By Charles Biderman
April income tax payments sent in by individuals are surging, up by more than $50 billion over April 2012 and higher by $63 billion year to date. That means to me that year end 2012 income from asset sales and bonuses had to have spiked by around $300 billion to generate that $63 billion in bigger tax payments. I know, this is a lot of numbers and some of you should read the transcript instead of this video. To go back, in other words anticipation of this year’s higher taxes created a one time 10 percent pop in income over those few months the $300 billion became income!
And all you GDP watchers out there will never see that pop. Why? The US Bureau of Economic Analysis, which puts the garbage in garbage out GDP number, in its infinite wisdom ignores capital gains as well as any and all real time data. Why? Who knows. You ask them, they won’t answer me.
So no wonder the economy looked great to start this year. The $300 billion income spike created a very rosy glow particularly since none but us at TrimTabs were saying that the year pop in income was a one time event. Checking my year end videos I was guessing $100 to maybe $200 billion in higher income, not $300 billion.
Right now, over the past three weeks, wage and salary growth has slowed to less then 3 percent year over year, and that is before inflation. In other words, anticipation of higher taxes boosted economic activity at the end of last year and to start this year. Now that all the new money has been spent, the US economy is back to no growth.
I love watching those on CNBC who worship at the church of what works trying to defend record stock prices with the argument that the economy has to be improving or else stocks would not be going up.
Really? These guys obviously do not understand that all there is in the stock market are shares of stock and money. There is no earnings or interest rates in the stock market. Just shares of stock and money. So when the Federal Reserves is creating $85 billion in phony money each month to buy financial assets for the foreseeable future, what difference does it make what earnings or the economy is doing?
That is as long as companies are not selling huge amounts of new shares. And announced corporate buying has been exceeding all visual corporate and insider share sales since February of this year. Indeed, Apple’s $50 billion new buyback underlines that trend.
Therefore, more money mostly from government printing is greater then any growth of shares available. For as long as that continues, stocks will keep going up, regardless of what the economy does.
So to summarize, since the perpetual QE was announced in last September, the market value of US stocks is up by $2.4 trillion, or 13%, and wages and salaries are now growing by about $200 billion a year, or just under 3%.
To get to where we are now, $2 trillion of phony money a year is being created, $1 trill by the Fed and $1 trill by the Government. That $2 trillion is equal to $30% of the $7 trillion in after tax income for everybody who pays taxes. So it takes adding 30% of phony money to grow stocks by 13% and take home pay by 3 percent.
In the history of this planet money printing as a long term solution always works initially but then results in government bankruptcy.
How will it end this time? My guess is that initially at some point in the next few months the Japanese currency will plunge to 200 to the dollar, much more then the Japanese Central Bank wants. That will create financial panic in the Japanese consensus based society. After that the Euro will be next then followed the US dollar, forcing all three economies into a sort of bankruptcy.
But after the governments get out of the way the incredibly robust online world will flourish creating an unprecedented global prosperity.
Tags: capital gains Census Bureau census bureau retail sales Economics Economy Market Sentiment salaries weather