Around the Globe 05.31.2013

Japan Consumer Prices Slide in Challenge to Abe Revival Campaign – Bloomberg.

Chart from Bloomberg

Chart from Bloomberg

Japan Population

The reason deflation rules Japan is because an aging population demands less and less resources.  What is needed to revive the country is not a grand money printing experiment but actual demographic changes that promote growth.  Encouraging immigration and better treatment of women will revive Japan’s population growth leading to better economic prospects.  This takes time, and what everyone wants is a silver bullet solution, which has taken the form of a printing press.

Japan Output Gains as Tokyo Prices End Four-Year Slide: Economy – Bloomberg.

Japan Industrial Production 05.2013

Japan has had output increases before, so this may be a blip in the data.  However, four months in a row of positive growth indicates a trend in my book.  Without strong increases in demand from Japan’s main trading partners, the U.S. and China, growth will not hit escape velocity.

This Chart Shows Dow Should Be Lower…a Lot Lower.

EPS-vs-Price-053013

I do not agree with this article’s conclusion that the Dow should be lower according to EPS.  Declining yields in all markets should allow stocks to become more expensive, and they will over the next few months.  Once yields level off, the stock market will stop rising soon thereafter.

Consumer Spending in U.S. Unexpectedly Declined in April – Bloomberg.

Consumers Feel Pinch as Income Flat, Spending Off.

US Retail Sales

The necessary ingredient for an organic, self-sustaining economic recovery in the United States is a strong labor market.  As long as the demand for labor remains weak, incomes will not rise, and consumer spending will remain weak.  Since the end of the recession, retail sales have risen albeit at a slower and slower rate.  At the present rate of change, they will flat-line sometime next year.

Of course, falling consumer spending will not get in the way of the recovery meme, as we shall soon see.

Consumer Sentiment in U.S. Rises to Highest Since July 2007 – Bloomberg.

US Consumer Sentiment Rallies to Six-Year High in May.

Consumer sentiment strongest in nearly six years in May | Reuters.

Reuters-UMich Consumer Confidence via Bloomberg

Yea! Consumer sentiment is at its highest level since July, 2007.  Consumer sentiment measures peoples feelings about the economy as opposed to the hard data that shows real indicators like sales and employment levels.  What we have here is a words versus actions situation.  According to the survey, people believe that everything is wonderful and that they are ready to buy.  Then, consumer spending falls, and we realize that what consumes say and what they do are two different things.

Euro-Area Jobless Rate Rises to Record Amid Recession: Economy – Bloomberg.

Record unemployment, low inflation underline Europe’s pain | Reuters.

Tough Times Still Ahead for Euro Zone – WSJ.com.

Eurozone Unemployment 05.31.2013

Yesterday, Bloomberg was telling us

Economic confidence in the euro area increased in May, adding to signs the region is beginning to emerge from the longest recession in the single-currency era.

Once again, the Eurozone recovery narrative put forth by the mainstream financial press is dealt a harsh blow by the facts.  As long as the Continent remains shackled to the Euro and its sundry sclerotic institutions, it will continue to contract.  Occasionally, the rate of contraction will slow, and journalists will all jump over each other in an attempt to call the end of the malaise first.  Then, the data will rear its ugly head.  The real victims in the Eurozone are the young people faced with an unemployment rate close to 25%.

Euro-Zone Bailouts Leave Public Creditors at a Loss – WSJ.com.

WO-AN959_Brusse_G_20130530182716

The red portion of the bar graph is earmarked towards paying off the holders of the country’s sovereign debt courtesy of the EU taxpayer.  The gold portion of the bar graph is used mostly to restructure banks who are the largest holders of the sovereign debt again on the taxpayer’s tab.  Essentially, each sovereign bailout is a thinly disguised gift to European banks that made poor investment decisions in Greece, Ireland, Portugal and Cyprus soon to be joined by Slovenia, Spain and Italy.

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