:

“Overall, the U.S. economy appears likely to expand at a moderate pace over the second half of 2007 with growth then strengthening a bit in 2008 to a rate close to the economy’s underlying trend. Such an assessment was made around the time of the June meeting of the Federal Open Market Committee… The central tendency of the growth forecast… is for real GDP to expand roughly 2.25% to 2.5% this year and 2.5% to 2.75% in 2008. ….The unemployment rate is anticipated to edge up between 4.5% and 4.75% over the balance of this year and about 4.75% percent in 2008.”

The punchline

Real Time Economics:

The recession began five months later, in December 2007, and lasted until June 2009. For the full year 2007, GDP grew by 1.7%. In 2008, it shrank by 0.3%, and shrank another 3.5% in 2009. Unemployment hit 5% in December 2007 and by December 2008 had risen to 7.3% and kept climbing.

 

Funny, eh?

An Even Better Thing

Last week I wrote that "it's a good thing we're in a recovery and there's no real prospect of another downturn (at least that's what Wall Street 'strategists' and politicians keep telling us)." Otherwise, a variety of negative reports about conditions in this country (which I cited in the article) "might be a cause for concern."

I'd add that it's an even better thing that economic woes overseas are unlikely to have any real impact on the pace of growth in the U.S., as "economists" and other so-called experts have been reassuring us since the Great Recession "ended." Otherwise, reports like the following might be an even greater cause for concern:

"McDonald’s Sees Downbeat Consumers World-Wide" (Real Time Economics)

New McDonald’s CEO Don Thompson says consumer confidence has become a problem in most markets around the world, pressuring the company to “crank up” its focus on value, even though such a move weighs on margins.

“We are seeing more markets that have consumer-confidence issues and at what we consider to be more-substantial levels,” he said during the company’s second-quarter earnings conference call.

“This is one the first times where we have seen it in a much broader-based perspective. It’s a little bit more than a European cold.” CFO Peter Bensen added, “The magnitude of the issues in Europe are having ripple effects around the world,” hurting consumer confidence and causing fewer people to eat out.

"Global Economy in Worst Shape Since 2009" (Associated Press)

Mounting fears about Spain's financial health help illustrate why the global economy is in its worst shape since 2009.

Six of the 17 countries that use the euro currency are in recession. The U.S. economy is struggling again. And the economic superstars of the developing world — China, India and Brazil — are in no position to come to the rescue. They're slowing, too.

The lengthening shadow over the world's economy illustrates one of the consequences of globalization: There's nowhere to hide.

"Japan Sees Wider Global Slowdown as China Growth Cools: Economy" (Bloomberg)

China’s economic outlook was cut by Japan, its biggest Asian trading partner, as the Shanghai Composite Index fell to its lowest level in three years on concern about faltering domestic demand and export growth.

“The slowdown in the global economy is becoming more widespread,” the Cabinet Office said in a monthly report released in Tokyo today. Song Guoqing, an academic member of a monetary policy committee, said July 21 that China’s expansion may be 7.4 percent, the least since the first quarter 2009.
Enlarge image Japan Sees More ‘Widespread’ Global Slowdown With China Cooling

Japan’s increased pessimism echoes that of the International Monetary Fund, which lowered 2013 global growth forecasts this month on Europe’s debt crisis and slower expansions in emerging markets from China to India.

"IMF Warns of Rising Risks to Global Economy" (Agence France-Presse)

WASHINGTON — The International Monetary Fund stepped up its warnings Monday on risks to the global economy, mainly from the crisis-mired eurozone, as it trimmed its growth forecast for the rest of the year.

IMF economists said that the frail situations in Spain and Italy especially could quickly turn worse amid market doubts over eurozone leaders' resolve in implementing pledged reforms.

But they also pointed to the US "fiscal cliff" trajectory which, if not corrected, could crunch the US economy and heavily impact the rest of the world.

"In the past three months, the global recovery, which was not strong to start with, has shown signs of further weakness," the fund said in its quarterly economic forecast.

"Financial market and sovereign stress in the euro-area periphery have ratcheted up," it said, while growth has fallen below expectations in a number of major emerging-market economies.

If policy reactions in major economies remain inadequate or too slow, the IMF said, fissures could deepen, they added.

"The main risk is obvious," IMF chief economist Olivier Blanchard told reporters.

"Rio Tinto Warns on the Global Economy" (Ninemsn)

Rio Tinto had mixed news for investors when it released its second-quarter production statement.

On the plus side, iron ore, which accounts for over three-quarters of its profits, saw record first-half production. But the comments of Rio Tinto chief executive Tom Albanese on the global economy were less inspiring:

Global economic conditions and sentiment dropped markedly in the second quarter. We are keeping a close eye on the pace of the US recovery, the continuing eurozone crisis and the impact of efforts to stimulate the Chinese economy on the markets that we serve.

Good Skill Set

(Image: source)

I hear there's also an opening at the White House...

Wrong Reasons

It was only 10 days ago when the so-called experts were heralding a big jump in consumer borrowing as a positive sign for the economy.

"May Consumer Credit Expands Most in Five Months" (Reuters)

Consumer credit expanded in May by the most in five months as Americans used their credit cards more readily, offering hope household spending will help the sputtering economy.

The Fed also said credit rose more during April than originally thought.

The data follows a report on Friday that showed employers hired at a dismal pace in June, a sign Europe's debt crisis was shifting the economy into low gear. Most economists think economic growth slowed in the second quarter, when the pace of hiring fell off dramatically.

The credit data from May suggests consumers are gaining some confidence after a long stretch in the doldrums.

"If sustained, this dynamic would be positive news for consumer spending as a whole and, ultimately, for job creation," said Dana Saporta, an economist at Credit Suisse in New York.

However, like most of what passes for analysis these days, that upbeat assessment had little to do with economic reality.

As Real Clear Markets notes in "Americans Resort to Plastic Safety Nets,"

Americans are starting to borrow once again, they're doing so at an unexpectedly high level, but it's for all the wrong reasons.

One of those reasons, according to Victor Nava and Anthony Randazzo, has to do with the nature of the obligations that are being taken on.

This added debt is coming from increased levels of borrowing on revolving lines of credit. Households are struggling to pay their bills, leading credit card usage specifically to jump 11 percent in May. Essentially, households are taking on more debts with high servicing costs - not low rate home and business loans.

The latter, for the most part, are paid down over time, leading to reduced debt loads and stronger household balance sheets, while the higher rates and open-ended repayment structure of credit cards and other revolving debt tends to have the opposite effect, leaving consumers worse off. Hence, the authors conclude,

while the Federal Reserve's recent consumer credit report may appear to paint a rosy picture of Americans who are spending money, taking out bank loans at a growing rate, and generally feeling better about the economy, closer inspection suggests a stagnant economy that is failing to create jobs, and Americans resorting to their "plastic safety nets" just to get by.

But even if one takes issue with this assessment, it's not hard to find other evidence that suggests the debts being racked up now are increasingly a matter of necessity rather than choice.

A new report from the Pew Charitable Trust, for instance, detailed by the Huffington Post in "Poorest Americans Turning To Payday Loans To Afford Food, Electricity," reveals that

the poorest Americans are stringing together multiple high-interest loans each year just to keep the lights on and food on the table.

According to the report, 7 out of 10 borrowers use payday loans -- typically short-term, high-interest cash advances [e.g., parrot loans] -- to make payments on recurring bills, including utilities, car payments, food, rent and mortgage payments. This is contrary to the typical marketing from payday lenders, who often pitch the loans as quick cash for a onetime cash crunch.

The report's release comes as other financial woes, like high unemployment and rising household costs, continue to put economic pressure on many consumers. There are signs that other kinds of high-cost borrowing, like use of credit cards, are also being increasingly tapped to pay for everyday items as well.

In contrast, those at the other end of the economic spectrum, who presumably could afford to amp up their spending and borrowing if they were so inclined, are apparently moving in the opposite direction, as Reuters reveals in "AmEx Revenue Misses as Spending Growth Moderates":

Credit card company American Express Co's second-quarter revenue marginally missed Wall Street estimates as cardmember spending growth moderated amid low consumer confidence.

U.S. retail sales fell in June for the third straight month, the longest run of consecutive drops since 2008, and consumer sentiment is now at its lowest level in seven months as Americans take a dim view of their finances and job prospects.

"Overall cardmember spending rose 7 percent, or 9 percent adjusted for foreign currency translations. That's slower than the increases we've seen in the recent quarters," Chief Executive Officer Kenneth Chenault said in a statement.

Cardmember spending at the company, which focuses on the affluent customer, grew in the double-digit range for the last nine quarters.

American Express said spending growth rates slowed across all business lines and all segments.

The company's card data is widely held as an indicator of the spending sentiment of the more affluent consumer, signaling that the weak recovery is taking its toll across all economic segments.

In sum, while more borrowing might have been seen as a positive sign in the good bad old days, that doesn't appear to be the case now.

A Difference of Opinion

We have this --

"Fed's Bernanke: 'We Don't See a Double-Dip Recession'" (CNBC)

"At this point we don't see a double dip recession. We see continued moderate growth. But we are very committed to ensuring, or at least doing all we can to ensure, that we continue to make progress on the employment side. And we have stated that we are prepared to take action as needed to try to make sure that we see continued progress on employment." --

and we have this --

"Gary Shilling: 25 Out Of The Last 27 Times Retail Sales Collapsed Like This We Were In A Recession" (Business Insider)

Retail sales have been negative for three straight months. In June they fell 0.5 percent.

And Gary Shilling, told Bloomberg TV that the U.S. economy is already in a recession and that the retail sales numbers signal a recession:

"You look at retail sales there were negative for three consecutive months, April, May, June. That's happened only 27 times there were first reported in 1947 and in 25 of the 27 it was in a recession or within three months of a recession."

Hmmm, I wonder who I should believe?

It's a Good Thing

It's a good thing we're in a recovery and there's no real prospect of another downturn (at least that's what Wall Street "strategists" and politicians keep telling us). Otherwise, reports like these might be a cause for concern:

"Pawn Shops Go Upscale for Affluent Clients" (USA Today)

Maybe it's the original artwork displayed around the office or the soft lighting, paneled walls, Persian rugs and leather furniture. The receptionist adds to the aura, too. So does the TV screen turned to a financial-news channel.

Whatever the reason, Biltmore Loan and Jewelry feels more like a stock brokerage or private-banking office than a pawn shop.

...

"We want to give people a professional option with dignity," said David Goldstein, Biltmore's president and a veteran jewelry retailer. "We're private, quick and discreet."

Pawn-brokering might be associated more with dingy storefronts cluttered with junk and customers desperate to scrape up enough cash for groceries or rent. But the recession, credit crunch and slow economic recovery have hit Americans up and down the socio-economic ladder, and that has created an opportunity to serve a more high-end clientele for firms like Biltmore.

"We're seeing an increase in these kind of stores in Beverly Hills and other affluent neighborhoods," said Emmett Murphy, a spokesman for the National Pawnbrokers Association. "People in all walks of life are in need of short-term credit."

"U.S. Economic Confidence Falls to Lowest Since January" (Gallup)

Americans' economic outlook weakens more than ratings of current conditions

PRINCETON, NJ -- Gallup's U.S. Economic Confidence Index averaged -27 for the week ending July 15, down four points from -23 each of the prior two weeks. This extends a gradual decline in confidence that has been underway since late May, when the index was at a four-year best of -16. The index was nearly this low a month ago -- at -26 in mid-June -- and now stands at the lowest weekly average since late January of this year.

"Americans Joining Disability Now Outpacing Americans Finding Jobs" (The Weekly Standard)

A new chart set to be released by the Republican side of the Senate Budget Committee details an alarming fact: In the last three months, more Americans have joined disability than have found a job:

As the chart shows, between April-June 2012, an estimated 246,000 Americans were added to Social Security's disability insurance program. In that same time period, only 225,000 American jobs were created.

These alarming numbers, though, are part of a wider trend, as another chart, also set to be released later today, from the Republican side of the Senate Budget Committee shows:

As this chart shows, since 2008, 3.6. million Americans have been added to Social Security's disability insurance program. In that same time period, a net total of 1.3 million jobs were lost.

"Fewer U.S. Companies Planning to Hire; Europe Looms: Poll" (Reuters)

American companies are scaling back plans to hire workers and a rising share of firms feel the European debt crisis is taking a bite out of their sales, a survey showed on Monday.

Only 23 percent of the firms polled in June plan to add to staff in the next six months, the National Association for Business Economics said on Monday.

NABE's prior survey, conducted in late March and early April, had shown 39 percent of companies planning to add workers.

Already, hiring by U.S. companies has slowed dramatically in recent months as employers worry about a sagging global economy hurt by Europe's snowballing debt crisis.

"Fiscal Crisis in States Will Last Beyond Slump, Report Warns" (New York Times)

WASHINGTON — The fiscal crisis for states will persist long after the economy rebounds as states confront financial problems that include rising health care costs, underfunded pensions, ignored infrastructure needs, eroding revenues and expected federal budget cuts, according to a report issued here Tuesday by a task force of respected budget experts.

The severity of the long-term problems facing states is often masked by lax state budget laws and opaque accounting practices, according to the report, an independent analysis of six states released by a group calling itself the State Budget Crisis Task Force. The report said that the financial collapse of 2008, which caused the most serious fiscal crisis for states since the Great Depression, exposed a number of deep-set financial challenges that will grow worse if no action is taken by national policy makers.

“The ability of the states to meet their obligations to public employees, to creditors and most critically to the education and well-being of their citizens is threatened,” warned the two chairmen of the task force, Richard Ravitch, the former lieutenant governor of New York, and Paul A. Volcker, the former chairman of the Federal Reserve.

"ZIRP Strikes Again: Pension Under-Funding For S&P 500 Companies Hits Record" (Zero Hedge)

The public pension and retirement 'schemes' are in considerable trouble (as we noted here and here) and now, according to a recent S&P study, private companies are at record levels of pension under-funding. Fiscal 2011 shows that the under-funded level for S&P 500 companies' defined pensions reached an epic $354.7 billion - an increase of over $100 billion from 2010 and surpassing the 2008 record of $308.4 billion - and OPEB under-funding reached $223.4 billion. An aggregate $578 billion or 29.5% underfunding or the $1.96 trillion in obligations is increasing as the rates of return are reduced thanks to yet more unintended consequences of the Fed's ZIRP and perhaps most worrying is there comment that "The American dream of a golden retirement for baby boomers is quickly dissipating; plans have been reduced and the burden shifted with future retirees needing to save more for their retirement. For many baby-boomers it may already be too late to safely build-up assets, outside of working longer or living more frugally in retirement."

S&P 500 Pension Underfunding Compared to Market Level

Don't worry, be happy. It's all good.

At the Forefront Once Again?

I (and others) have noted that the stock market seems increasingly divorced from economic reality. But that is not entirely true. As the chart shows, one sector, comprised of economically-sensitive issues, has been lagging the broader market for several months. In fact, the Morgan Stanley cyclical index has just hit its lowest level relative to the S&P 500 index in three years. Given that cyclical stocks led the way up when the bull market began more than three years ago, the obvious question is: Are they at the forefront once again?

What The Bulls Believe

The bulls believe the housing market is getting better because demand is outpacing supply. But as AOL’s Real Estate blog reports in "‘Shadow REO’: As Many as 90% of Foreclosed Properties Held Off the Market, Estimates Suggest" [hat tip Naked Capitalism], the lion's share of REOs are being withheld from sale, according to estimates provided to AOL Real Estate by two analytics firms.

The bulls believe that our nation's financial condition is improving because private sector debt has declined since 2008. But as Forbes contributor Rob Clarfeld reveals in "What Deleveraging? Financial Relativism and the U.S. Economy," (which I highlighted in "'We Have Barely Moved the Needle'") total credit market debt [including loans offered by www.paydayloansonline.com and myriad other lenders] has actually increased since the ostensible end of The Great Recession.

The bulls believe that strong demand for Treasurys means that investors are not concerned about our government's spending-and-borrowing policies. But as Economics Fanatic points out in a Seeking Alpha post, "Why The Treasury Bond Bull Market Is Already Over," the Federal Reserve has been the biggest buyer of U.S. government securities over the last three years, and is the second largest holder (after Social Security and other government trust funds).

The bulls believe that rising share prices means investors see economic recovery on the horizon. But as Business Insider details in "Almost All Of The Money In The Market Can Be Made Using This Simple Fed Frontrunning Strategy," citing data from the New York Fed's Liberty Street Economics blog, "since 1994, more than 80 percent of the equity premium on U.S. stocks has been earned over the twenty-four hours preceding scheduled Federal Open Market Committee (FOMC) announcements (which occur only eight times a year)—a phenomenon [they] call the pre-FOMC announcement 'drift.'"

The bulls believe that increasing demand for new cars is a sign that the consumer is back on his feet. But as Time's Moneyland blog writes in "Is Subprime Lending Fueling the Auto Surge?" research shows that "lenders are loosening their standards for auto loans for people with damaged credit," according to data from credit scoring company FICO, "which found that just over half of lenders say the biggest increase in subprime lending will be for car loans."

In light of all that, perhaps I should have substituted the word "fools" for "bulls"...?

Equally Misinformed?

It's become fashionable in some quarters to blame sound-bite journalism and a lack of education regarding financial matters for the American public's negative perceptions about the state of our economy.

Given the findings of a recent Pew Research Center global economic survey, excerpted below, I wonder if these arrogantistas would also argue that those who reside beyond our borders are equally misinformed?

The economic mood is exceedingly glum all around the world. A median of just 27 percent think their national economy is doing well, according to a survey in 21 countries by the Pew Research Center’s Global Attitudes Project. Only in China (83%), Germany (73%), Brazil (65%) and Turkey (57%) do most people report that current national economic conditions are good.

The public mood about the economy has worsened since 2008 in eight of 15 countries for which there is comparable data, while it is essentially unchanged in four others. The Chinese are the lone exception. They have been positive about their economy for the past decade.

Less than a third of Americans (31%) say the U.S. economy is doing well. That figure is up 13 percentage points from 2011. (But it is down 19 points from 2007, the year before the financial crunch began.) A median of just 16% of Europeans surveyed think their economy is performing up to par. That includes just 2% of the Greeks and 6% of the Spanish and Italians. Among Europeans, only the Germans (73%) give their economy a thumbs up. And just 7% of Japanese believe their economy is doing well.

'We Have Barely Moved the Needle'

One development that convinced me by late-2005 that a major financial crisis was on the way (contrary to popular wisdom), and which inspired me to put together a book proposal on that very subject (at the risk of looking like a fool, I might add), was the fact that the total amount of public and private sector debt outstanding relative to the size of our economy had reached levels that were last seen at the onset of the Great Depression.

So, what has changed in this regard since Financial Armageddon was first published in March 2007?

Not a lot, really.

In fact, as Forbes contributor Rob Clarfeld notes in "What Deleveraging? Financial Relativism and the U.S. Economy," citing data (and a chart) from Bianco Research, our aggregate credit market debt has actually grown since the ostensible end of The Great Recession. According to Clarfeld,

total credit market debt has increased to nearly $54 trillion.  While the private sector debt burden, currently, has declined from $33 trillion in 2008 to $30 trillion, during this interval, public sector debt levels have risen to a record $24 trillion. Relative to GDP and the ability to service this debt, we have deleveraged from a high of 385% total debt to GDP in late 2008 down to 353% today – not very much considering the depth of the last recession.

Even if only modest, this sounds like we’ve at least made some progress, right? Once again, this is only true in a relative sense. We have lowered our debt relative to GDP from their worst levels ever, to the levels that existed way back in…2007 — yes, 2007 — when the financial markets figured out that we had borrowed way more than could be paid back, to be followed by a major credit crisis and the worst recession in 80 years. We have barely moved the needle.

Almost time for financial Armageddon 2.0 (the event, not another book)?