Friday, February 27, 2009
"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.....