Osprey Flyer

The USA public debt continues greater than the annual GDP. That is, the debt ratio has exceeded 100%. Egan-Jones warned about this in their downgrade of United States sovereign debt to AA. This is disturbing plus foolhardy as Americans enjoy the free ride while they can. Your share of the United States public debt is $50,100 and add another $1,320 for your share of this year’s interest expense if we prefer not to roll the interest into the debt.

The two-party corporate political system kicks this debt bomb down the road with the blessings of their constituency. This is because a majority of Americans have bought into the fallacy that the government works for them and should be in charge of their lives in the name of the public good, safety, health, protection against the latest terrorists, and/or (insert your rationale here).

Of course, the government is actually for the benefit of the lobbyists, maximizing their profits, and keeping you under control. But just enough morsels are tossed out to the masses so they buy into the fiction: “Government is the great fiction, through which everybody endeavors to live at the expense of everybody else” (Frederic Bastiat). The problem is this fiction cannot sustain itself and ultimately a Day of Reckoning cometh for the USA. The morsels will stop at that Day for American citizens. The government domestic security infrastructure and matrix that is being built up will sure come in handy to keep you subdued, obedient, and compliant.

This fiscal lunacy doesn’t stop the federal spending on wars & military budgets, Homeland Security, TSA, NSA, CIA, & police state infrastructure, federal employee & military pensions & benefits, corporate welfare & subsidies, individual tax breaks & credits, social benefits & care, and all the other free stuff and handouts every last American wants. A significant portion of this spending has to be funded by borrowing (30%+ of every dollar spent) and this keeps the fiction alive that you live in the Land of the Free. The major media, the corporate advertising delivery system, will continue to affirm this make-believe world for you and will act just as surprised as you when the Day of Reckoning arrives.

Bash poor old Chairman Ben Bernanke and the Bankster-controlled Federal Reserve all you want, but he’s got to keep those interest rates crammed down in a zero-interest rate environment and print money just as fast as he can to keep America afloat. He doesn’t get one bit of assistance from the President or Congress to stop this madness as they dance to the  tune of the lobbyists. If he doesn’t perpetuate this Ponzi scheme, the entire American Dream would blow up.

The interest expense on the USA’s ever-increasing debt could skyrocket easily to $1 trillion annually if the interest rates got  loose from Bernanke! Not only that, some of the Too Big To Fail banks might actually become insolvent from interest rate shock and counter party panic. The entire frigging financial system might meltdown! It’s hard out here for the Wall Street Banksters! Ask JPMorgan CEO Jamie Dimon and his accomplices about that!

Charts consist of the latest data available from the Bureau of Economic Analysis (GDP at 3-31-12), U.S. Treasury (Public Debt at 5-29-12), and U.S. Census Bureau (Population at 5-31-12):
Public Debt $15.71 trillion
GDP $15.45 trillion
Population 313.65 million
Annualized Interest Expense $413.96 billion
Effective Interest Rate 2.80%

USA Sovereign Debt Now Exceeds GDP: Greetings From Big Brother

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Bureau of Economic Analysis: Gross Domestic Product

The Bureau of Economic Analysis released the second estimate of Q1 2012 GDP which was +1.9% quarter over quarter, a drop from the advance estimate of +2.2% and from the prior Q4 2011 of +3.0%. The total GDP was an all-time high $15.45 trillion annualized. The GDP has increased quarter over quarter for 11 consecutive quarters, since Q3 2009. Growth rates have ranged from a near-abysmal +0.4% in Q1 2011 to a robust +3.9% in Q1 2010.

The Big Question: Where is the USA economy headed? A recession in 2012 does not appear probable (yet), but continues as a low risk. Three scenarios are usually discussed: (1) a double dip recession whereby the GDP will turn negative yet again with a higher unemployment rate, (2) the economy will continue ”bottom bouncing” with slow to very slow growth and a continuing relatively high unemployment rate, or (3) the bottom is in and GDP growth will accelerate and full employment and is on the horizon.

Scenario (2) with slow to very slow economic growth and a continuing relatively high unemployment rate appears to be the most likely scenario for 2012, with an annual GDP growth projected of approximately +2.0% or a little more. The average of the most recent 4 quarters reported by the Bureau of Economic Analysis is +2.00% (+1.3%, +1.8%, +3.0%, +1.9%).

There is a more important chapter developing in the Story of America. The annualized GDP is $15+ trillion and the funded national debt has also exceeded $15 trillion. Yes, the USA debt has reached and passed the threshold of a national debt that exceeds GDP as the federal budget deficits continue uncontrolled. The sovereign debt to GDP  ratio has now exceeded 100%.

In the minds of many Americans, the 100% benchmark is usually surpassed by wild-eyed socialist countries and absurd dictators as these misguided nations implode into chaos and poverty. A review of this American milestone was reviewed earlier here: USA Sovereign Debt Now Exceeds GDP: Greetings From Big Brother. Later today, I’ll again update the data and explore the upcoming American Day of Reckoning, the result of the fiscal and monetary excesses in our American Dream Gone Wild.

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The Conference Board: Consumer Confidence Index

The May 2012 Consumer Confidence Index dropped -3.8 to 64.9 (preliminary) and a 4-month low, after reaching a 12-month high in February (71.6). Americans are pessimistic. The May reading is below the 74.6 monthly average from January 2005 through May 2012. However, this reading is well above the dismal October 2011 reading of 40.9, which was a 30-month low, the lowest since April 2009. Compared to the Pre-Great Recession peak of 111.9 in July 2007 consumer confidence continues at historically low levels regardless of the monthly ups and downs.

Says Lynn Franco, Director of The Conference Board Consumer Research Center, “Consumer Confidence fell in May, following a slight decline in April. Consumers were less positive about current business and labor market conditions, and they were more pessimistic about the short-term outlook. However, consumers were more upbeat about their income prospects, which should help sustain spending. Taken together, the retreat in the Present Situation Index and softening in consumer expectations suggest that the pace of economic growth in the months ahead may moderate.”

This is after the Thomson Reuters / University of Michigan Index of Consumer Sentiment was reported at a 55-month high in May, the highest since October 2007. Obviously there are two conflicting storylines between consumer “confidence” and “sentiment”. I have not been able to reconcile these reports: one positive and one negative. Americans are comparatively giddy according to the other report: USA Consumer Sentiment Rises to 55-Month High! This results in the two indexes being a Bulls Survey vs. Bears Survey.

Consumer Confidence Index by Month The Consumer Confidence Index (CCI) reached a Post-Great Recession peak of 72.0 in February 2011. The Great Recession cyclical low was 25.3 in February 2009. The Pre-Great Recession peak was 111.9 in July 2007.

Consumer Confidence Index by Year For each year, the related months are averaged. The Great Recession low was in 2009 at a 45.2 average and the Post-Great Recession peak has been 2011 at a 58.2 average, which is a 4-year high. For the 5 months ended May 2012, consumer confidence is at a 5-year high of 67.2.

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The Largest USA Tech Companies have reported aggregate total assets of $888 billion, which is the highest in the 5 quarters reviewed and an all-time high. This is a net increase of +$25 billion and +3% from the prior quarter. Apple led the way with a strong +$12 billion increase, followed by Microsoft (+$6 billion), Google (+$5 billion), and Qualcomm (+$4 billion). The only decreases were reported by Amazon (-$5 billion) and IBM (-$1 billion).

The $100 Billion Club: For the latest quarter reported, Apple continues #1 and largest at $150.9 billion. HP continues in second at $127.7 billion, followed by #3 Microsoft at $118.0 billion. IBM dropped to #4 at $115.3 billion. Next is #5 Cisco at $91.2 billion. The next group are #6 Google at $77.1 billion, which surpassed now #7 Oracle ($74.4 billion). Intel continues at #8 ($71.8 billion) followed by #9 Qualcomm ($41.5 billion). Amazon is last and #10 at $20.3 billion. I have included Amazon because of the Kindle Fire, streaming, cloud services, and the resulting competition with others listed.

The Largest USA Tech Companies have reported an average capital to assets ratio of 54.89%, a +1.39% increase from the prior quarter. The net increase was led by Amazon (+5%) and Apple (+3%). Only Google reported a decrease and this was negligible (-0.12%).

For the latest quarters reported, Google continues leading with the strongest capital of 80%, followed by Qualcomm at 77%. Apple is #3 at 68%, followed closely by Intel at 65%. Next are Oracle, Microsoft, and Cisco at 58%, 58%, and 56%, respectively. Amazon is 8th at 36%, followed by HP (33%) and finally IBM (18%).

Status
Updated through HP quarterly financial results reported 5-23-12

Largest USA Tech Companies Earnings Slip, Apple Dominates

Big Tech Market Cap: Apple Larger Than Microsoft and IBM Combined!

Big Tech Profits Increase: Qualcomm, Apple, Google Lead Surge

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The USA Banks Loan Charge-Off Rate of +1.17% for the quarter ended March 31, 2012 indicates the substandard loans on the books have been mostly worked off. Total Loans decreased by -0.8% from the prior QE December 31, 2011. However, banks are more risk-averse than before the 2008 USA financial system crisis and the Great Recession that officially ended the QE June 30, 2009. Therefore, Loan Charge-Offs should continue to decline as loan underwriting standards are more conservative. The Net Charge-Off Rate is still high compared to historical rates.

USA Banks Net Charge-Off Rate by Quarter The USA Banks Net Charge-Off Rate decreased to 1.17% for quarter ended March 31, 2012, which was the lowest since the QE March 31, 2008 at 0.99%. The Net Charge-Off Rate peaked at 2.89% for the QE December 31, 2009, during the USA financial system crisis.

USA Banks Net Charge-Off Rate by Segment For the 3 months ended March 31, 2012, the Net Charge-Off Rates by segments were:
All institutions +1.17%
Credit card banks +4.18%
International banks +1.48%
Agricultural banks +0.17%
Commercial lenders +0.76%
Mortgage lenders +0.95%
Consumer lenders +1.55%
Other specialized (< $1 billion total assets) +0.25%
All other (< $1 billion total assets) +0.37%
All other (> $1 billion total assets) +1.01%

Loan Losses Improve in All Major Loan Categories (FDIC Quarterly Banking Profile, May 24, 2012) Loan losses declined from year-ago levels for a seventh consecutive quarter. Net charge-offs (NCOs) totaled $21.8 billion in the first quarter, the lowest quarterly total in four years, and $11.7 billion (34.8 percent) less than in first quarter 2011. Charge-offs were lower in all major loan categories. The largest year-over-year declines were in credit cards, where NCOs fell by $4.3 billion (37.7 percent), in real estate construction and land loans, where NCOs were $1.8 billion (60.6 percent) lower, and in commercial and industrial (C&I) loans, where NCOs declined by $1.5 billion (44.4 percent).

USA Banks Return on Assets Rise to Post-Crisis High

FDIC Deposit Insurance Fund Balance at 10-Quarter High

FDIC Problem Bank List Decreases to 9-Quarter Low

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USA Banks Return on Assets of +1.02% for the quarter ended March 31, 2012 signals continued improvement in profitability and ongoing stability in the banking system. There were 7,307 financial institutions reporting. The prior year quarter, the QE 3-31-11, was +0.86%. The current ROA is the highest since the full-year 2006 (+1.28%).

Return on assets reflects the overall performance, and health, of the banking system and takes into account all of the income statement components, including net interest margins, loan loss provisions, operating expenses, and income taxes. Return on assets also indicates how effectively and efficiently assets are being deployed and if the asset mix is ultimately profitable. An ROA of +1.00% is a banking benchmark.

USA Banks Return on Assets by Year The USA Banks Return on Assets (ROA) was +1.28% for the years ended 2004, 2005, and 2006. The ROA decreased to +0.81% and +0.03% in 2007 and 2008. The ROA then turned negative to -0.07% in 2009, before rebounding to +0.65% in 2010 and +0.88% in 2011.

USA Banks Return on Assets by Segment For the 3 months ended March 31, 2012, the Annualized ROA by banking segments were:
All institutions +0.88%
Credit card banks +3.33%
International banks +0.85%
Agricultural banks +1.27%
Commercial lenders +0.84%
Mortgage lenders +0.81%
Consumer lenders +1.78%
Other specialized (< $1 billion total assets) +1.73%
All other (< $1 billion total assets) +1.00%
All other (> $1 billion total assets) +1.02%

Earnings Rise to Post-Crisis High (FDIC Quarterly Banking Profile, May 24, 2012) FDIC-insured commercial banks and savings institutions reported $35.3 billion in net income for first quarter 2012. This represents a $6.6 billion (22.9 percent) improvement over first quarter 2011 results, and is the highest quarterly net income reported by the industry since second quarter 2007. The average return on assets (ROA) rose above the 1 percent threshold for only the second time since second quarter 2007 (third quarter 2011 ROA was 1.03 percent). Quarterly net income has now improved year over year for 11 consecutive quarters. More than two-thirds of all institutions (67.5 percent) reported year-over-year improvement in their quarterly earnings, and only 10.3 percent were unprofitable, the lowest level since second quarter 2007.

FDIC Deposit Insurance Fund Balance at 10-Quarter High

FDIC Problem Bank List Decreases to 9-Quarter Low

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