Happy Holiday!

by Larry Levin

Equities gave back all of Thursday's gains in light volume trading that finished the month. Weakness was blamed on Dell's earnings and poor economic data regarding personal incomes and spending.

Before the open the Commerce Department said consumer spending fell 0.7% in July, the most in almost three years, while incomes also dropped. Regarding this news, Robert Pavlik the CIO at Oaktree Asset Management said, the decline in personal income makes sense, given job losses, the slowing economy and that the economic stimulus plan has been used up.

Another drop in personal incomes made me do a search on the subject. I wondered how there could be such GDP growth with falling incomes and once again, it just doesn't pass the smell test.

While searching I ran across this from CNN, This is the first business cycle ever in which the middle class had less income at the end than the beginning. The report refers to figures put out by the Census Bureau, showing that median real incomes for U.S. families dropped in the period 2000-2007 - from around $58,500 to $56,000. Moreover, this corroborates an independent study by the Chicago Tribune of a few years ago where it found Illinois incomes lower today than 2-decades ago, adjusted for inflation of course.

So I have to wonder aloud; how can we receive glowing monthly GDP data (endlessly) while real incomes drop? After all this time, doesn't it seem reasonable that this growth would have flowed into your income? Of course, if the government lied about inflation, which is now undeniable, the answer would be no.

Oh sure, most families have more dollars to spend today. The trouble is; consumer price inflation has made those dollars worth less.

So how did the GDP grow like it did you wonder? Did we discover the miracle of eternal growth? No, it was simply a mirage of credit expansion and inflation. Lucky for us, the bill NEVER comes due. How lucky we are.

I hope you all had a wonderful Holiday !

Real Time Trading Signals*for

Trade Date: 8/29/08

E-Mini S&P Trades*
(before fees and commissions):

1) PP sell @ 8:45am at 1295.25 = -1.75 (1 lot)

2) PP buy @ 9:25am at 1291.00 = -1.50 (1 lot)

3) OTF sell @ 12:00pm at 1288.25 = b/e*2

4) Algorithm positions (1)...combined total...-3.25


ZB (30 Year Bond) Trades*
(before fees and commissions):

1) Buy @ 11:59am at 117.095 = -2.5*3...combined total...-7.5


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