GDP Shrivels

First quarter GDP came in at 0.6%. The slowest rate in more than four years. When you consider the government's wild underestimation of inflation that GDP number is, in real terms, probably negative. So the economy contracted in the first quarter.

Signs of Impending Doom

Lake Okeechobee is on fire. For those unfamiliar, Okeechobee is the second largest freshwater lake in the continental U.S. with a drainage basin that covers over 4,600 square miles. The water levels at "Big O" are at their lowest- EVER. The lake has receded far enough for 5,000+ acres of former lake bottom to actually catch on fire. The fire remains mostly inaccessible to firefighters as they are not really equipped to fight fires in lakes.

Maybe hurricane season, which starts June 1, will bring much needed rain to Floridians.

ATM Broken

The housing ATM is out of service. Those people who have been living beyond their means thanks to a rising tide of home equity had better start saving. The whole refinance game is kaput. What are you going to do now if you've been living comfortably by using your house as an ATM? Interest rates are higher and home prices are down in many cases. Time to stop going out to dinner three times a week. Time to stop buying all that crap you don't need...and charging it.

Equity withdrawal has certainly provided a wind in the sails of our economy. Without it we won't be seeing much growth in GDP. Furthermore, most of the nation's job growth the last couple years has been housing related. Brokers, appraisers, agents, roofers, electricians. Here in SW Florida you couldn't walk five feet without running into a mortgage broker and they were generally obnoxious and arrogant about their new found success. The number of available jobs in housing related sectors will not grow but contract.

Belt tightening time. Prices are drifting lower, rates are drifting higher, there is enough inventory to choke on and lending standards are being tightened. There has already been a lot of bottom calling. Strikes "The Skeptic" as premature.

Inflation Obfuscation Redux

Link-InflationArticle

Article:
Paul Volcker, the former Fed chairman widely credited for putting the clamp on the runaway inflation of the 1970s, once referred to rising prices as "a cruel and maybe the cruelest tax, because it hits in an unexpected way, in an unplanned way, and it hits the people on a fixed income hardest."

Comment:
Just for the record "The Skeptic" will take John Williams' (of Shadow Stats) numbers over those reported by our government. At the very least, Williams is using a consistent methodology instead of moving the goalposts.
Also, inflation is the enemy of a bondholder. Of late, bond prices have traded off with yields scooting higher. We've experienced a secular bull market in bonds. When that ends (now?) rates will be heading higher for years. It should be clear the implications for a nation up to it's ears in debt.

Dollar-Induced Indigestion

Recently Kuwait abandoned it's currency link to the dollar in attempt to quell inflation there. Many countries, including many in the Middle East, have home currencies linked directly to the dollar- the world's reserve currency. We've all heard much bluster about China's similar dollar peg.

This is an event that is clearly bearish for the dollar. If other Middle Eastern nations follow suit, for instance Saudi Arabia or Qatar where inflation was 11.83% in 2006, the dollar will be in more trouble. Central banks around the world have satiated their appetite for dollars.

Bloomberg article. Enjoy.