Friday, February 27, 2009

Bury My Heart At Wounded Knee

"I shall not rest quiet in Montparnasse.
I shall not lie easy at Winchelsea.
You may bury my body in Sussex grass,
You may bury my tongue at Champmedy.
I shall not be there. I shall rise and pass.
Bury my heart at Wounded Knee."

Stephen Vincent Benet, "American Names"

And so the time has come to lay another month to rest. Two down, ten to go. As observed yesterday, it looks set to be another wild and wooly month-end today. Indeed, it has already been so; month-end flows have finally given the yen a bit of support, while the rest of Asia has been smacked badly. The euro has been hit by stops and (reportedly) reserve manager selling, while equities aren't really sure what to make of the Citigroup news or the proposed World Bank bail-out for Eastern Europe.

For Macro Man, it will be a particularly eventful day. Not only must he navigate the usual month end fixing cacophany, but as soon as the sheets are marked and the month is in the books, he will race off to the hospital for surgery on his knee. Naturally, he hopes to bury considerably less than his heart with today's procedure on his wounded knee.

"Bury My Heart at Wounded Knee" is also, of course, the title of a history of the US government's gutting of the Native American heartland. The modern-day economic equivalent, fortunately occurring without loss of life, is perhaps taking place before our very eyes.

For how else to characterize a recession that is, more than a year in, still gaining potentcy? Yesterday's figures were just the latest in a skein of horrible data, a trend which now seems as long as the national breadline. (thanks, BR). Yesterday's jobless claims numbers shattered both expectations and the previous highs, and confirmed that this downturn is being felt in the heartland much, more more than either of the previous two recessions. The all-time high of 695k in October '82 is now within sight.
Meanwhile, the orders and activity data just keeps getting worse and worse. The early-noughties recession was famously all about corporate excess and the IT/dot-com investment bubble. When it popped, it was ugly. This recession famously started with housing and the consumer; the manufacturing sector was generally thought to be in pretty decent shape, because excesses were not allowed to build up after the early years of this decade.

Think again. The rate of change of manufacturing shipments is now considerably worse than anything observed during the last (business-driven) recession, though core shipments (nondefense capital goods excluding aircraft and parts) have not yet reached the early-00's nadir. You may observe a more than passing resemblance to the shape of this chart with that of the earnings momentum chart posted yesterday; while these are two completely different series, they are clearly capturing the same horrible dynamic.

So what is a citizen or an investor to do? Somewhat frighteningly, the answer appears to have a Wild West flavour to it. For as the Bloomberg chart of the day points out (as flagged by SP), it seems as if Americans are spending their pennies on those two staples of raw survivalism, guns and tinned goods. How else to explain the relative outperformance Sturm Ruger and Hormel, maker of firearms and Spam, respectively?
On second thought, maybe that Sussex (or shall I say Surrey) grass doesn't look too bad, after all.....


Anonymous said...

Congrats on the new template MM, it's a clear improvement!

I also like your insight in retaining all graphics going back to 2006 are still there, I'm guessing you have a rather large photobucket account?

As always, your daily accounts make for an interesting read...nice to peruse the entries of 2006 and reminisce of better times - if the front page of todays economist is anything to go by we're genuinely in a sorry state of affairs here in Europe.

All the best and good luck with your surgery.

Tales of a Starbucks Addict said...

Love the blog and like the new layout.

Saw this entry by Mr Cowen and think it ties in pretty well with your collapse in trade thesis


Yohay said...

The recession plague is everywhere. I feel it also in my industry - the hi-tech industry that was supposed to "learn" from the bubble burst.
Good luck with the knee surgery!

MW said...

One pedantic point: the 695K claims figure should (arguably) be considered relative to the size of the labour force.

Hope the surgery goes well, MM.

Anonymous said...

absolutely agree with the above, we will get a -1MM payroll within the next 3 months as population base so much bigger. that may prove to be a "bottom" before false dawn of cronnie expenditure based and hence temporary "recovery" takes off. market is getting fatigued from negative news flow short term and will just be flushing out short term players with no sense of direction meanwhile.

jonathan said...

I'm on vicodin from my surgery this morning. Yowza!!

This ain't a recession if you think "normal part of the business cycle"; the MBS/CDS mess pricked the balloon but now aggregate demand worldwide is failing. Seems a lot of countries not only bet ultra on exporting but tied themselves to unsustainable expectations. This contraction should reshape the world much more than a typical cyclical contraction.

Low Cost Lisa said...

Get well soon, Mr. Man.

pupkinus said...

Get well!

Macro Man said...

Yes, I of course concur that a) 695k now isn't quite the same as it was 27 years ago but that b)an equivalent threshold will probably be reached.

Thanks to all for your kind wishes, I am home and walking about gingerly....and fully expecting to be back in the hospital within a few weeks for a full reconstruction!

Jonathan, hope your surgery went well too.

Anonymous said...

I think it's great that Citigroup moved assets from Column A, to Column B. Apparently it changes everything.

At least that is the Bear Thesis.

Hopefully somebody can explain that one.

Owe Jessen said...

About the outperformance of weapons and spam: started a series on Armageddon-trades back in October (seems a lifetime ago):