Foreshadowing the Great Recession of 2013 -- Wednesday - The Year of the Pipeline -- RBN Energy -- Frigid in GB

Foreshadowing the Great Recession of 2013? See archival link posted November 14, 2012, which is now where these stories will be aggregated.

Analysts expected meager growth of 1%. Couldn't even get that. Economy UNEXPECTEDLY contracts 0.1%. And, gee, everything was going so well.

The WSJ story. And, of course, Steve Liesman of CNBC is able to spin this into gold.

But the Obama administration is already spinning the news (see third paragraph in bold), an AP story:

The U.S. economy shrank from October through December for the first time since the recession ended, hurt by the biggest cut in defense spending in 40 years, fewer exports and sluggish growth in company stockpiles. The decline occurred despite faster growth in consumer spending and business investment.

The Commerce Department said Wednesday that the economy contracted at an annual rate of 0.1 percent in the fourth quarter. That's a sharp slowdown from the 3.1 percent growth rate in the July-September quarter and the first contraction since the second quarter of 2009.

Economists said the surprise decrease in the nation's gross domestic product wasn't as bad as it looked. The weakness was primarily the result of one-time factors. Government spending cuts and slower inventory growth subtracted a total of 2.6 percentage points from growth.

Does that mean excluding these one-time cuts, GDP would have almost tripled analysts' expectations, from 1% (analysts' expectations) to 2.5% (estimates by Obama-friendly economists)? First we had the government publishing unemployment numbers based on estimates from states who never forwarded the data; now we have a new way of measuring GDP: forgeddaboutdaonetimefactors.

My hunch is a) Ben has marching orders to spend as much money as necessary to prevent a second month of contraction in GDP; and, b) failing that, the definition of two consecutive months of recession = a recession will be changed (the definition will be changed; in fact, there is no hard and fast rule defining a recession). The scary part is that this was a huge drop: from 3% ballpark to -0.1%. Can't recall when I last saw that "unexpectedly."

And so it goes. Happy days are here. The economy grew by 2.5%, almost tripling estimates, except for one time factors. Cue up Connie Francis.

Oh, by the way, "they" say much of this drop was due to huge decrease in defense spending. Think what will happen when "sequestration" kicks in. Sequestration will effect the entire government, not just defense spending.

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Scroll down for wells coming off confidential list; earnings.

From RBN Energy: huge increase in storage capacity along the Gulf Coast -- tectonic shifts?

Over the next three years seven Gulf Coast region terminal operators will build an estimated 19 MMBbl of new crude oil storage capacity. Those storage expansions are being made in preparation for as much as 3.1 MMb/d of new crude supplies expected into the Gulf Coast refining region over the next two years from new pipeline projects. Today we summarize the efforts that terminal operators are making to get ready for the flood.

WSJ Links

Section D (Personal Journal):

Microsoft: "more control for annual fee" -- one doesn't have to read much more than this to know this ... Microsoft is now "renting "Office."

The company on Tuesday started offering consumers a new version of Office—the widely used bundle of personal-computer applications—that for the first time arrives along with a version that can be "rented" for a monthly fee, similar to how people subscribe to cable or to Netflix Inc.'s movie service.

Microsoft is pushing hard to get most people to opt for Office 365, as the subscription version is known, for an upfront annual fee of $99.99, or $9.99 a month for a pay-as-you-go option. (People buying Office along with a new computer can pay a $79.99 annual subscription for Office 365.) 

For no cost, Apple pushes updates of its operating system for free, and almost seamlessly (only asking whether I want to install the update). Of course, operating systems and applications are very different but I don't think average users are going to fall for this. MSFT is hoping DOD falls for it. DOD is going to have make a huge decision on whether they want to spent $99/employee/year for upgrades that almost never matter. In fact, the only reason some folks upgrade is so they can share information with others who have upgraded. MSFT "Office" is generally not backward-compatible.

So, if you like to pay a subscription for a big company to control your "office," you will love this newest revenue stream idea that MSFT has dreamed up.

Section C (Money & Investing):

Page C14: don't back up the truck with Hess. 

Section B (Marketplace): 

Can gas undo nuclear power?

Chesapeake CEO to exit.

Even Facebook must change to be relevant on Apple's mobile devices.

Investors agitate in oil patch.

Section A: 

Egypt is warned of collapse. No link. Story is everywhere. First linked at Drudge yesterday. [Later, February 1, 2013: in the LA Times -- a photograph of "westernized" males who obviously have no interest in an Islamic society. Cue up Connie Francis. They can thank President Obama.]

Coal is dead? Not in Mexico. Texas gives okay to coal mine on the border that will provide coal for a Mexican utility -- faux environmentalists must be going nuts.  Location, location, location.

Other links, stories

Satellite photo of Great Britain covered in snow; one of the coldest, snowiest periods in British history

Unusually frigid and snowy conditions blanketed much of the island of Great Britain in snow earlier this month. The winter wonderland was spotted from above by NASA's Terra satellite on Jan. 26.

The snow started falling mid-month when a storm system blowing in from over the North Atlantic combined with unusually chilly conditions ushered in by a pattern called the Scandinavian Block, according to Accuweather.com. This high-pressure pattern sits in place over Scandinavia and funnels cold air toward the United Kingdom from over the Baltic and western Russia, according to the U.K. Met Office.

Nothing To Do With the Bakken -- Added Jobs: Less Than Expected; Citi To Cut 11,000 Jobs

This is not about the Bakken; if you came to the site for the Bakken, scroll down to posts below.

To newbies: this is for personal use only, for archival purposes only. At one time I had trouble keeping track of these numbers, so this is for my benefit only.  This is not meant for those following the Bakken.

There are two different stories here: one is unemployment (the magic number is 400,000); the second story has to do with employers adding new jobs (the magic number is 200,000)

The magic number of new unemployment claims is 400,000 -- the lower the better. The last report, bad news: hovering around 395,000.

Now, this, the magic number for new jobs: 200,000 -- the higher the better. Today's report: we've gone under the magic number -- only 118,000 new jobs were added.



Citi To Cut 11,000 Jobs

Link here to Bloomberg. 

The plan will cut 11,000 jobs worldwide, including 1,900 jobs in the institutional clients group, most of whom, I assume are in New York City. That's in the same ballpark as the 18,000 Hostess/Twinkie jobs lost. Cue up Connie Francis.

  Remember: the magic number is 200,000

Link here to Reuters.

Private-sector employers added 118,000 jobs in November, shy of economists' expectations.

Economists surveyed by Reuters had forecast the ADP National Employment Report would show a gain of 125,000 jobs.

October's private payrolls were revised slightly down to an increase of 157,000 from the previously reported 158,000.

Foreshadowing the Great Recession of 2013.

Fiscal Cliff

Correct me if I'm wrong, but generally we're only hearing about the tax cuts that will expire on December 31, 2012.

I haven't heard much talk about the automatic spending cuts that will take effect, beginning January 1, 2013 if no budget plan is reached.

There has to be a reason we're not hearing about the automatic cuts.

Sequestration will hit California particularly hard, Victor Valley Daily Press.

California will be hit hard by sequestration, the automatic spending cuts in the federal budget set to go into effect Jan.1 unless Congress agrees on a plan by year end to reduce the federal deficit by more than $1 trillion, according to a study by an private economic development council.  

If sequestration goes forward, combined with the earlier mandated cuts to the Department of Defense, the state will lose 336,000 defense-related jobs, $21 billion in economic output and $6.9 billion in personal earnings over the next eight years, according the Southern California Leadership Council and the Southwest Defense Alliance. 

Sequestration will account for 136,000 of these lost jobs, $7.5 billion in reduced economic output and $2.4 billion in lower personal earnings, the study revealed.
Sequestration calls for $1.2 trillion in spending reductions from fiscal years 2013 through 2021 from both defense and non-defense departments. 

However, defense spending will be disproportionately affected. The Department of Defense accounts for 19 percent of the federal budget but is slated to take 50 percent of the required sequestration cuts, meaning that the Pentagon must cut $492 billion in military spending over the next 10 years. This is on top of the $487 billion already set to be cut from the defense budget over the same decade.

Am I Mis-Reading This?

Cut-and-paste from the LA Times:

The administration warns that automatic tax hikes set for next year could cripple the holiday shopping season and slash consumer spending by $200 billion in 2013.

What? Holiday shopping season will be over by the time the new taxes take effect. Foreshadowing the Great Recession of 2013.  But I digress.

The above link is the front page story in the LA Times today.

But the White House report warned that "the hard-earned rise in consumer confidence will be at risk if the middle-class tax cuts are not soon extended with a minimum of political drama."

North Dakota With Bragging Rights for Regional Economic Expansion

October survey at Prairie Business Magazine.

The overall index ranges between 0 and 100. Growth neutral is 50, and a figure greater than 50 indicates an expanding economy over the next three to six months.

For the Mid-America Region (numbers rounded).

North Dakota: hit a regional high of 64 in October, compared to 62 in September. Continues to grow. Bragging rights, but barely above Oklahoma, the other oil state in this region.

Oklahoma: soared to 63 from 57 in September. The new oil plays in Oklahoma.

Iowa: dropped slightly from 57 to 54. Claim to fame: lots of wind energy.

Missouri: slipped to 50 from 51.

Kansas: rose to a still weak 48 from 47.

Minnesota: for the fourth straight month, below 50; at 47 last two months. Stagnant.

South Dakota: for the fourth straight month, growth below 50; slipped to 45 in October from 47 in September. Getting worse.

Nebraska: for the third time in four months, below 50; plummeted from 50 in September to 45 in October. Going the wrong direction. Wow, Warren's state almost in as bad a shape as Arkansas.

Arkansas: plummeted from 50 to 42.

Simply foreshadowing the Great Recession of 2013.

WSJ Links; Gut Check for Heidi -- Opportunity To Break Up Family Farms

Wow, wow, wow -- foreshadowing the Great Recession of 2013. I first blogged about this a week or so ago, citing a Boston Globe article. This morning, it's the top story above the fold, front page of the Wall Street Journal: investment falls off a cliff.

U.S. companies are scaling back investment plans at the fastest pace since the recession, signaling more trouble for the economic recovery.

Half of the nation's 40 biggest publicly traded corporate spenders have announced plans to curtail capital expenditures this year or next, according to a review by The Wall Street Journal of securities filings and conference calls.

Nationwide, business investment in equipment and software—a measure of economic vitality in the corporate sector—stalled in the third quarter for the first time since early 2009. Corporate investment in new buildings has declined.

At the same time, exports are slowing or falling to such critical markets as China and the euro zone as the global economy downshifts, creating another drag on firms' expansion plans.

Elections have consequences.

A full page shouting graphic covers the front page of the fourth section: CEOs to Washington: strike a deal -- and do it now!

Speaking of "elections have consequences."

Opportunity for Ms Heitkamp to break up family farms.

Whether or not tax breaks are extended for all but the top 2%, an increase in the estate tax is a given, or is it? Will Ms Heitkamp provide the deciding vote for Mr Obama?

This will be a gut-check for Ms Heitkamp: supporting the President's goal to eliminate the Bush tax breaks will likely break up North Dakota farms. This article was in The Bismarck Tribune earlier, but it's been removed. New link:

Agriculture organizations are sounding the alarm about estate tax changes that could break up family farms if Congress does not act to stop them before January.

NAWG and more than 30 other farm organizations wrote every House and Senate office this week to urge prioritization of this important issue for farmers and ranchers.

The estate tax changes as planned could devastate family businesses in the agriculture sector by dramatically reducing the estate tax exemption, from $5 million to $1 million, while also dramatically increasing the estate tax rate, from 35 percent to 55 percent.

Many farm businesses that provide the primary income for the families who operate them would reach the $1 million threshold quickly with just a few pieces of equipment and less than 100 acres of land. This means parts of the business would almost certainly have to be split off and sold to pay taxes after the death of the primary owner.

America's oil boom: Shape up or ship out

U.S. crude-oil exports are heavily restricted. Refined products such as gasoline can be shipped abroad more easily—indeed, the U.S. became a net exporter of these last year for the first time since 1949. Refiners have been selling increasing amounts in foreign markets as domestic demand has sagged amid economic sluggishness and renewed energy-conservation efforts.

Pressure to export crude oil won't grow because the U.S. will suddenly no longer need imports. The Department of Energy expects net imports to meet 39% of domestic oil consumption in 2013. Rather, it is a matter of logistics.The rapid increase in onshore U.S. oil output in states such as North Dakota, as well as rising Canadian oil-sands output, has created a glut in the Midwest. As a result, domestic grades sell for less than international benchmarks such as Brent. West Texas Intermediate, or WTI, trades at about $87 a barrel, $22 or 20% below Brent.

Hostess union clings to hope

The union that brought the 85-year-old baker of Twinkies and Wonder Bread to its knees is holding out hope that a buyer will salvage chunks of the company and send the union's members back to work, even as Hostess Brands Inc. gears up for a fire sale.

Hostess, the company behind treats snacked on for generations, is poised on Monday to present to a federal bankruptcy judge a plan to shut down 36 plants and sell off the company's business. The liquidation was sparked by a nationwide strike orchestrated by the snack maker's second-largest union, the Bakery, Confectionery, Tobacco Workers and Grain Millers.

Profitable brands will be bought; contracts will be re-written.

Drillers begin reusing 'frack water' -- huge story, front page, above the fold, second section

Companies are racing to find ways to recycle the water used in hydraulic fracturing, chasing an emerging market that could be worth billions of dollars.

From energy industry giants Halliburton Corp. and Schlumberger Ltd. to smaller outfits such as Ecologix Environmental Systems LLC, companies are pursing technologies to reuse the "frack water" that comes out of wells after hydraulic fracturing, or "fracking"—the process of using highly pressured water and chemicals to coax oil and gas out of shale-rock formations.

Spinach, a great source for nutritional iron? Think again! This is quite incredible. I always thought spinach was a great source for iron. Nope. Wrong. 

In 1870, German chemist Erich von Wolf analyzed the iron content of green vegetables and accidentally misplaced a decimal point when transcribing data from his notebook. As a result, spinach was reported to contain a tremendous amount of iron—35 milligrams per serving, not 3.5 milligrams (the true measured value). While the error was eventually corrected in 1937, the legend of spinach's nutritional power had already taken hold, one reason that studio executives chose it as the source of Popeye's vaunted strength.

The point, according to Samuel Arbesman, an applied mathematician and the author of the delightfully nerdy "The Half-Life of Facts," is that knowledge—the collection of "accepted facts"—is far less fixed than we assume. In every discipline, facts change in predictable, quantifiable ways, Mr. Arbesman contends, and understanding these changes isn't just interesting but also useful. For Mr. Arbesman, Wolf's copying mistake says less about spinach than about the way scientific knowledge propagates.

By the way, faux environmentalists did the same thing with the hockey stick graph and global warming. And so it goes.

Warren Buffett Buying and Selling

Dumps GE and Johnson & Johnson.

According to the filing, Warren Buffett's holding company cut its stake in pharmaceutical giant Johnson & Johnson by 95% and its GE position was slashed by 88%. As of the filing period, Berkshire held just $34 million worth of JNJ and under $12 million of GE. 

Among the stocks that were purchased during the quarter were Deere & Co.,...  It is likely that these positions were initiated by either Combs, Weschler, or both, and not the work of Buffett. 

The relatively small position sizes would suggest that the Oracle of Omaha did not choose the stocks himself, as he normally is only involved in purchases of $1 billion or more. The Deere position was valued at $337 million .... market cap for Deere is around $35 billion.

Warren's folks must think GE is having trouble getting its footing in the energy sector. GE liked wind. Also, I can only assume that the feds cutting back on defense spending will hurt GE. But then ... my hunch: Warren is looking forward to next summer when there should be lots of good buys.

Foreshadowing the Great Recession: Banks Cut 160,000 Jobs; More To Come; Not All Layoffs Counted

Link here to Reuters/Yahoo.

Major banks have announced some 160,000 job cuts since early last year and with more layoffs to come as the industry restructures, many will leave the shrinking sector for good as redundancies outpace new hires by roughly two-to-one.

A Reuters analysis of job cuts announced by 29 major banks showed the layoffs were much bigger in Europe than in Asia or the United States. That is a particular blow to Britain where the finance industry makes up roughly 10 percent of the economy.

The tally of nearly 160,000 job cut plans, meanwhile, is likely to be a conservative estimate as smaller banks and brokers are also cutting staff or shutting up shop, and bigger banks have not always disclosed target numbers of layoffs.

The tally also does not include reports of 6,000 job cuts to come at Commerzbank, for example, which the German group would not confirm last week.

Foreshadowing The Recession of 2013

Updates

January 30, 2013: This post started as way of tracking the economy leading up to 2013 where data points suggested the likelihood of a "Great Recession" in 2013. Late in 2012 and early in 2013, things seemed to be turning around. Then, on this date, the government reported that the economy contracted for the first time since "the" recession ended -- and the contraction was unexpected.

So, now back to this past: tracking general economic activity through 2013.

Original Post

For archival purposes only.

Corporate America will cut back on jobs and hours due to rising cost of employees after January 1, 2013. The stories are already out there. It was going to happen regardless (due to the 29-hour week mandated by ObamaCare) but the severity of the job cuts will be exacerbated by the uncertainty colloquially referred to as the "fiscal cliff." Everyone now agrees that taxes, fees, and/or health care premiums will go up for every US citizen in 2013. Taxes may be the least regressive, but fees and health care premiums will be highly regressive. (Taxes may be less regressive, but loopholes easier found in tax code than in fees and health care premiums.)

This is not unexpected. As the US continues its transition to "a new economic and sociopolitical worldview and method of socioeconomic inquiry" one should expect significant jolts to the system. 

Speaking of jolts. Last night in the dark and fairly heavy rain, I was barreling down the sidewalk toward another intersection. Over the years, most cities have removed curbs for wheeled vehicles to move seamlessly from street to sidewalk, and so it was at this particular intersection. But in the dark, it was very, very difficult to find the "path." At the last moment, I saw it and had not choice to take it. If I did not take the "path" I would hit an 8-inch curb and go "head-over-heels." It was amazing how fast I was able to make that decision, turn, hit the "path," miss the curb, and prevent a major mishap. It was all over in a nanosecond. 

Unfortunately, at the end of that nanosecond, I was headed directly for a huge, grand, old (oak?) tree, head-on. The only thing, in retrospect: hitting the tree was preferable to hitting the curb. Hitting the curb would have been "head-over-heels" and probably a broken neck; hitting the tree head-on could be averted by a slight turn resulting in a glancing blow and a sliding, careening spill. I gripped the handlebars very, very firmly, headed for the tree, and at the last nanosecond (again) pulled slightly right. I missed the tree by a margin that I would not care to repeat. 

That's how I see 2013 playing out. The "fiscal cliff" and the next six months: we are headed for an 8-inch curb on a bicycle out of control, with "head-over-heels" outcome. The movers and shakers will avert the neck-breaking crash, but the question is whether we miss the tree. 

So, for archival purposes, tracking the business stories leading up to next summer.

Foreshadowing the Recession of 2013

January 30, 2013: economy unexpectedly contracts; GDP at -0.1%.

After several months of good news, some bad news: new home sales fall 0.3%, foreshadowing the great recession of 2013, CNBC, November 28, 2012.


Boston Globe: the state of Massachusetts is in trouble, going into 2013, November 25, 2012

Facing weaker than expected state tax revenues, Governor Deval Patrick’s administration has curbed state hiring, halted an automatic income tax reduction, and begun identifying cuts in spending that may be necessary to balance the budget.

Recent tax collections have been unexpectedly disappointing, failing to measure up to last year’s levels. In October, revenues were $162 million short of budgetary estimates and $48 million below the level reached in October 2011.

State revenues are running $256 million behind budget and $33 million behind last year’s actual collection, officials said.

One "fact" that is hard to refute: states have usually gotten into severe financial trouble under Democratic governors; states with Republican governors generally thrive. Just an observation.

This paragraph from the Boston Globe story above says it best:

“If this were happening at the beginning of a recession, it would be seen as . . . not a dramatic shortfall,” said Michael Widmer, president of the Massachusetts Taxpayers Foundation. “But when it comes in year five of this extended fiscal crisis, it’s a serious issue.”  -- Cue up Connie Francis.

In fact, I think one can predict where the jobs will be the next five years by looking at this map: map of the US, in color. The linked map looks very much like the rtw map.

Morgan Stanley: major recession in 2013, November 20, 2012

The bank’s economics team forecasts a full-blown recession next year, under a pessimistic scenario, with global gross domestic product (GDP) likely to plunge 2 percent.

“More than ever, the economic outlook hinges upon the actions taken or not taken by governments and central banks,” Morgan Stanley said in a report.

Under the bank’s more gloomy scenario, the U.S. would go over the “fiscal cliff” leading to a contraction in U.S. GDP for the first three quarters of 2013. In Europe, the bank’s pessimistic scenario assumes a failure of the European Central Bank (ECB) in cutting rates and a delay of its bond-buying program.

EU economic summit likely to end in failure; severe results, France24, November 18, 2012

Eurozone back in recession; since this was a foregone conclusion/predictable, not a headline, The Bismarck Tribune, November 15, 2012

President Obama agrees: taxes on middle class might bring on recession; will affect seasonal retail sales; hiring, November 14, 2012, Reuters/Yahoo (he's starting to understand)

Retail sales in US decrease for first time in four months, November 14, 2012, Bloomberg

Budget deficit rises to $120 billion in October, 22% increase, larger than expected; November 13, 2012, Reuters

Business spending falls off a cliff, November 9, 2012, Boston Globe

6,125 proposed regulations and notifications posted in last 90 days; average 68 per day, November 9, 2012, CNS News, 

McDonald's: reports first drop in same-store sales in nine years, November 8, 2012, WSJ

Friday Morning Links -- Most Of It: Nothing To Do With The Bakken; If You Came Here For The Bakken, Scroll Up or Down But Avoid This Post

Updates

Later, 7:07 pm: this is getting weirder by the moment. Now this story (sent to me by a reader, thank you), regarding the movie about fracking, Dimock, EPA, and starring Matt Damon.

While left-leaning Hollywood often targets supposed environmental evildoers, Promised Landwas also produced “in association with” Image Media Abu Dhabi, a subsidiary of Abu Dhabi Media, according to the preview’s list of credits. A studio spokesperson confirmed that AD Media is financing the film. The company is wholly owned by the government of the UAE. 

Original Post

Fracking, Dimock (Pennsylvania), EPA, Matt Damon, and all that jazz: perhaps the best link of the day, from a reader's comment. Thank you. See update above, dated "later, 7:07 pm." This is getting really, really weird. But at least we're starting to find out who is backing anti-fracking in this country.

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IPs for wells coming off the confidential list today have been posted; see sidebar at the top.

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Google Chinese slowdown idles US coal mines. This article is about metallurgical coal. It is a very, very sobering story. Front page story in the WSJ.

While many have blamed the downturn in the US coal industry on cheap natural gas supplanting coal and tougher environmental regulations, the slide in metallurgical coal demand has been equally devastating.

But voters seem to be content/satisfied. Polling continues to show four more years.

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What are the odds? The other night I met a nice young couple from Sri Lanka here in Boston area; he was working in the local area; she was his sister visiting the US for the first time. I knew a little, but not much, about Sri Lanka. So, today, p. D6 of the WSJ, a full page story on "tropical modernism in Sri Lanka." Almost as good as opening to a full page on the Bakken. Sri Lanka is a tropical paradise, and for Bakken oil millionaires, one can get a brand-new, 8,000 square-foot architectural masterpiece for 40 million rupees ($300,000).

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Google Obama trumpets revised job data.

For the first time since President Barack Obama's inauguration, the number of jobs in the US economy is higher than it was when he took office.

And voters seem to be content/satisfied. Polling continues to show four more years.

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Google ObamaCare's tax raid on medical devices. --> RECESSION

Data point: the new health care bill places a 2.3 percent tax on medical devices -- call it  the US medical devices VAT. The tax...

threatens thousands of American jobs and our global competitiveness. It will also stifle critical medical innovation in the industry that gave us defibrillators, pacemakers, artificial joints, stents, chemotherapy delivery systems and almost every device we depend on to save lives. 

The 2.3% tax well be charge to manufacturers on each sale and takes effect in January. 

Many US device companies, in response, have already announced layoffs, canceled plans for domestic expansion and slashed research-and-development budgets. This month, Welch Allyn --- a make of stethoscopes and blood-pressure cuffs -- announced that it will lay off 10% of its global workforce over the next three years, but all of the jobs being cut are in the US. [Welch Allyn produces 90% of the medical diagnostic equipment sold in the United States. -- wiki]

And that's the point. Remember all the hand-wringing over NAFTA which essentially sent US textile jobs overseas, and killed that domestic industry -- at least that's what I've heard. I don't know. I don't follow the industry.

But Evan Bayh, a US senator from Indiana, a member of the president's party, says that the medical device VAT will force another US industry overseas.

I'm pretty sure this industry was headed overseas before the VAT. A 2.3% VAT on medical devices seems pretty inconsequential. If a medical device company cuts margins that close ...

What's the production tax and extraction tax on Bakken oil? I believe its 6 to 7% on each -- 12% total. Again, I could be wrong (see "welcome" and "disclaimer" posts regarding this blog). Maybe a grand compromise: the senators from "oil states" will vote for repeal of the medical device VAT if senators from "high tech" states vote for keeping the EPA out of fracking on state land.

I wonder what high-tech medical device company is located in Indiana that got Mr Bayh's attention?

Regardless of how this turns out, it appears not to be a big issue for voters. Americans seem pretty content/satisfied; polling shows we are headed for four more years.

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Remember: An ISM reading above 50 -- expanding; an ISM reading below 50 -- contracting
See also: Business investment falls off a cliff -- November 19, 2012

The linked article has a lot of words and phrases we've come to expect from the mainstream media when reporting on current state of the economy; words like: "unexpectedly," unexpectedly contracted," "uncertainties surrounding domestic fiscal policy," "unemployment exceeding 8 percent for 43 consecutive months -- the longest stretch in the post-World War II era," etc. But here's the data points from the linked article:

• business activity in the US unexpectedly contracted in September for the first time in three years -- foreshadowing the Great Recession of 2013
• the ISM fell to 49.7; it was a whopping 53 in August -- just one month earlier
• expectations: median -- 52.8; range -- 50 to 54.54. No one predicted a contraction.
• this explains why the Fed acted -- QE3
• household purchases rose by 0.5 percent (GOOD); because prices increased 0.4 percent (BAD)
• the jump in prices was the biggest since March, 2011, (not March, 2012, but March, 2011) (BAD)
• unemployment exceeding 8 percent for 43 consecutive months; the longest stretch in the post-WWII era (REALLY BAD)
• household spending increased at a 1.5 percent annual rate in the second quarter, the lowest in a year (BAD)
• lingering concerns (Congressional dithering) about the January "fiscal cliff" are restricting business such as ATT and their long-term planning (BAD)
• taxes are going to go up and companies are looking at ways to cut costs

Bakken readers know that when oil companies look to cut costs, they lay down rigs (or at least that's the mantra).

But Americans are content/satisfied. Polling suggest we are headed for four more years.

The really good news: once these artificial chokeholds on American business are released, the pent-up demand for goods and services will be staggering. If the eight percent unemployed can just hang on for another four years.

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Speaking of VAT. There's been a lot of talk in Washington about a VAT. Won't happen. So, one way to get around a VAT: do it by industry. The medical device VAT is as good an industry as any to start.

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