Hey look at the bright side, Ebay will be full with busloads of Mikita hand saws, De Walt cordless drills and used pickup trucks. They'll be realllly cheap too.
So, I'm curious: given the number of high-profile builder retrenchments - that is, cancelled projects and starts - why the lag in this statistic?
It's my speculation that low-level production workers were shed first, by which I mean: illegal alien sheet rock hangers, vinyl siding staplers (well, staplers of all sorts of things: OSB, shingles, etc.). These folks weren't on the books and made up the bulk of production employment. The workers being shed now are skilled labor - folks whose skills were heavily leveraged by the use of unskilled 'helpers' - licensed (and unionized?) electricians, plumbers, masons and carpenters. At an even more insulated layer, would be architects, engineers, and project managers.
I am a real neophyte though, so I have no idea how this works. As a HS student and undergrad I 'muled' a couple of summers for a local construction co, but that was in the early 80s. I know this is how I'd handle my labor costs, and is what I saw in the late-2004 construction of my sibling's Mc-Poo-box in Stone Mountain, GA. That labor model resulted in a house that revealed major structural flaws in approximately 9 months. Amazingly she unloaded for a slight gain (about enough to offset all transaction costs - going in and out) in 2006 - in for only 11 mos.
Is this statistical trend more connected to other artifacts (BLS Birth and Death model)?
Tax relief without cuts in gov't spending is nothing more than tax deferral.
Business tax revenues are set to decline dramatically. Same with personal income tax revenues. Throw in higher gov't spending and our national debt is set to soar even higher.
A weaker dollar and higher measured cpi inflation are guaranteed. Asset deflation, consumer inflation. Proceed accordingly.
Anecdotally, we've had a really tough time the last year or so finding candidates to interview. We almost gave up altogether.
Just in the past two months or so, it seems like it's gotten a lot easier.
A friend of mine who used to work here was asking if his old position was available. He was one of the more highly qualified people here during his time.
--
UR (Unemployment Rate) Up 0.6% from the cycle low.
When the UR rises 0.5% from the low in the cycle the economy was is recession every time.
RECESSION FULLY CONFIRMED.
I am loving my forecast for recession to have begun in Oct, but no later than Dec, more and more and more every day, especially, when confirmed by barrage of data.
Net birth death adjustment +66,000. I guess Bend over Ben and King Henry will have an interesting discussion with George in the White House today. Perhaps another hint of an emergency rate cut later today to save the 13,000 level on the DJIA and give the folks on Wall Street a pleasant weekend.
central_scrutinizer: Ebay will be full with busloads of Mikita hand saws, De Walt cordless drills and used pickup trucks. They'll be realllly cheap too.
Ebay may have to change their algorithm to allow prices to FALL as too many items of the same products get listed. (Currently Ebay prices can only go up, unlike stock price which can go up and down. Hmm, how about an anti-ebay to allow shorting? Or ebay-options market?)
Scott, the reason for the lag in residential construction employment is probably a combination of: the BLS has not correctly counted illegal immigrants working in construction (although they didn't count them on the way up either), the BLS Birth/Death model has missed the turning point in employment, and therefore the BLS has overstated the current number of residential construction employees, some construction employees have moved from residential to commercial work, but they are still being reported as residential construction employees to the BLS, many workers are still employed, but they are working far fewer hours.
All of these arguments have some merit. Now that commercial construction is slowing, we will probably see the job losses.
The weak jobs report puts more pressure on the Federal Reserve to act aggressively to prevent a recession.
Which I would revise to:
The weak jobs report puts more pressure on the Federal Reserve to act aggressively to postpone a recession in favor of a some future cataclysmic super-recession.
Ebay may not allow prices for an invidual item to be bid down, but if the supply for that item overwhelms the demand you can bet that the ask prices will fall, and bids will evaporate.
So the net effect should be the sam, I think. I do like you idea on ebay derivatives, that has real potential.
if you think the housing situation was bad now, and about to get worse with steep price declines in the year ahead, now lets toss a 7-8% unemployment rate by 2009 into the mix.
All, it's looking more and more like December was a very weak month - although the last time we saw a weak jobs report it was revised away.
Looking at the report though, it seems like the revisions to the unemployment rate are fairly modest (and for the past year they all seem to be upward adjustments).
I assume its due to no birth death model involved.
Companies that are not related to financials are cutting expenditure. At best they see flat capital spending this year. Well that's what our CEO is saying. We are ready for yet another reorg.
According to the household data, employment increased 600,000 from Oct to Nov, then fell 436,000 from Nov to Dec. This report is really a parody of itself. It's inaccuracy is self-evident.
Has anyone tracked the number of people currently drawing unemployment insurance from the DOL claims report? During the week ending Dec. 22 it was 2,761,000, up about 100,000 over a few weeks. So layoffs aren't jumping, but people laid off are having a harder time finding new jobs.
In December, actual private sector jobs created over the past twelve months (Nov '06 to Dec '07) stands at 1.001 million -- the lowest level since March 2004. The employment picture in the US has been on a steady slide for 18 months. Combine that with the -0.5% savings rate in November, the lowest monthly tally (since the Big Revision to the personal income figures) since the Great Depression, and with CR's housing data, and you've got the equivalent of "Surrender, Dorothy" written in the sky.
Thanks very much - ISTR you've mentioned the Commercial vs. Residential mis-labeling before, sorry I forgot that.
I always overlook the fact that illegals weren't counted on the way up. Doh.
FWIW - the business of graph interpretation on this blog really does take me back to my days as an undergraduate Chem major - trying to tease out the various structures represented by peaks in chromatographs - I guess my brain really has atrophied!
According to the household data, employment increased 600,000 from Oct to Nov, then fell 436,000 from Nov to Dec. This report is really a parody of itself. It's inaccuracy is self-evident.
Not so. The household survey is the best window into U.S. employment over time. Monthly variations should be averaged. Household survey shows the U.S. economy added only about 300,000 new jobs in 2007.
Remember that the payroll survey usually shows a huge one-time downward adjustment to the birth-death model every January.
According to the household data, employment increased 600,000 from Oct to Nov, then fell 436,000 from Nov to Dec. This report is really a parody of itself. It's inaccuracy is self-evident.
Has anyone tracked the number of people currently drawing unemployment insurance from the DOL claims report? During the week ending Dec. 22 it was 2,761,000, up about 100,000 over a few weeks. So layoffs aren't jumping, but people laid off are having a harder time finding new jobs.
I think a lot of the inaccuracies this time of year are due to seasonal adjustments. Treating the data like it's winter when it's still as warm as summer, etc.
Also I think you have to be careful with the jobless claims and payrolls this time around simply because a lot of real estate related jobs don't show up in these measures -- the complete opposite of the tech jobs we lost starting in 2000.
I think that explains some of the mystery of the "jobless recovery" we had a few years back -- a lot of the jobs that were getting created weren't showing up on payrolls. Likewise we might have a "jobful recession" (relatively speaking).
Part of the reason for the big jump in this report is that the household survey was done earlier in November, due to the Thanksgiving holiday. So December is getting more change than it normally would.
Still, the change in continuing claims does show that the ability of laid-off workers to find new jobs is diminishing, as have multiple employment measures. This report is not an aberration.
Larry Kudlow has left his DC home in an ambulance after police were summoned to his neighborhood this morning.
Police found the incoherent Kudlow stumbling around his apartment, mumbling incoherently about "the greatest story never told." Several neighbors claimed they could hear the conservative pundit shouting "Goldilocks porridge is just right, dammit" around 8:31AM.
Several empty tubes of Testors model airplane glue were found littered in the apartment, along with empty pizza boxes, Miami Vice re-runs and posters of the Gipper.
Re the gold and oil longs, to my mind, oil in the ground is a proxy for everything for which gold is a proxy.
Yeah, oil and energy will go down during (let me choose the word carefully) disinflationary times, but gold is likely to get killed.
Oil is still a cyclical but, barring a deus ex machina, the lows will be higher and the highs will be higher for the rest of our children's lives. I'd still be comfortable dollar-cost-averaging into physical oil during this time.
Looks like the normal business cycle with a periodicity of 4 to 8 years. This one fell right in the middle at 6 years. What's different? A media, to include blogs, that amplify the obvious.
Ebay may not allow prices for an invidual item to be bid down, but if the supply for that item overwhelms the demand you can bet that the ask prices will fall, and bids will evaporate.
going way OT...
That is not exactly true. A seller can actually modify the 'asking price' (presumably downward) if they are not getting any bids (up until 12 hours before the auction ends iirc). Also, people can list things as "BIN or Best Offer" (which I see more and more of these days). So there is some reaction capability there. For some items, eBay is becoming a buyers market. More and more, the buyers are becoming wise to certain types of junk being listed, and are letting it go unsold.
Five of 18 industries were growing in December: retail, information, professional services, construction ? and health care. Eight industries were contracting
Kudlow released from DC hospital pending further psychiatric evaluation. Friends and family are rumored to be planning an intervention, involving re-education in the joys of bear markets and a cutoff of Koolaid supply.
Is there a place to see the number of 401k loans and hardship withdrawals over a period of time? I imagine these will increase in the coming year. And, that many will stop contributions. Oh, and dreams of a comfortable retirement for many in their 50's and early retirement for many in their 30's and 40's will disappear. This report will definitely accelerate the fear. We should have gone to the doctor sooner, now we have to take our medicine.
Jas is right about the recessionary implication of the jobless rate rise. There is some reason to be suspicious of a 0.3% rise in a single month, but in this case, my suspicion is that we would have seen a rise in November, had it not been for early retail hiring. Retail employment is a big deal in November and December, and the payroll data show it was moved forward this year. Thus the jobless rate held steady in November when it would otherwise probably have risen, but then there was not enough retail hiring left for December to prevent a big rise. So the 5% is probably right, but we should have gotten here a bit more smoothly, given seasonal adjustments appropriate to the new hiring pattern. The jobless rate stopped falling a year ago. A prolonged period of no decline in the jobless rate is a pretty good signal of trouble, but a 0.5% (now 0.6%) rise is just deadly.
The odds that we will have a recession in 2008 just went up big time. This morning the Labor Department released the December employment report and it showed only 18,000 jobs created vs. expectations of 70,000. This was the lowest rate of job creation since 8/03, when the last recession was coming to an end. The unemployment rate jumped to 5.0% from 4.7%. Expectations were for an unemployment rate of 4.8%. While in a historical context 5.0% unemployment is not that bad, it is the highest rate since the storm ravaged data of 11/05. On the plus side, the job creation numbers for November were revised upwards by 21,000, but then again October was revised down by even more than that, so call the revisions a wash. Part of the reason for the low unemployment rate has been a smaller proportion of the population in the work force. The labor force participation rate now stands at 66.0% vs. 66.4% a year ago and the employment to population ratio is at 62.7% vs. 63.4% a year ago. Average hourly earnings were up 0.4% for the month better than the 0.3% expected, but the November gain was revised down to 0.4% from 0.5%. The average workweek was unchanged at 33.8, a level it has been pretty much stuck at for over a year.
Looking deeper inside the numbers the picture become even more bleak. More than all the net jobs created in December were government jobs, which increased by 31,000. Over the last five months, new government jobs have increased by 178,000 or 41% of the 429,000 new jobs created in the economy.
Health care jobs continue to expand, which is an indication that health care continues to expand as a percentage of the economy (already by far we spend much more than any other country in the world on health care as a percent of GDP, even though on objective measures we are decidedly middle of the pack amongst developed countries). Over the last year we have added 381,000 new health care jobs. Health Care at least provides a range of high, middle and low income jobs.
The same can not be said of the food service industry which is the other big job growth engine in the economy, adding 27,000 jobs in December and 304,000 over the last year. Goods producing jobs continue to tumble falling 75,000 for the month and 275,000 over the last five months. Goods producing includes 2 major categories, Construction and Manufacturing. Construction jobs were down 49,000 on the month and are down 160,000 over the last five months. That is not very surprising given the difficulties that the housing market is experiencing (actually it is very surprising that it is not down much more).
Manufacturing was down 31,000 for the month and 127,000 over the last five months. Given that a resurgence in exports has been one of the key strengths of the economy in recent months, the weakness there is a bit more surprising. Then again the Instituted for Supply Management came out earlier this week with a reading
Also worth noting, I think, is that construction and manufacturing just got chewed up in the revisions. Net revisions for the past two months totaled +10k, but for the goods sector, it was -33k. The revisions alone were like a bad month for the goods sector. This is entirely consistent with ISM data, which show the factory sector weakening progressively, while the service sector is growing at a tepid but fairly steady pace.
It occurs to me that even if the birth-death model is completely accurate in predicting the number of people who are starting new businesses, it doesn't necessarily mean those people are making enough to pay their bills.
I imagine many of the folks leaving gainful construction employment are starting businesses in the sense that they have ordered business cards, and they might even report themselves as employed in the household survey.
Does anybody know if the birth-death model has any input that would control for new "businesses" that don't actually make any money?
Looking deeper inside the numbers the picture become even more bleak. More than all the net jobs created in December were government jobs, which increased by 31,000. Over the last five months, new government jobs have increased by 178,000 or 41% of the 429,000 new jobs created in the economy.
I know someone asked this yesterday but I didn't see any response.
Any ideas on why SRS has moved the way it has the past two days? I'm not complaining, just trying to find some reason for my good fortune.
A lot of leveraged speculative trades are unwinding. Hedge funds are getting hammered and the smart ones are starting to move short.
Whatever U.S. assets that have had had high negative correlation with yen the past year (such as SRS) are dropping. Strangely, emerging markets aren't yet doing the same, at least not as fast. They're next.
Then again the Instituted for Supply Management came out earlier this week with a reading of 47.7, below the 50.0 reading that is the dividing line between expansion and contraction in the manufacturing part of the economy. If the resurgence in exports starts to fade, watch out below, because there is not that much else propping up this economy.
All in all it was a pretty ugly report. The only silver lining is that it raises the probability that the Fed cuts by 50 basis points at the end of the month rather than just by 25 (the chance of no cut or an increase is approximately the same as seeing a Ron Paul vs. Dennis Kucinich race this fall).
FHA Reforms
NAR successfully lobbied for the passage of H.R. 1852, the Expanding American Homeownership Act of 2007, which helps modernize FHA by expanding the availability of safe and affordable FHA-backed loans for purchases and refinances. The bill includes provisions to eliminate the 3% down payment requirement, increase loan limits up to 175% of the conforming limit in high-cost areas, streamline condominium purchases, and eliminate the cap on Home Equity Conversion mortgages (HECMs). The Senate Banking Committee passed a similar bill. The Senate bill is expected on the floor by the end of the year.
Freddie Mac/Fannie Mae Reform
NAR also successfully lobbied for passage of H.R. 1427, the Federal Housing Financing Reform Act of 2007, which overhauls the regulatory structure of the nations housing finance government-sponsored enterprises (GSEs). H.R. 1427 provides for regional adjustments to the caps on mortgages the GSEs may buy for high-cost areas, helping more working families qualify for safer GSE loans. The House passed H.R. 1427, 313-104. The Senate has taken no action to date.
Strangely, emerging markets aren't yet doing the same, at least not as fast. They're next.
I think the hedgies are going to attempt to aggressively protect emerging markets and commodities for the next bubble phase in anticipation of more rate cuts.
The industry needs asset bubbles to survive in its current form, so expect them to defend "emerging bubbles" like their life depends on it.
But when they finally break, it could be violent... especially if a lot of hedgies panic and go short all at once.
But the bill that the banking industry will likely be watching the most closely is one that isn't even under Dodd's jurisdiction. Dodd has said he wants to propose legislation that would make it easier for bankruptcy judges to alter the terms of a mortgage to help borrowers escape foreclosure.
The banking industry has fought hard against similar legislation in the House. If Dodd introduces the bill, it would have to be considered by the Senate Judiciary Committee because it deals with legal and court matters.
The Big Picture blog puts a lot of emphasis on the birth-death model.
"Hence, the absurd determination that 199,000 small business construction jobs have been created since January 2007.
Consider: The B/D generated 1,239,000 jobs from February thru November 2007. That's rather surprising, since the total NFP jobs created since January 2007 was 1,208,000. In other words, the Net Birth/Death jobs created over 10 months was actually greater than the total NFP jobs created in all of 2007. That's rather odd, don't you think?."
Nothing this administration says is believable. Shame.
CR,
What are your thoughts on the participation rate? I notice the NILF Not In labor Force) has risen 10 million since 2000. [ref: ftp://ftp.bls.gov/pub/suppl/empsit.cpseea1.txt ]
Thanks for all you do.
Hi, My name is Larry K., and I am addicted to koolaid.
It all started innocently enough. I would have a shot or two at the end of a bull market, just to keep the buzz going. I never got into any trouble back then.
But in 2001, everything changed. A lot of pushers moved into the neighborhood--they were givin' the stuff away! I'd spend time on the street, and there they'd be, handin' it out every time a bad report came out.
After 9/11, I couldn't keep my hands off of the stuff. Lil' G'span was always there for me--givin' me all I could handle. The Koolaid WORKED--every doubt I entertained would fade away with another shot of the Kade.
It just kept gettin' worse, though. More and more people would tell me that I needed help. I woke up itchin' and beggin' for another sip. I started selling everything for another shot. Hank the P and ChopperB still gave it up, but I had to get down on my knees and scream lies on television.
Then, the December jobs report came out. I knew my boys on Constitution could help, but they started calling in their markers. "Not until we feel better about inflation..." Sh*t!!!
I needed my Kade, adn I needed it now. I hit bottom. I tried mixing Cough syrup and Splenda, drank a whole bottle of it, and when I woke up, I was in the Psych ward at GWU Hospital.
That's how I got to this meeting. It's my last chance. I know I gotta start telling truth, and kick the Kade.
Tax rebate..great! another whole $300 large...that just might pay for the grocery bill...Oh if i only had 3 wishes...Hmm is that a helicopter i here flying over my house?...honey quick grab a bag the tax rebate is here.
It is going to be ugly for the schmucks in Sacramento when folks wake up and realize what a huge risk it is to be lending to a state with such a terrible fiscal future.
Let the rate cuts continue...
Neal | 01.04.08 - 9:11 am | #
And inflation rise???
I thought controlling inflation was the #1 job of the Fed. Or does the #1 job change when reality intrudes? Or whatever. I think the Fed is going to be in a big big squeeze.
Alpha Omega, the Cambridge-based jewelry and watch chain, filed for Ch. 11 bankruptcy protection yesterday and asked the court to approve the sale of its assets by an auction.
The chain, which made the filing under its Lexington Jewelers Exchange Inc. corporate name, temporarily shut its four stores in Cambridge, Boston, Natick and Burlington for two days last month after owner Raman Handa fled to India amid growing financial problems, and the companys bank seized its assets
When money is being vaporised in the housing market and now the stock market that isn't exactly inflationary. The FED only directly controls about 45 billion in reserves, volocity is falling. Gold held it value in the depression only because the goverment fixed the price of gold which meant the price wouldn't fall below a certain level, all the other commodities got crushed. Guess what the goverment doesn't set the price of gold, fools do.
Time for me to cover the SPY shorts and get ready to short the bounce TTFN
a new name to stick your fork into:
Edward Lazear (LazIAR),everybody!
By Betty Liu and John Brinsley
Jan. 4 (Bloomberg) -- The U.S. economy is likely to avert a
recession and growth may accelerate in the second half of 2008,
President George W. Bush's chief economist said.
An increase in the nation's gross domestic product of ``2.5
to 3 percent still looks reasonable for this year,'' said Edward
Lazear, chairman of the White House's Council of Economic
Advisers, in an interview from Washington.
In todays WSJ:
American Home Mortgage Investment Corp.'s plan to destroy 490,000 hard-copy mortgage files has drawn fire from federal bankruptcy monitors, who say it could hurt homeowners' ability to sue the failed lender.
The company, once one of the country's largest mortgage lenders, says it can no longer afford the $45,000-per-month rental on warehouse space to preserve paper files. Its bid for court permission to destroy the files has been criticized by Kelly Beaudin Stapleton, the U.S. Trustee monitoring the case.
Destruction of the paper files could create trouble for American Home borrowers, compromising their ability to file lawsuits against the Melville, N.Y., company, Ms. Stapleton said in papers filed with the U.S. Bankruptcy Court in Wilmington, Del. American Home, which collapsed into bankruptcy in August, is selling its assets and going out of business American Home's Intention To Destroy Files Raises Ire - WSJ.com
ac, you actually have a job? You post insightful comments AND collect a salary? Who's the boss/employer who's getting the short-end on that deal?
Ha ha... that's a little bit below the belt I think.
Fortunately in some industries with work products that are highly visible and specialized in nature, what really matters is the quality of your output.
Um, sue BK company.
Get nothing, waste of time folks.
Now the recession is officially on, Kudlow is already calling for tax cuts.
It is a new year, time for new solutions. Of course the mainstream seems to have no real solutions, so now Obama and Huckabee are being touted as providers of solutions.
Alot of the surge in exports has to do with the significantly increased value of our agricultural exports. Wheat alone is near $10/bushel, up huge and the US is the single largest exporter of wheat. The agricultural exports are significant to our exports. People just automatically believe that we must be exporting more widgets, not so. There's alot of food stuff mixed in with those widgets. This partially fills the gap between the drop in manufacturing jobs with reported increases in our exports.
CR said:
All, it's looking more and more like December was a very weak month
I am seeing mixed results for Dec. Weak retailers held on to live to month end and are now seeking closures. But I think some retailers did rather well in Q4. I am not seeing much after Christmas adverts which leaves me to believe there is no inventory hangover. Then again, Bed/Bath was a surprize. I'm anxious to see how Home Depot did. I'll bet Walmart was flat.
As to employment - I would not want to be in Fin. Services. Lots (LOTS!) of chatter of "effeciencies" and "moving forward".
ac, you're like Barry Bonds in his prime: lots of down and bench time, but hitting for extra bases (visible, specialized, high quality) when you get up?
Is there a private firm or some govt agency that keeps track of "unlawful detainer court filings?" (i.e. eviction filings). It would be interesting to know if numbers are rising or not?
With regard to 12th percentile's question and the answers above re:SRS (double-short REIT ETF) performance, the Centro deal and OC stats alone don't seem like enough to cause a 15% move in two days, though I do agree that they're meaningful. And REITS were among the losing sectors last year, so I would think selling related to the Yen negative correlation/unwinding carry trade would focus on better-performing areas like commodities or gold, but I'm admittedly veering into conjecture here. I'm also baffled by the good fortune of owning the thing, and getting a bit worried about whether to let the winner ride or stick to my sell target.
Completely and utterly OT, I would like to nominate another entrant into Tanta's bad metaphor contest. From Bloomberg today, with regard to the poor performance of senior loan funds:
``Loan funds got hit square in the face with the contagion,'' said Payson Swaffield, chief investment officer for fixed income at Boston-based Eaton Vance, who oversees $53 billion, including $20 billion in bank-loan assets.
Link: Bloomberg.com
How can the Federal reserve cut rates again with Inflation being so high?
I dont care how bad unemployment gets, if inflation is high how can they justify cutting the rate?
(BTW I dont believe the lowering rate will improve employment at all, the time constant on the economy is long and a low rate will just give us another bubble later on.)
There's a great analogy in this story (Imagine Bai=Bernanke and the Ford is the economy. The train is debt):
Bai, who has been working in Fishkill, was driving west on Green Lane around 7 p.m., and told Metropolitan Transportation Authority police the GPS system instructed him to turn right as he was crossing the tracks. He was headed for the Saw Mill River Parkway, just past the tracks.
He got stuck, tried unsuccessfully to reverse and finally abandoned the 2006 Ford Focus minutes before it was slammed by a northbound Metro-North Harlem Line train, MTA police said.
"As the car is driving over the tracks, the GPS system tells him to turn right, and he turns right onto the railroad tracks," said Brucker. "That's how it happened."
Brucker added, "He tried to stop the train by waving his arms, which apparently was not totally effective in slowing the train."
i think its price in nominal terms may get hurt from these levels, but as a store of real value i think the data from past deflations indicate it does better than just about any other commodity.
depressions are all about deflating asset prices (higher order goods) vis-a-vis commodities (lower order goods) as the economy is deleveraged. gold bullion is about the lowest order good out there, next to cash -- and may well outperform cash, depending on government actions.
not a chance. CBs will fight deflation tooth and nail. Gold through the roof, let alone also factor in the pressure on the Fed fiscal budget over the coming years from SS and medicare. In fact, to the moon. Debt monetization tsunami coming to a treasury dept near you.
Thanks to the consolidation of ownership of US media over the past 15 to 20 years, the quality and credibility has slid to near-Soviet levels. The so-called business news is all happy talk.
I confess I don't understand this thing for gold. It has relatively limited utilitarian value, being mostly a raw material for shiny trinkets. Surely the demand for shiny trinkets is extremely elastic. The use of gold as a wealth proxy is an odd anachronism from the days of Queen Isabella. Oil, on the other hand, has a strictly utilitarian value and is probably the core staple of modern industrial economies. Demand slackens during slow times but never disappears and, with the sheer inertia of the giant growing Chinese economy, may not even slacken much in this new down cycle.
you guys who think "peak oil" type of thoughts consider China & India are living and consuming in ~$60/bbl world with the govt subsidizing the difference. as ca receipts are falling for china and govt budget deficits are mounting in india this situation is at inflection point. oil might go higher depending on what happens to the >global< supply of money (can grow before it goes down), but it will fall once the marginal consumers start to pay the real price.
I dont care how bad unemployment gets, if inflation is high how can they justify cutting the rate?
if they look forward to credit destruction instead of back at the recent forced credit expansion brought on by the reintermediaion of commerical banks into the "shadow banking system", they'll have a lot of room to justify. the question is how they can anticipate deterioration in this graph.
"Jas, are you absolutely sure? Sebastian's models confirmed, with an absolute 100% certainty, that there would be NO recession in 2008."
Since the end of WW II, every time that the UR went up 0.5% from the cycle low the economy had already entered the recession. One Tony Crecenzi (sp?) just confirmed that on CNBC.
"Sebastian's models" makes for a good piss-pot. His head is full of garbage and he drops it everywhere he goes. He makes a real mess. Even clean up crew cant keep up.
Does anyone here (or in China) understand the ramifications of 40 year mortgages with zero down, and Jumbo Mortgages of 1 million bucks?
Does anyone think this is good or that Fannie & Paulson are helping Americas future, by subjecting our housing market to chaos, as we struggle with subprime default and banking corruption and a recession crisis?
Re: FHA Reforms
NAR successfully lobbied for the passage of H.R. 1852, the Expanding American Homeownership Act of 2007, which helps modernize FHA by expanding the availability of safe and affordable FHA-backed loans for purchases and refinances. The bill includes provisions to eliminate the 3% down payment requirement, increase loan limits up to 175% of the conforming limit in high-cost areas, streamline condominium purchases, and eliminate the cap on Home Equity Conversion mortgages (HECMs). The Senate Banking Committee passed a similar bill. The Senate bill is expected on the floor by the end of the year.
Freddie Mac/Fannie Mae Reform
NAR also successfully lobbied for passage of H.R. 1427, the Federal Housing Financing Reform Act of 2007, which overhauls the regulatory structure of the nations housing finance government-sponsored enterprises (GSEs). H.R. 1427 provides for regional adjustments to the caps on mortgages the GSEs may buy for high-cost areas, helping more working families qualify for safer GSE loans. The House passed H.R. 1427, 313-104. The Senate has taken no action to date.
DH
Maybe we should chat about hair styles or the color of blue instead?
WASHINGTON - The Federal Reserve announced Friday that it is increasing the amount of money available to banks through a new auction process, one of the main ways it is combatting a severe credit squeeze. The Fed again pledged to continue with the auctions "for as long as necessary."
We cant have a recession if everyone is gainfully employed.
That was the comment from a bimbo named Diane Garnick played on Bloomberg. What caught my attention was not what the bimbo said but her eye movements and facial expression while sharing this important insight with the world. She is the founder of the Ladies in Red. And she was wearing red to draw maximum attention to her propaganda. The most important and some of the best paid jobs in America are for propagandists and we can see that Ms garnick is gainfully employed. And so was Greenspan for a very long time.
There are few problems with Ms Garnicks pronouncement. First, no one has informed Ms Garnick that not everyone in America is gainfully employed. Second, right smack in the middle of the last recession the unemployment rate was 4.6%, lower than what it has been since Sep07. Third, employment doesnt start to fall until few months into a recession. Forth, the serious job losses take place a year AFTER the beginning of the recession.
Employment is the laggiest of the lagging indicators for a reason. But, propagandists make use of it to deny recession and push Scams. Bubbleheads dont need much more than fluff to remain positive even when they are losing money in Scams because it is just temporary or even a buying opportunity.
This recession is not going to be an ordinary recession and losses in Scams are not going to be recovered for decades. Beware of propagandists who crowd the boob tube.
the question really is, though, do CBs -- particularly the fed -- actually have a choice?
the united states has total outstanding credits of $40tn over a monetary base of $0.8tn -- and is a huge foreign debtor. could it force enough currency into the system to counter a credit contraction? and do it while risking a dollar/debt repudiation that would do a lot to cut it off from the foreign markets on which it is reliant?
and further, there's little to say it would work even if tried. japan pushed 12% of gdp into its banks in 1999, and watched as they reserved it against losses and loaned it out overseas. the result was eight years of domestic deflation in the face of 25% YoY expansion of monetary base as banks slowly recapitalized.
i don't know the answer, but i suspect we'll get not a hyperinflation (at least right away) but a muddle-through ZIRP, bank bailouts, and credit contraction partially offset by more government borrowing and monetary base growth.
Mish is absolutely brilliant and hopelessly deluded at the same time, in my opinion ...
Detroit Dan | 01.04.08 - 11:36 am | #
Please elaborate on the latter, Mish is very forthright in his reasoned debates and data. I appreciate that in this creative, meritocratic salon environment. If you have convincing data or theories rather than conjecture, please share.
Personally I wish I had a crystal ball, but must rely on what I perceive are the best reasoned theories. So far it has done much better than preserve capital, thank goodness.
--
"Jas- We know the 'problem', what is the 'fix'?"
Total collapse of the current American econo-political system! Nothing else will do. It is way beyond evolution of a new system via changes. It is like a house that needs demolition to build a new one.
Evil deeds of BFNYC, Pushing Debt and building Debt Concentration Camps, have made a German-style change very likely. In political development America is where Germany was 100 years ago. Therefore, the best forecast for Americans is what happened to Germans with approx 100 years of time lag. Stupidity has its price. We can thank the Propaganda Machine for that.
Sorry,
Jas
PS: Please note that in early 1900s Germany was by far the most technologically and philosophically advanced nation. Professors educated in Berlin were the most respected in American universities.
Fortunately in some industries with work products that are highly visible and specialized in nature, what really matters is the quality of your output.
Which is why I am working six days a week boxing processed cheese. All the hamburger chains seems to be doing well...
Mike in AZ,
The problem is that the world reserve figures are probably BS. Go look at the BP annual statistical review and look at the reserve figures for OPEC members in the 1980's, one would have thought that was the golden age of big oil finds, since reserves were boosted by apx 250 billion barrels. However, there were no significant oil finds durring that era. What happened was a battle for market share within OPEC as oil prices fell. Since the only reason for OPEC to exist is to set production quotas, and production quotas are based on the amount of reserves, the countries fell over themselves to increase the stated amount of their reserves. Also note that Saudi Arabia magically has "found" exactly as much oil as it has pumped for each of thed last 12 years or so. However the last big oil find in SA was in 1964. For further reading check out "The Oil Drum" or pick up a copy of "Twilight in the Desert"
per Frances Martinez Myers, President of National Association of Hispanic Real Estate Professionals.Mortgages are now beening processed with ITIN numbers, issued by the IRS, who has issued 9 million ITIN numbers since 1996. Also CitiMortgage, which has loaned 5.6 Billion in mortgages, since April 2005 in Texas, plans to loan 200 billion by the year 2010, just in Texas. This way Citibank does not have to loan the Mexico government money any longer, and then have to write it off. CitiBank will at least have some colateral left then the dust clears.
It's possible you are right. Generally, however, the "I don't like the numbers, therefore they must be fudged" argument is pretty weak. The BP report doesn't even include the Canadian oil sands. Including those brings the ratio up to over 46 years. Also, I think I'll put more faith in BP than in theoildrum.com.
IMHO, the current price of oil is just the latest bubble which I expect will pop sometime during this recession.
The B/D model has been subtracting construction jobs since November, but it's seasonal should start adding jobs come February.
The new headscratcher is all the jobs added in Financial services. 67k jobs added since August? Puh-leaze.
The employment survey (incl B/D) compared to the BED survey related to construction is generous by 5k jobs, but that's due to the -52k January adjustment. Next BED survey should be Mid Feb. for Q2 2007.
The BES total was +12k construction jobs(even though the Q2 average was -10k to Q1), but the B/D added 115k of those. I'd hazard to guess that the discrepancy shall be exaggerated in that paper.
I'll point to a specific, then, of why I "don't like the numbers". Page 6 of the report you linked. Let's take a single line as an example - Iran.
At the ends of 1986, Iran's proven reserves were 92.9 thousand million barrels. A decade later, at the end of 1996, they were 92.6 tmb. At the end of 2005, they were 137.5 tmb. What's not shown in the report is that this jump (50%) happened in a single year, and is what is reported by Iran, not due to a publicly (or industry restricted, even) reviewable survey.
This isn't the only place there's a peculiar hop that is immune to review. Some, like Kazakhstan going from 0 to 39.9 tmb, have been verified. But many aren't. We're trusting people who have a vested interest in "good numbers" to give us an honest report. It's kind of like (given the host's pages) trusting the NAR to give a good forecast of house sales.
I'll also raise a secondary issue that matters, and Kazakhstan's reserves are the ideal example. Cheap oil depends on ease of access and extraction. Eventually, after sufficient transport mechanisms are in place, Kazakhstan's access will be cheaper. Now - and for extraction for the foreseeable future - it's not cheap. It's viable because overall prices are so (relatively) high.
Mish makes interesting reading in matters economic and financial. But when he steps outside that parameter he says things that are indefensible (e.g. his advocating support for Ron Paul).
Anyone with a three-digit I.Q. can figure out that R. Paul has no realistic chance of getting the nomination let alone winning the election. Therefore, a vote for Paul is a vote thrown away.
Incidentally, Jas Jain, your comment about the utility of Seb's model is the funniest thing I've read today.
--
"We need our own lobbying group - we could call it common sense and personal responsibility"
Impotent people sometimes have trouble in coming to terms with their impotence. 99% of the American People are politically impotent. Voting is like a religious ritual! It is like I feel good because I poured some water on the stone god.
Anglo-American democracy is the biggest fraud in history. It is capitalism thru and thru (democracy is juts a front to keep people in line) and capitalists rule!
Re: Residential construction employment declined 28,500 in December, and including downward revisions to previous months, is down 293.1 thousand, or about 8.5%, from the peak in March 2006. (compared to housing starts off almost 50%).
Correlation data: In order to qualify for VITA, your family income must be $40,000 or below. For a single person without children their income must be below $20,000.
In order to qualify for the EITC there are various cutoffs, depending on how many children you have and other factors.
We also help individuals who do not have a Social Security number to get an Individual Taxpayer Identification Number. You can get an ITIN regardless of your legal status in this country. We charge $20 for that service, as opposed to hundreds of dollars other providers in the city are charging.
When we started to offer VITA, in 2003, we did just under 300 returns. For the 2007 tax site we did almost 2000 returns, and the total refund people got this year was $3.2 million. It really adds up. Cumulatively over the past four years weve done over 6000 returns and generated over $9.8 million in refunds. We also saved people the $100-$300 fees that they wouldve paid to for-profit tax prepares.
Were the 91st largest VITA site in the whole country, out of about 36,000 sites.
ITIN numbers, issued by the IRS, who has issued 9 million ITIN numbers since 1996. Also CitiMortgage, which has loaned 5.6 Billion in mortgages, since April 2005 in Texas, plans to loan 200 billion by the year 2010, just in Texas.
You said your son is an accountant, so what would he think about a new, continuous 24/7 "real-time" accounting system that eliminates bogus quarterly and year-end profit earnings, yearly bonuses, tax schemes etc. that drive the psudo-real stock markets and cause volitility?
I'm no accountant, but w/ super-computers it seems that all the earnings games and other nonsense like off-balance sheet stuff could be made transparent on a continuous basis. The days of pencil and paper are long over, as are local markets.
I suppose this would cause companaies to go private, unless they were also required to provide real-time continous accounting.
This current system of short-sightedness would no longer be useful or appropriate in the new 'America' as you describe it seems to me.
Mike in Az - tinoil hats? I presented the factual reason for my mistrust of the reserve numbers. Specifically the fact that they are "trust me" despite an extraordinary jump. I also showed specifically why even the gains aren't as ideal as they are when viewed in aggregate - difficulty of extraction and transportation.
So... you want to blindly trust the numbers. I want to see why they've changed before I trust, and until then want to continue with known values. Exactly which of us is fantasizing?
So you found 45 tmb in the Iranian reserves that you don't trust. What about the other 1,163? What about the 163 tmb not included from the Canadian oil sands? This is a "factual reason" to not trust the entire report?!
Seems to me, if BP had a hidden agenda, it would be to understate reserves to drive up the price of oil.
BTW, did you know Tesla Motors has developed an electric car that goes 0-60 in 4 seconds and gets the equivalent of 135 mpg? Not a concept car, a production car. What will happen to demand for oil, when these become common?
My only point is that there is plenty of oil and we can use it much more efficiently with existing (and improving) technology. The only things needed are:
High oil prices..... check
Climate change.... check
P.S. We have over 147 years worth of coal reserves also. Unless BP is fudging those numbers too ;^)
Yes, you are not an accountant. Much of investor usefull financial reporting is based on cash flow plus various management estimates such as reserve for loan losses, reserve for bad debts, velocity of morgage paydowns, etc. Without these estimates developed by mangement over time, and verified by auditors, on a regular basis (not when convenient to management), I'm afraid, your realtime financial statemtents would be useless to investors. Also, to do real time estimates, extensive modeling would be necessary, which could and would be manipulated by unscupulous management, as the problems with asset backed securities demonstrates.
--
"Jas- You said your son is an accountant, so what would he think about a new, continuous 24/7 "real-time" accounting system that eliminates bogus quarterly and year-end profit earnings, yearly bonuses, tax schemes etc. that drive the psudo-real stock markets and cause volitility?"
Thanks. BTW, my father was an accountant at the age of 15 with a big city firm (in Jodhpur, India). My father thought that at the age of 8 he was nowhere as good as I was (I was an arithmetic wiz kid and could easily do compound interest calculations on client accounts at the age of 8). I chose a different career than what my family wanted me to. Everyone around me thought that I would be the smartest lawyer! (My nickname at the age of 10 was sir lawyer).
Anyway, to answer your question accounting in the US by public companies is a sham. Most of the companies have no need to go public except for scamming the public! My bearishness on corporate America began with Scam Options abuse in mid-1990s and how the political system supported it.
I cannot over-emphasize the importance of honest and proper accounting to our system. In 1990s the accountants were corrupted (money corrupts!) and it is all down hill from there. Crooks can hire and own almost anyone and they know it.
Well I'm hoping that was the real General Glut and we hear more from him.
In the meantime, I know its a hard one to leave behind but the Unemployment rate needs to be given the special attention we gave the illegal aliens.
Heckofajob Jose and horde (dang these people are profitable!) and in their wake, ruinous BLS stats...so take that UE 4.7->5.0% increase with a grain of salt ( an illegal alien shovelful).
So the BLS will just look bad for awhile until regulations are enforced that enable them to measure labor performance...and not just take subprime-like guesses, yes?
Since I have a day job my comments are no doubt late and may be echoed elaswhere. However,what should be of real concern is the fact that the Birth Death model is now responsible for over 70% of the jobs created in the economy. Consequently, we dont really know what the true employment picture is, making it extremely difficult to know what the right policy should be, not that Benji & Pauli would have a clue. Perhaps Kudlow's the greatest economic story never told, is actually now beginning to betold. This could also explain why well over 50% of Americans believe we are already in a recession.
I understand and agree basically with what you said. Also agree the current system is be gamed.
What I am suggesting is that there seems to be chonic manipulation regarding Q-O-Q & Y-O-Y comparisons that are generally manipulated to influence short-term profits, bonuses, dividends and stock prices.
Thus, there is a need for more accounting transparency on a more frequent basis. Hisitoric data can be rehashed for investors and presented to compare it to an improved, modern 21st century accounting system that is not strictly year-over-year based that is being gamed.
Hopefully, the current one will become extinct if this really get ugly.
You forgot oil shale, which we have in the US in amounts that equal 3 saudi arabia's worth of oil.
Seems like it's even more than that, stealthwii! We've got 2 trillion barrels (out of 2.6 worldwide!). Compared to Saudi Arabia's 264 billion barrels gives the US 7.5x as much.
Check out the process requirements before you get too excited, as well as the EROEI for shale oil - as previously stated, educate yourself - the issue is actually more about how fast can you produce that oil than how much of it there may (or may not) be there.
Additionally, the economic and social dislocations required to bring oil shale (or even more exotic alternatives like gas hydrates) on line are non-trivial.
Conservation and the more efficient utilization of existing convetional hydrocarbons is absolutely going to be a requirement. But we aren't going to get there waving our arms, building straw men and name calling. I've heard that Step 1 to solving a problem is acknowledging that one exists...
It is glaringly obvious by now: the residential employment numbers are totally whacked.
None of the explanations offered so far, or any combination of them, really explains how far out in space that number is. This means that, should housing eventually reverse in a few years, the number will simply be useless, even as a relative indicator. Either the methods of sampling need to be revised or the number might as well be scrapped.
Mike in AZ, I specified, "One example is Iran." I regret you are unwilling to take the opportunity to review YOUR OWN RESOURCE to see where other examples might be.
I will point out that I didn't say BP was lying, but rather that I didn't trust the number from (in this case) Iran. I explained why. Allow me to supplement.
If you identify the 'explosive growth in reserves' nations and separate them, you will notice three tendencies. First, all the non-explosive reserve nations - which provide over 3/4 of total reserves - have declining reserves. Second, the explosive growth nations themselves divide into two general categories. First there are the nations that had zero or near-zero reserves in 1996 but suddenly have them now. A bit of research will show that these nations have a fairly decent record of the surveys being accessible - that is, the tests done to determine reserves exist can be verified independently. The remaining explosions, however, come from nations which refuse to allow outside access to their surveys. They are all saying, "trust us". If these are replaced with the 1996 numbers - stagnant instead of declining as all the other known locations - the production to reserve value drops below that 40 percent line you reference.
You asked why they would lie - though you asked of BP, and I say it's possibly the producing nations. The answer boils down to the desire to keep the price from exploding too high. If the price of oil goes too high, other energy strategies and resources become interesting and viable. OPEC learned this in the 1970s. There is a 'sweet spot' in all pricing - a high point in the total profit curve. It is in the best interest of a producer to remain in that sweet spot however easy it may be to demand more profit per item -- and subsequently price oneself out of the market.
Again, I did not say BP was lying. I said I did not trust the numbers of certain nations in the report. They had extraordinary jumps in proven reserves at a time when the price of oil was moving out of the sweet spot, and ask their customers to trust them that the surveys are valid.
One last small point. BP - or rather it's chief economics officer - says the peak oil theory isn't valid. On the other hand, the CEOs of Total and Conoco-Phillips plus the chief economics officer of the International Energy Agency say it's valid and (variously) approaching fast or we've passed the point. Adding just a bit more to the fire, the CEO of BP said at an oil production conference in November that "about half" the oil reserves of the world have been extracted -- which is the essential core of peak oil (the point at which half the oil available for extraction has been so).
Oil sands? They were in your referenced report - and form a negligible increase. It's at least close to breakeven on energy return on investment, unlike (as mentioned) shale oil.
Coal is, indeed, plentiful. It's also got a low retur
Conservation and the more efficient utilization of existing convetional hydrocarbons is absolutely going to be a requirement. But we aren't going to get there waving our arms, building straw men and name calling. I've heard that Step 1 to solving a problem is acknowledging that one exists...
energyecon, maybe you should read my post at 3:31PM. Then I will be happy to accept your apology :^)
Greatest story never told....
4.7 to 5 in one month??
That's got to be ringing alarm bells all over the place.
All, it's looking more and more like December was a very weak month - although the last time we saw a weak jobs report it was revised away.
The jump in the unemployment rate will shock people.
Best to all.
Let the rate cuts continue...
Birth/Death Model
64k
Hey look at the bright side, Ebay will be full with busloads of Mikita hand saws, De Walt cordless drills and used pickup trucks. They'll be realllly cheap too.
I understand Bush is at work on an economic stimulus package. God help us, it's probably another war.
How are the main Presidential players likely to change their campaign strategies in the light of these numbers?
This suggests residential construction employment could fall significantly from current levels.
"Could fall"?! That's quite, umm, understated. Think Sean Penn in Dead Man Walking.
So, I'm curious: given the number of high-profile builder retrenchments - that is, cancelled projects and starts - why the lag in this statistic?
It's my speculation that low-level production workers were shed first, by which I mean: illegal alien sheet rock hangers, vinyl siding staplers (well, staplers of all sorts of things: OSB, shingles, etc.). These folks weren't on the books and made up the bulk of production employment. The workers being shed now are skilled labor - folks whose skills were heavily leveraged by the use of unskilled 'helpers' - licensed (and unionized?) electricians, plumbers, masons and carpenters. At an even more insulated layer, would be architects, engineers, and project managers.
I am a real neophyte though, so I have no idea how this works. As a HS student and undergrad I 'muled' a couple of summers for a local construction co, but that was in the early 80s. I know this is how I'd handle my labor costs, and is what I saw in the late-2004 construction of my sibling's Mc-Poo-box in Stone Mountain, GA. That labor model resulted in a house that revealed major structural flaws in approximately 9 months. Amazingly she unloaded for a slight gain (about enough to offset all transaction costs - going in and out) in 2006 - in for only 11 mos.
Is this statistical trend more connected to other artifacts (BLS Birth and Death model)?
As ever - thanks for the education!
I've been thinking about Bush's stimulus plan.
Tax relief without cuts in gov't spending is nothing more than tax deferral.
Business tax revenues are set to decline dramatically. Same with personal income tax revenues. Throw in higher gov't spending and our national debt is set to soar even higher.
A weaker dollar and higher measured cpi inflation are guaranteed. Asset deflation, consumer inflation. Proceed accordingly.
Anecdotally, we've had a really tough time the last year or so finding candidates to interview. We almost gave up altogether.
Just in the past two months or so, it seems like it's gotten a lot easier.
A friend of mine who used to work here was asking if his old position was available. He was one of the more highly qualified people here during his time.
It feels a bit like a sea change to me.
--
UR (Unemployment Rate) Up 0.6% from the cycle low.
When the UR rises 0.5% from the low in the cycle the economy was is recession every time.
RECESSION FULLY CONFIRMED.
I am loving my forecast for recession to have begun in Oct, but no later than Dec, more and more and more every day, especially, when confirmed by barrage of data.
Jas
Was it the fall in the household data employment numbers (-436,000) which caused the jump in the unemployment rate?
Regards,
Funny, but it will probably be a tax rebate. What else can they do at this point? Things are moving too fast.
I'll take a tax rebate...and use it to buy more SHORTS.
LOL, please Mr. Prez can I have my rebate check directly deposited into my brokerage account?
Net birth death adjustment +66,000. I guess Bend over Ben and King Henry will have an interesting discussion with George in the White House today. Perhaps another hint of an emergency rate cut later today to save the 13,000 level on the DJIA and give the folks on Wall Street a pleasant weekend.
Sorry for being OT, but:
central_scrutinizer: Ebay will be full with busloads of Mikita hand saws, De Walt cordless drills and used pickup trucks. They'll be realllly cheap too.
Ebay may have to change their algorithm to allow prices to FALL as too many items of the same products get listed. (Currently Ebay prices can only go up, unlike stock price which can go up and down. Hmm, how about an anti-ebay to allow shorting? Or ebay-options market?)
go s.w.a.p.s!
Scott, the reason for the lag in residential construction employment is probably a combination of: the BLS has not correctly counted illegal immigrants working in construction (although they didn't count them on the way up either), the BLS Birth/Death model has missed the turning point in employment, and therefore the BLS has overstated the current number of residential construction employees, some construction employees have moved from residential to commercial work, but they are still being reported as residential construction employees to the BLS, many workers are still employed, but they are working far fewer hours.
All of these arguments have some merit. Now that commercial construction is slowing, we will probably see the job losses.
Best Wishes.
Oh, I like this (from MarketWatch):
The weak jobs report puts more pressure on the Federal Reserve to act aggressively to prevent a recession.
Which I would revise to:
The weak jobs report puts more pressure on the Federal Reserve to act aggressively to postpone a recession in favor of a some future cataclysmic super-recession.
What if Bush instituted a do-over package.
We could erase the Iraq war, housing bubble, massive increase in size of gov't, etc. What Bush policies would be left standing? (maybe tax cuts)
Ebay may not allow prices for an invidual item to be bid down, but if the supply for that item overwhelms the demand you can bet that the ask prices will fall, and bids will evaporate.
So the net effect should be the sam, I think. I do like you idea on ebay derivatives, that has real potential.
The asset inflation is the fun part. The CPI inflation and debt repudiation are the hang over.
Sadly, this was not even a fun party for the majority.
for those of us short the mkt this last yr and long gold and oil, 2008 is shaping up to be a fantastic yr.
sorry that was me:
for those of us short the mkt this last yr and long gold and oil, 2008 is shaping up to be a fantastic yr.
if you think the housing situation was bad now, and about to get worse with steep price declines in the year ahead, now lets toss a 7-8% unemployment rate by 2009 into the mix.
"Let the rate cuts continue..."
We don't have a rate cut problem we have solvency which is leading to a velocity problem, the slower the volocity the faster prices fall.
"for those of us short the mkt this last yr and long gold and oil, 2008 is shaping up to be a fantastic yr."
Gold and oil may get their wings cliped in a defaltionary spiral, shorts will do very well though.
CNBC is reporting that Regions Financial sees weakness in homebuilding. DUH! You can't make this stuff up.
How do some people stay employed?
All, it's looking more and more like December was a very weak month - although the last time we saw a weak jobs report it was revised away.
Looking at the report though, it seems like the revisions to the unemployment rate are fairly modest (and for the past year they all seem to be upward adjustments).
I assume its due to no birth death model involved.
Gold and oil may get their wings cliped in a defaltionary spiral, shorts will do very well though.
Anonymous
not when we have fundamental problem with peak oil and not until all CB's stop expanding money/debt supplies to match deflating assets.
Companies that are not related to financials are cutting expenditure. At best they see flat capital spending this year. Well that's what our CEO is saying. We are ready for yet another reorg.
According to the household data, employment increased 600,000 from Oct to Nov, then fell 436,000 from Nov to Dec. This report is really a parody of itself. It's inaccuracy is self-evident.
Has anyone tracked the number of people currently drawing unemployment insurance from the DOL claims report? During the week ending Dec. 22 it was 2,761,000, up about 100,000 over a few weeks. So layoffs aren't jumping, but people laid off are having a harder time finding new jobs.
In December, actual private sector jobs created over the past twelve months (Nov '06 to Dec '07) stands at 1.001 million -- the lowest level since March 2004. The employment picture in the US has been on a steady slide for 18 months. Combine that with the -0.5% savings rate in November, the lowest monthly tally (since the Big Revision to the personal income figures) since the Great Depression, and with CR's housing data, and you've got the equivalent of "Surrender, Dorothy" written in the sky.
CR -
Thanks very much - ISTR you've mentioned the Commercial vs. Residential mis-labeling before, sorry I forgot that.
I always overlook the fact that illegals weren't counted on the way up. Doh.
FWIW - the business of graph interpretation on this blog really does take me back to my days as an undergraduate Chem major - trying to tease out the various structures represented by peaks in chromatographs - I guess my brain really has atrophied!
Best Regards,
Scott
Not so. The household survey is the best window into U.S. employment over time. Monthly variations should be averaged. Household survey shows the U.S. economy added only about 300,000 new jobs in 2007.
Remember that the payroll survey usually shows a huge one-time downward adjustment to the birth-death model every January.
According to the household data, employment increased 600,000 from Oct to Nov, then fell 436,000 from Nov to Dec. This report is really a parody of itself. It's inaccuracy is self-evident.
Has anyone tracked the number of people currently drawing unemployment insurance from the DOL claims report? During the week ending Dec. 22 it was 2,761,000, up about 100,000 over a few weeks. So layoffs aren't jumping, but people laid off are having a harder time finding new jobs.
I think a lot of the inaccuracies this time of year are due to seasonal adjustments. Treating the data like it's winter when it's still as warm as summer, etc.
Also I think you have to be careful with the jobless claims and payrolls this time around simply because a lot of real estate related jobs don't show up in these measures -- the complete opposite of the tech jobs we lost starting in 2000.
I think that explains some of the mystery of the "jobless recovery" we had a few years back -- a lot of the jobs that were getting created weren't showing up on payrolls. Likewise we might have a "jobful recession" (relatively speaking).
Part of the reason for the big jump in this report is that the household survey was done earlier in November, due to the Thanksgiving holiday. So December is getting more change than it normally would.
Still, the change in continuing claims does show that the ability of laid-off workers to find new jobs is diminishing, as have multiple employment measures. This report is not an aberration.
Breaking news: (AFP)
Larry Kudlow has left his DC home in an ambulance after police were summoned to his neighborhood this morning.
Police found the incoherent Kudlow stumbling around his apartment, mumbling incoherently about "the greatest story never told." Several neighbors claimed they could hear the conservative pundit shouting "Goldilocks porridge is just right, dammit" around 8:31AM.
Several empty tubes of Testors model airplane glue were found littered in the apartment, along with empty pizza boxes, Miami Vice re-runs and posters of the Gipper.
Re the gold and oil longs, to my mind, oil in the ground is a proxy for everything for which gold is a proxy.
Yeah, oil and energy will go down during (let me choose the word carefully) disinflationary times, but gold is likely to get killed.
Oil is still a cyclical but, barring a deus ex machina, the lows will be higher and the highs will be higher for the rest of our children's lives. I'd still be comfortable dollar-cost-averaging into physical oil during this time.
Well, I guess Jas and I agree on one thing.
I told you CR, but you didn't listen to me. Our business can read recession like no economist can. Or at least, before economists can.
Just put the new recession bar in that graph. Maybe Nov., but definitely December.
Not that I'm happy about it. It just is what it is.
Looks like the normal business cycle with a periodicity of 4 to 8 years. This one fell right in the middle at 6 years. What's different? A media, to include blogs, that amplify the obvious.
Ebay may not allow prices for an invidual item to be bid down, but if the supply for that item overwhelms the demand you can bet that the ask prices will fall, and bids will evaporate.
going way OT...
That is not exactly true. A seller can actually modify the 'asking price' (presumably downward) if they are not getting any bids (up until 12 hours before the auction ends iirc). Also, people can list things as "BIN or Best Offer" (which I see more and more of these days). So there is some reaction capability there. For some items, eBay is becoming a buyers market. More and more, the buyers are becoming wise to certain types of junk being listed, and are letting it go unsold.
Ray
So many pundits are saying growth is the place to be in a slow down. They point to the recent run-up in the Nasdaq as proof.
To me this is not a safe place to hide. Overvalued Companies get crushed during recessions.
COMPANY P/E Market CAP
AAPL 49 168B
GOOG 53 212B
RIMM 59 61B
AMZN 108 39B
Will these be stores of value in a slow down? 1/2 trillion in market cap!
idoc: "...and not until all CB's stop expanding money/debt supplies to match deflating assets."
You might want to rethink that.
Can't wait to see what the market does when the job number goes negative. I'm assuming that will be next month.
CR thanks for that updated graph. Very informative. Great work!
I know someone asked this yesterday but I didn't see any response.
Any ideas on why SRS has moved the way it has the past two days? I'm not complaining, just trying to find some reason for my good fortune.
It's funny how bullish the mainstream media were on the job numbers based on the ADP survey:
BusinessWeek "Jobs on a Solid Track in December"
Forbes "U.S. Jobs: Slowing But Growing"
MarketWatch "Job growth slowing, but still positive"
and Dewey Defeats Truman...
central_scrutinizer you forgot the gigantic punch bowl of kool-aid......
Services-sector growth slows slightly in Dec., ISM says
Services-sector growth slows slightly in Dec., ISM says - MarketWatch
Five of 18 industries were growing in December: retail, information, professional services, construction ? and health care. Eight industries were contracting
12th Percentile
i think the Centro report and the OC vacancy report from yesterday bring to light the weakness in the CRE mkt.
CSPI (Central Scrutinizer Press Intl) update:
Kudlow released from DC hospital pending further psychiatric evaluation. Friends and family are rumored to be planning an intervention, involving re-education in the joys of bear markets and a cutoff of Koolaid supply.
Is there a place to see the number of 401k loans and hardship withdrawals over a period of time? I imagine these will increase in the coming year. And, that many will stop contributions. Oh, and dreams of a comfortable retirement for many in their 50's and early retirement for many in their 30's and 40's will disappear. This report will definitely accelerate the fear. We should have gone to the doctor sooner, now we have to take our medicine.
Jas is right about the recessionary implication of the jobless rate rise. There is some reason to be suspicious of a 0.3% rise in a single month, but in this case, my suspicion is that we would have seen a rise in November, had it not been for early retail hiring. Retail employment is a big deal in November and December, and the payroll data show it was moved forward this year. Thus the jobless rate held steady in November when it would otherwise probably have risen, but then there was not enough retail hiring left for December to prevent a big rise. So the 5% is probably right, but we should have gotten here a bit more smoothly, given seasonal adjustments appropriate to the new hiring pattern. The jobless rate stopped falling a year ago. A prolonged period of no decline in the jobless rate is a pretty good signal of trouble, but a 0.5% (now 0.6%) rise is just deadly.
My Take, cross posted from Zacks.com:
The odds that we will have a recession in 2008 just went up big time. This morning the Labor Department released the December employment report and it showed only 18,000 jobs created vs. expectations of 70,000. This was the lowest rate of job creation since 8/03, when the last recession was coming to an end. The unemployment rate jumped to 5.0% from 4.7%. Expectations were for an unemployment rate of 4.8%. While in a historical context 5.0% unemployment is not that bad, it is the highest rate since the storm ravaged data of 11/05. On the plus side, the job creation numbers for November were revised upwards by 21,000, but then again October was revised down by even more than that, so call the revisions a wash. Part of the reason for the low unemployment rate has been a smaller proportion of the population in the work force. The labor force participation rate now stands at 66.0% vs. 66.4% a year ago and the employment to population ratio is at 62.7% vs. 63.4% a year ago. Average hourly earnings were up 0.4% for the month better than the 0.3% expected, but the November gain was revised down to 0.4% from 0.5%. The average workweek was unchanged at 33.8, a level it has been pretty much stuck at for over a year.
Looking deeper inside the numbers the picture become even more bleak. More than all the net jobs created in December were government jobs, which increased by 31,000. Over the last five months, new government jobs have increased by 178,000 or 41% of the 429,000 new jobs created in the economy.
Health care jobs continue to expand, which is an indication that health care continues to expand as a percentage of the economy (already by far we spend much more than any other country in the world on health care as a percent of GDP, even though on objective measures we are decidedly middle of the pack amongst developed countries). Over the last year we have added 381,000 new health care jobs. Health Care at least provides a range of high, middle and low income jobs.
The same can not be said of the food service industry which is the other big job growth engine in the economy, adding 27,000 jobs in December and 304,000 over the last year. Goods producing jobs continue to tumble falling 75,000 for the month and 275,000 over the last five months. Goods producing includes 2 major categories, Construction and Manufacturing. Construction jobs were down 49,000 on the month and are down 160,000 over the last five months. That is not very surprising given the difficulties that the housing market is experiencing (actually it is very surprising that it is not down much more).
Manufacturing was down 31,000 for the month and 127,000 over the last five months. Given that a resurgence in exports has been one of the key strengths of the economy in recent months, the weakness there is a bit more surprising. Then again the Instituted for Supply Management came out earlier this week with a reading
Also worth noting, I think, is that construction and manufacturing just got chewed up in the revisions. Net revisions for the past two months totaled +10k, but for the goods sector, it was -33k. The revisions alone were like a bad month for the goods sector. This is entirely consistent with ISM data, which show the factory sector weakening progressively, while the service sector is growing at a tepid but fairly steady pace.
i think the Centro report and the OC vacancy report from yesterday bring to light the weakness in the CRE mkt.
I was wondering if it was the commercial news. Of course if you've been reading this blog those don't seem like such large events.
thanks.
No time to read all the posts, but just wait until all those seasonal retail workers get their pink slip next week.
And here's some cliff diving/strange dollar action:
INO Equities Stocks Indexes - U.S $ INDEX (NYBOT:DX) Price Chart and Quote
Cheers,
BusinessWeek "Jobs on a Solid Track in December"
Forbes "U.S. Jobs: Slowing But Growing"
MarketWatch "Job growth slowing, but still positive"
You kinda have to say stuff like when all your advertisers sell stocks for a living.
A lot of financial and investment related publications went out of business in the last downturn.
It occurs to me that even if the birth-death model is completely accurate in predicting the number of people who are starting new businesses, it doesn't necessarily mean those people are making enough to pay their bills.
I imagine many of the folks leaving gainful construction employment are starting businesses in the sense that they have ordered business cards, and they might even report themselves as employed in the household survey.
Does anybody know if the birth-death model has any input that would control for new "businesses" that don't actually make any money?
Dirk,
You might take note that agricultural products have been a leading part in export growth.
Looking deeper inside the numbers the picture become even more bleak. More than all the net jobs created in December were government jobs, which increased by 31,000. Over the last five months, new government jobs have increased by 178,000 or 41% of the 429,000 new jobs created in the economy.
Izat the real General Glut?
General Glut | 01.04.08 - 9:46 am |
Any ideas on why SRS has moved the way it has the past two days? I'm not complaining, just trying to find some reason for my good fortune.
A lot of leveraged speculative trades are unwinding. Hedge funds are getting hammered and the smart ones are starting to move short.
Whatever U.S. assets that have had had high negative correlation with yen the past year (such as SRS) are dropping. Strangely, emerging markets aren't yet doing the same, at least not as fast. They're next.
OT.
Did anybody see Chuck Norris standing behind Mike Huckleberry last night during his Iowa victory speech?
Chuck has the biggest, brightest teeth I've ever seen. Maybe those pearly whites were there to create a halo effect around Huck.
cross post continued:
Then again the Instituted for Supply Management came out earlier this week with a reading of 47.7, below the 50.0 reading that is the dividing line between expansion and contraction in the manufacturing part of the economy. If the resurgence in exports starts to fade, watch out below, because there is not that much else propping up this economy.
All in all it was a pretty ugly report. The only silver lining is that it raises the probability that the Fed cuts by 50 basis points at the end of the month rather than just by 25 (the chance of no cut or an increase is approximately the same as seeing a Ron Paul vs. Dennis Kucinich race this fall).
FHA Reforms
NAR successfully lobbied for the passage of H.R. 1852, the Expanding American Homeownership Act of 2007, which helps modernize FHA by expanding the availability of safe and affordable FHA-backed loans for purchases and refinances. The bill includes provisions to eliminate the 3% down payment requirement, increase loan limits up to 175% of the conforming limit in high-cost areas, streamline condominium purchases, and eliminate the cap on Home Equity Conversion mortgages (HECMs). The Senate Banking Committee passed a similar bill. The Senate bill is expected on the floor by the end of the year.
Freddie Mac/Fannie Mae Reform
NAR also successfully lobbied for passage of H.R. 1427, the Federal Housing Financing Reform Act of 2007, which overhauls the regulatory structure of the nations housing finance government-sponsored enterprises (GSEs). H.R. 1427 provides for regional adjustments to the caps on mortgages the GSEs may buy for high-cost areas, helping more working families qualify for safer GSE loans. The House passed H.R. 1427, 313-104. The Senate has taken no action to date.
Strangely, emerging markets aren't yet doing the same, at least not as fast. They're next.
I think the hedgies are going to attempt to aggressively protect emerging markets and commodities for the next bubble phase in anticipation of more rate cuts.
The industry needs asset bubbles to survive in its current form, so expect them to defend "emerging bubbles" like their life depends on it.
But when they finally break, it could be violent... especially if a lot of hedgies panic and go short all at once.
Dodd is pissed, wants revenge?
But the bill that the banking industry will likely be watching the most closely is one that isn't even under Dodd's jurisdiction. Dodd has said he wants to propose legislation that would make it easier for bankruptcy judges to alter the terms of a mortgage to help borrowers escape foreclosure.
The banking industry has fought hard against similar legislation in the House. If Dodd introduces the bill, it would have to be considered by the Senate Judiciary Committee because it deals with legal and court matters.
The Big Picture blog puts a lot of emphasis on the birth-death model.
"Hence, the absurd determination that 199,000 small business construction jobs have been created since January 2007.
Consider: The B/D generated 1,239,000 jobs from February thru November 2007. That's rather surprising, since the total NFP jobs created since January 2007 was 1,208,000. In other words, the Net Birth/Death jobs created over 10 months was actually greater than the total NFP jobs created in all of 2007. That's rather odd, don't you think?."
Nothing this administration says is believable. Shame.
Jim
but gold is likely to get killed.
LMAO! That's a popular misconception that Mish (the uber-deflationist) has dispelled time and again.
Overall this is a very weak report, and the unemployment rate rising to 5% will set off recession arguments.
"Set off" recession arguments? Seems to me it ends those, and starts the depression arguments.
There's nothing unexpected here...
CR,
What are your thoughts on the participation rate? I notice the NILF Not In labor Force) has risen 10 million since 2000. [ref: ftp://ftp.bls.gov/pub/suppl/empsit.cpseea1.txt ]
Thanks for all you do.
Hi, My name is Larry K., and I am addicted to koolaid.
It all started innocently enough. I would have a shot or two at the end of a bull market, just to keep the buzz going. I never got into any trouble back then.
But in 2001, everything changed. A lot of pushers moved into the neighborhood--they were givin' the stuff away! I'd spend time on the street, and there they'd be, handin' it out every time a bad report came out.
After 9/11, I couldn't keep my hands off of the stuff. Lil' G'span was always there for me--givin' me all I could handle. The Koolaid WORKED--every doubt I entertained would fade away with another shot of the Kade.
It just kept gettin' worse, though. More and more people would tell me that I needed help. I woke up itchin' and beggin' for another sip. I started selling everything for another shot. Hank the P and ChopperB still gave it up, but I had to get down on my knees and scream lies on television.
Then, the December jobs report came out. I knew my boys on Constitution could help, but they started calling in their markers. "Not until we feel better about inflation..." Sh*t!!!
I needed my Kade, adn I needed it now. I hit bottom. I tried mixing Cough syrup and Splenda, drank a whole bottle of it, and when I woke up, I was in the Psych ward at GWU Hospital.
That's how I got to this meeting. It's my last chance. I know I gotta start telling truth, and kick the Kade.
Whatever it takes, man, whatever it takes.
My name is Larry K., and I am a Kade-holic.
"RECESSION FULLY CONFIRMED."
Jas, are you absolutely sure? Sebastian's models confirmed, with an absolute 100% certainty, that there would be NO recession in 2008.
Chuck has the biggest, brightest teeth I've ever seen. Maybe those pearly whites were there to create a halo effect around Huck.
Hey, leave Huck alone. He's funny, and comedy might turn out to be our chief export soon.
Tax rebate..great! another whole $300 large...that just might pay for the grocery bill...Oh if i only had 3 wishes...Hmm is that a helicopter i here flying over my house?...honey quick grab a bag the tax rebate is here.
I'm with Jas that the recession started in October.
I'm with rich and k harris on their read of the November/December employment reports.
ac, you actually have a job? You post insightful comments AND collect a salary? Who's the boss/employer who's getting the short-end on that deal?
404 - Resource not found
400 x employees as mort. lender goes chapter 11
I think we're due for another Cramer scream session today.
Terrible, that the Left Coast's borrowing costs are rising:
California Leads Borrowing Cost Rise on Housing Slump (Update1) - Bloomberg.com
It is going to be ugly for the schmucks in Sacramento when folks wake up and realize what a huge risk it is to be lending to a state with such a terrible fiscal future.
C'mon double digit borrowing rates!
America loves feel-good stories like Huck and Obama...for about 15 minutes.
Then it starts to get real.
Chuck Norris is there to show that Huck is a cage-fighting political animal on the inside, even if he is warm and fuzzy on the outside.
Let the rate cuts continue...
Neal | 01.04.08 - 9:11 am | #
And inflation rise???
I thought controlling inflation was the #1 job of the Fed. Or does the #1 job change when reality intrudes? Or whatever. I think the Fed is going to be in a big big squeeze.
Alpha Omega, the Cambridge-based jewelry and watch chain, filed for Ch. 11 bankruptcy protection yesterday and asked the court to approve the sale of its assets by an auction.
The chain, which made the filing under its Lexington Jewelers Exchange Inc. corporate name, temporarily shut its four stores in Cambridge, Boston, Natick and Burlington for two days last month after owner Raman Handa fled to India amid growing financial problems, and the companys bank seized its assets
Kurtyboy,
Awesome Larry K rant.
Please everybody, remain calm. Captain Bush and First Mate Cheney are at the helm. They see nothing but smooth sailing ahead.
Jibe-ho!
but gold is likely to get killed.
When money is being vaporised in the housing market and now the stock market that isn't exactly inflationary. The FED only directly controls about 45 billion in reserves, volocity is falling. Gold held it value in the depression only because the goverment fixed the price of gold which meant the price wouldn't fall below a certain level, all the other commodities got crushed. Guess what the goverment doesn't set the price of gold, fools do.
Time for me to cover the SPY shorts and get ready to short the bounce TTFN
a new name to stick your fork into:
Edward Lazear (LazIAR),everybody!
By Betty Liu and John Brinsley
Jan. 4 (Bloomberg) -- The U.S. economy is likely to avert a
recession and growth may accelerate in the second half of 2008,
President George W. Bush's chief economist said.
An increase in the nation's gross domestic product of ``2.5
to 3 percent still looks reasonable for this year,'' said Edward
Lazear, chairman of the White House's Council of Economic
Advisers, in an interview from Washington.
Mish
is absolutely brilliant and hopelessly deluded at the same time, in my opinion ...
Comment from Tanta please:
In todays WSJ:
American Home Mortgage Investment Corp.'s plan to destroy 490,000 hard-copy mortgage files has drawn fire from federal bankruptcy monitors, who say it could hurt homeowners' ability to sue the failed lender.
The company, once one of the country's largest mortgage lenders, says it can no longer afford the $45,000-per-month rental on warehouse space to preserve paper files. Its bid for court permission to destroy the files has been criticized by Kelly Beaudin Stapleton, the U.S. Trustee monitoring the case.
Destruction of the paper files could create trouble for American Home borrowers, compromising their ability to file lawsuits against the Melville, N.Y., company, Ms. Stapleton said in papers filed with the U.S. Bankruptcy Court in Wilmington, Del. American Home, which collapsed into bankruptcy in August, is selling its assets and going out of business
American Home's Intention To Destroy Files Raises Ire - WSJ.com
ac, you actually have a job? You post insightful comments AND collect a salary? Who's the boss/employer who's getting the short-end on that deal?
Ha ha... that's a little bit below the belt I think.
Fortunately in some industries with work products that are highly visible and specialized in nature, what really matters is the quality of your output.
Um, sue BK company.
Get nothing, waste of time folks.
Now the recession is officially on, Kudlow is already calling for tax cuts.
It is a new year, time for new solutions. Of course the mainstream seems to have no real solutions, so now Obama and Huckabee are being touted as providers of solutions.
I can hardly wait.'
Someday this war's gonna end...
Alot of the surge in exports has to do with the significantly increased value of our agricultural exports. Wheat alone is near $10/bushel, up huge and the US is the single largest exporter of wheat. The agricultural exports are significant to our exports. People just automatically believe that we must be exporting more widgets, not so. There's alot of food stuff mixed in with those widgets. This partially fills the gap between the drop in manufacturing jobs with reported increases in our exports.
CR said:
All, it's looking more and more like December was a very weak month
I am seeing mixed results for Dec. Weak retailers held on to live to month end and are now seeking closures. But I think some retailers did rather well in Q4. I am not seeing much after Christmas adverts which leaves me to believe there is no inventory hangover. Then again, Bed/Bath was a surprize. I'm anxious to see how Home Depot did. I'll bet Walmart was flat.
As to employment - I would not want to be in Fin. Services. Lots (LOTS!) of chatter of "effeciencies" and "moving forward".
goverment doesn't set the price of gold
True. But they can make it illegal to own it.
ac, you're like Barry Bonds in his prime: lots of down and bench time, but hitting for extra bases (visible, specialized, high quality) when you get up?
Good jig that you've got, sir.
Re: illegal immigrant layoffs, has anyone seen recent numbers on cash flows to home countries?
Is there a private firm or some govt agency that keeps track of "unlawful detainer court filings?" (i.e. eviction filings). It would be interesting to know if numbers are rising or not?
With regard to 12th percentile's question and the answers above re:SRS (double-short REIT ETF) performance, the Centro deal and OC stats alone don't seem like enough to cause a 15% move in two days, though I do agree that they're meaningful. And REITS were among the losing sectors last year, so I would think selling related to the Yen negative correlation/unwinding carry trade would focus on better-performing areas like commodities or gold, but I'm admittedly veering into conjecture here. I'm also baffled by the good fortune of owning the thing, and getting a bit worried about whether to let the winner ride or stick to my sell target.
Completely and utterly OT, I would like to nominate another entrant into Tanta's bad metaphor contest. From Bloomberg today, with regard to the poor performance of senior loan funds:
``Loan funds got hit square in the face with the contagion,'' said Payson Swaffield, chief investment officer for fixed income at Boston-based Eaton Vance, who oversees $53 billion, including $20 billion in bank-loan assets.
Link: Bloomberg.com
How can the Federal reserve cut rates again with Inflation being so high?
I dont care how bad unemployment gets, if inflation is high how can they justify cutting the rate?
(BTW I dont believe the lowering rate will improve employment at all, the time constant on the economy is long and a low rate will just give us another bubble later on.)
Conjure bag will be insufferable.
There's not enough cigars in Cuba AND Guatemala after this.
There's a great analogy in this story (Imagine Bai=Bernanke and the Ford is the economy. The train is debt):
Bai, who has been working in Fishkill, was driving west on Green Lane around 7 p.m., and told Metropolitan Transportation Authority police the GPS system instructed him to turn right as he was crossing the tracks. He was headed for the Saw Mill River Parkway, just past the tracks.
He got stuck, tried unsuccessfully to reverse and finally abandoned the 2006 Ford Focus minutes before it was slammed by a northbound Metro-North Harlem Line train, MTA police said.
"As the car is driving over the tracks, the GPS system tells him to turn right, and he turns right onto the railroad tracks," said Brucker. "That's how it happened."
Brucker added, "He tried to stop the train by waving his arms, which apparently was not totally effective in slowing the train."
Oil down, gold down, yen up on news today. Hmmmmmmmm.
but gold is likely to get killed.
i think its price in nominal terms may get hurt from these levels, but as a store of real value i think the data from past deflations indicate it does better than just about any other commodity.
depressions are all about deflating asset prices (higher order goods) vis-a-vis commodities (lower order goods) as the economy is deleveraged. gold bullion is about the lowest order good out there, next to cash -- and may well outperform cash, depending on government actions.
If gold isnt a safe investment to retain value.....what is?
"but gold is likely to get killed"
not a chance. CBs will fight deflation tooth and nail. Gold through the roof, let alone also factor in the pressure on the Fed fiscal budget over the coming years from SS and medicare. In fact, to the moon. Debt monetization tsunami coming to a treasury dept near you.
giacutter, not too many out there borrowing in gold and oil and buying HY assets
Thanks to the consolidation of ownership of US media over the past 15 to 20 years, the quality and credibility has slid to near-Soviet levels. The so-called business news is all happy talk.
I confess I don't understand this thing for gold. It has relatively limited utilitarian value, being mostly a raw material for shiny trinkets. Surely the demand for shiny trinkets is extremely elastic. The use of gold as a wealth proxy is an odd anachronism from the days of Queen Isabella. Oil, on the other hand, has a strictly utilitarian value and is probably the core staple of modern industrial economies. Demand slackens during slow times but never disappears and, with the sheer inertia of the giant growing Chinese economy, may not even slacken much in this new down cycle.
Oil, on the other hand, has a strictly utilitarian value and is probably the core staple of modern industrial economies.
But it's hard to carry oil around and trade it at the local bazaar.
you guys who think "peak oil" type of thoughts consider China & India are living and consuming in ~$60/bbl world with the govt subsidizing the difference. as ca receipts are falling for china and govt budget deficits are mounting in india this situation is at inflection point. oil might go higher depending on what happens to the >global< supply of money (can grow before it goes down), but it will fall once the marginal consumers start to pay the real price.
No money, no job.
Credit crunch hits small businesses - Oct. 1, 2007
Not DH
I dont care how bad unemployment gets, if inflation is high how can they justify cutting the rate?
if they look forward to credit destruction instead of back at the recent forced credit expansion brought on by the reintermediaion of commerical banks into the "shadow banking system", they'll have a lot of room to justify. the question is how they can anticipate deterioration in this graph.
Rite aid closing numerous stores in LV
More CRE pain...
--
""RECESSION FULLY CONFIRMED."
"Jas, are you absolutely sure? Sebastian's models confirmed, with an absolute 100% certainty, that there would be NO recession in 2008."
Since the end of WW II, every time that the UR went up 0.5% from the cycle low the economy had already entered the recession. One Tony Crecenzi (sp?) just confirmed that on CNBC.
"Sebastian's models" makes for a good piss-pot. His head is full of garbage and he drops it everywhere he goes. He makes a real mess. Even clean up crew cant keep up.
Jas
Does anyone here (or in China) understand the ramifications of 40 year mortgages with zero down, and Jumbo Mortgages of 1 million bucks?
Does anyone think this is good or that Fannie & Paulson are helping Americas future, by subjecting our housing market to chaos, as we struggle with subprime default and banking corruption and a recession crisis?
Re: FHA Reforms
NAR successfully lobbied for the passage of H.R. 1852, the Expanding American Homeownership Act of 2007, which helps modernize FHA by expanding the availability of safe and affordable FHA-backed loans for purchases and refinances. The bill includes provisions to eliminate the 3% down payment requirement, increase loan limits up to 175% of the conforming limit in high-cost areas, streamline condominium purchases, and eliminate the cap on Home Equity Conversion mortgages (HECMs). The Senate Banking Committee passed a similar bill. The Senate bill is expected on the floor by the end of the year.
Freddie Mac/Fannie Mae Reform
NAR also successfully lobbied for passage of H.R. 1427, the Federal Housing Financing Reform Act of 2007, which overhauls the regulatory structure of the nations housing finance government-sponsored enterprises (GSEs). H.R. 1427 provides for regional adjustments to the caps on mortgages the GSEs may buy for high-cost areas, helping more working families qualify for safer GSE loans. The House passed H.R. 1427, 313-104. The Senate has taken no action to date.
DH
Maybe we should chat about hair styles or the color of blue instead?
WASHINGTON - The Federal Reserve announced Friday that it is increasing the amount of money available to banks through a new auction process, one of the main ways it is combatting a severe credit squeeze. The Fed again pledged to continue with the auctions "for as long as necessary."
Yahoo! 404 - Page Not Found
"I thought that controlling inflation was the #1 job of the Fed."
The number one job of the Fed is the continuation of the Ponzi by whatever means possible. Asset deflation, is not one of those means.
--
Recession Forecast From a Bimbo
We cant have a recession if everyone is gainfully employed.
That was the comment from a bimbo named Diane Garnick played on Bloomberg. What caught my attention was not what the bimbo said but her eye movements and facial expression while sharing this important insight with the world. She is the founder of the Ladies in Red. And she was wearing red to draw maximum attention to her propaganda. The most important and some of the best paid jobs in America are for propagandists and we can see that Ms garnick is gainfully employed. And so was Greenspan for a very long time.
There are few problems with Ms Garnicks pronouncement. First, no one has informed Ms Garnick that not everyone in America is gainfully employed. Second, right smack in the middle of the last recession the unemployment rate was 4.6%, lower than what it has been since Sep07. Third, employment doesnt start to fall until few months into a recession. Forth, the serious job losses take place a year AFTER the beginning of the recession.
Employment is the laggiest of the lagging indicators for a reason. But, propagandists make use of it to deny recession and push Scams. Bubbleheads dont need much more than fluff to remain positive even when they are losing money in Scams because it is just temporary or even a buying opportunity.
This recession is not going to be an ordinary recession and losses in Scams are not going to be recovered for decades. Beware of propagandists who crowd the boob tube.
Jas
Re: changes to fannie and freddie guidelines:
They are painting a burning barn. Time to call the fire dept, not the paint store, guys.
And by the way, while they are painting the barn, the house and crops caught fire from the spreading of the previously 'contained' embers.
Any peak oil types want to comment on the Reserve to Production Ratio? (Page 10)
It's remained fairly constant at around 40 years since the 1980's.
CBs will fight deflation tooth and nail.
the question really is, though, do CBs -- particularly the fed -- actually have a choice?
the united states has total outstanding credits of $40tn over a monetary base of $0.8tn -- and is a huge foreign debtor. could it force enough currency into the system to counter a credit contraction? and do it while risking a dollar/debt repudiation that would do a lot to cut it off from the foreign markets on which it is reliant?
and further, there's little to say it would work even if tried. japan pushed 12% of gdp into its banks in 1999, and watched as they reserved it against losses and loaned it out overseas. the result was eight years of domestic deflation in the face of 25% YoY expansion of monetary base as banks slowly recapitalized.
i don't know the answer, but i suspect we'll get not a hyperinflation (at least right away) but a muddle-through ZIRP, bank bailouts, and credit contraction partially offset by more government borrowing and monetary base growth.
Jas- We know the 'problem', what is the 'fix'?
Not DH
Mish is absolutely brilliant and hopelessly deluded at the same time, in my opinion ...
Detroit Dan | 01.04.08 - 11:36 am | #
Please elaborate on the latter, Mish is very forthright in his reasoned debates and data. I appreciate that in this creative, meritocratic salon environment. If you have convincing data or theories rather than conjecture, please share.
Personally I wish I had a crystal ball, but must rely on what I perceive are the best reasoned theories. So far it has done much better than preserve capital, thank goodness.
--
"The number one job of the Fed is the continuation of the Ponzi by whatever means possible. Asset deflation, is not one of those means."
"The number one job of the Fed is" to serve its real masters -- Bankrupters and Fraudsters of New York City.
Fed since Greenspan is in the wealth transfer business -- from the middle-class to the very wealthy.
Once half the American households are bankrupt, or poor, Fed's job would be done and it will be dismantled.
Jas
--
"Jas- We know the 'problem', what is the 'fix'?"
Total collapse of the current American econo-political system! Nothing else will do. It is way beyond evolution of a new system via changes. It is like a house that needs demolition to build a new one.
Evil deeds of BFNYC, Pushing Debt and building Debt Concentration Camps, have made a German-style change very likely. In political development America is where Germany was 100 years ago. Therefore, the best forecast for Americans is what happened to Germans with approx 100 years of time lag. Stupidity has its price. We can thank the Propaganda Machine for that.
Sorry,
Jas
PS: Please note that in early 1900s Germany was by far the most technologically and philosophically advanced nation. Professors educated in Berlin were the most respected in American universities.
Fortunately in some industries with work products that are highly visible and specialized in nature, what really matters is the quality of your output.
Which is why I am working six days a week boxing processed cheese. All the hamburger chains seems to be doing well...
Mike in AZ,
The problem is that the world reserve figures are probably BS. Go look at the BP annual statistical review and look at the reserve figures for OPEC members in the 1980's, one would have thought that was the golden age of big oil finds, since reserves were boosted by apx 250 billion barrels. However, there were no significant oil finds durring that era. What happened was a battle for market share within OPEC as oil prices fell. Since the only reason for OPEC to exist is to set production quotas, and production quotas are based on the amount of reserves, the countries fell over themselves to increase the stated amount of their reserves. Also note that Saudi Arabia magically has "found" exactly as much oil as it has pumped for each of thed last 12 years or so. However the last big oil find in SA was in 1964. For further reading check out "The Oil Drum" or pick up a copy of "Twilight in the Desert"
We need our own lobbying group - we could call it common sense and personal responsibility
per Frances Martinez Myers, President of National Association of Hispanic Real Estate Professionals.Mortgages are now beening processed with ITIN numbers, issued by the IRS, who has issued 9 million ITIN numbers since 1996. Also CitiMortgage, which has loaned 5.6 Billion in mortgages, since April 2005 in Texas, plans to loan 200 billion by the year 2010, just in Texas. This way Citibank does not have to loan the Mexico government money any longer, and then have to write it off. CitiBank will at least have some colateral left then the dust clears.
Dirk,
It's possible you are right. Generally, however, the "I don't like the numbers, therefore they must be fudged" argument is pretty weak. The BP report doesn't even include the Canadian oil sands. Including those brings the ratio up to over 46 years. Also, I think I'll put more faith in BP than in theoildrum.com.
IMHO, the current price of oil is just the latest bubble which I expect will pop sometime during this recession.
The B/D model
has been subtracting construction jobs since November, but it's seasonal should start adding jobs come February.
The new headscratcher is all the jobs added in Financial services. 67k jobs added since August? Puh-leaze.
The employment survey (incl B/D) compared to the BED survey related to construction is generous by 5k jobs, but that's due to the -52k January adjustment. Next BED survey should be Mid Feb. for Q2 2007.
The BES total was +12k construction jobs(even though the Q2 average was -10k to Q1), but the B/D added 115k of those. I'd hazard to guess that the discrepancy shall be exaggerated in that paper.
giacutter,
Now THAT is a great long play - where can I buy Macanudo futures - Conjure's consumption alone will be good for a ten handle!
Mike in Az,
I'll point to a specific, then, of why I "don't like the numbers". Page 6 of the report you linked. Let's take a single line as an example - Iran.
At the ends of 1986, Iran's proven reserves were 92.9 thousand million barrels. A decade later, at the end of 1996, they were 92.6 tmb. At the end of 2005, they were 137.5 tmb. What's not shown in the report is that this jump (50%) happened in a single year, and is what is reported by Iran, not due to a publicly (or industry restricted, even) reviewable survey.
This isn't the only place there's a peculiar hop that is immune to review. Some, like Kazakhstan going from 0 to 39.9 tmb, have been verified. But many aren't. We're trusting people who have a vested interest in "good numbers" to give us an honest report. It's kind of like (given the host's pages) trusting the NAR to give a good forecast of house sales.
I'll also raise a secondary issue that matters, and Kazakhstan's reserves are the ideal example. Cheap oil depends on ease of access and extraction. Eventually, after sufficient transport mechanisms are in place, Kazakhstan's access will be cheaper. Now - and for extraction for the foreseeable future - it's not cheap. It's viable because overall prices are so (relatively) high.
Mish makes interesting reading in matters economic and financial. But when he steps outside that parameter he says things that are indefensible (e.g. his advocating support for Ron Paul).
Anyone with a three-digit I.Q. can figure out that R. Paul has no realistic chance of getting the nomination let alone winning the election. Therefore, a vote for Paul is a vote thrown away.
Incidentally, Jas Jain, your comment about the utility of Seb's model is the funniest thing I've read today.
Mike in AZ,
Get educated on 'political reserves'...you will re-examine that conclusion.
Jas, I like the old helmets with the spike.
Maybe I'll get one to use when I have to man the ramparts in La Jolla, to keep order in my planned soup kitchen.
Wow, break out the tin-oil hats!
--
"We need our own lobbying group - we could call it common sense and personal responsibility"
Impotent people sometimes have trouble in coming to terms with their impotence. 99% of the American People are politically impotent. Voting is like a religious ritual! It is like I feel good because I poured some water on the stone god.
Anglo-American democracy is the biggest fraud in history. It is capitalism thru and thru (democracy is juts a front to keep people in line) and capitalists rule!
Jas
Re: Residential construction employment declined 28,500 in December, and including downward revisions to previous months, is down 293.1 thousand, or about 8.5%, from the peak in March 2006. (compared to housing starts off almost 50%).
Correlation data: In order to qualify for VITA, your family income must be $40,000 or below. For a single person without children their income must be below $20,000.
In order to qualify for the EITC there are various cutoffs, depending on how many children you have and other factors.
We also help individuals who do not have a Social Security number to get an Individual Taxpayer Identification Number. You can get an ITIN regardless of your legal status in this country. We charge $20 for that service, as opposed to hundreds of dollars other providers in the city are charging.
When we started to offer VITA, in 2003, we did just under 300 returns. For the 2007 tax site we did almost 2000 returns, and the total refund people got this year was $3.2 million. It really adds up. Cumulatively over the past four years weve done over 6000 returns and generated over $9.8 million in refunds. We also saved people the $100-$300 fees that they wouldve paid to for-profit tax prepares.
Were the 91st largest VITA site in the whole country, out of about 36,000 sites.
Doc Holiday
Ooops:
ITIN numbers, issued by the IRS, who has issued 9 million ITIN numbers since 1996. Also CitiMortgage, which has loaned 5.6 Billion in mortgages, since April 2005 in Texas, plans to loan 200 billion by the year 2010, just in Texas.
Jas-
You said your son is an accountant, so what would he think about a new, continuous 24/7 "real-time" accounting system that eliminates bogus quarterly and year-end profit earnings, yearly bonuses, tax schemes etc. that drive the psudo-real stock markets and cause volitility?
I'm no accountant, but w/ super-computers it seems that all the earnings games and other nonsense like off-balance sheet stuff could be made transparent on a continuous basis. The days of pencil and paper are long over, as are local markets.
I suppose this would cause companaies to go private, unless they were also required to provide real-time continous accounting.
This current system of short-sightedness would no longer be useful or appropriate in the new 'America' as you describe it seems to me.
Not DH
Greenspend, Bumblecat,
I'll post my comments on Mish on the currently active thread...
Mike in Az - tinoil hats? I presented the factual reason for my mistrust of the reserve numbers. Specifically the fact that they are "trust me" despite an extraordinary jump. I also showed specifically why even the gains aren't as ideal as they are when viewed in aggregate - difficulty of extraction and transportation.
So... you want to blindly trust the numbers. I want to see why they've changed before I trust, and until then want to continue with known values. Exactly which of us is fantasizing?
Kirk,
So you found 45 tmb in the Iranian reserves that you don't trust. What about the other 1,163? What about the 163 tmb not included from the Canadian oil sands? This is a "factual reason" to not trust the entire report?!
Seems to me, if BP had a hidden agenda, it would be to understate reserves to drive up the price of oil.
BTW, did you know Tesla Motors has developed an electric car that goes 0-60 in 4 seconds and gets the equivalent of 135 mpg? Not a concept car, a production car. What will happen to demand for oil, when these become common?
My only point is that there is plenty of oil and we can use it much more efficiently with existing (and improving) technology. The only things needed are:
P.S. We have over 147 years worth of coal reserves also. Unless BP is fudging those numbers too ;^)
Mike in AZ,
You forgot oil shale, which we have in the US in amounts that equal 3 saudi arabia's worth of oil.
Oil shale is just the precursor to oil crude, but the oil can be removed, just at a higher cost.
If we wanted to go electric we could, but it would require heavy nuclear power plant construction - solar, wind just wont bring enough capacity.
Anonymous,
Yes, you are not an accountant. Much of investor usefull financial reporting is based on cash flow plus various management estimates such as reserve for loan losses, reserve for bad debts, velocity of morgage paydowns, etc. Without these estimates developed by mangement over time, and verified by auditors, on a regular basis (not when convenient to management), I'm afraid, your realtime financial statemtents would be useless to investors. Also, to do real time estimates, extensive modeling would be necessary, which could and would be manipulated by unscupulous management, as the problems with asset backed securities demonstrates.
--
"Jas- You said your son is an accountant, so what would he think about a new, continuous 24/7 "real-time" accounting system that eliminates bogus quarterly and year-end profit earnings, yearly bonuses, tax schemes etc. that drive the psudo-real stock markets and cause volitility?"
Thanks. BTW, my father was an accountant at the age of 15 with a big city firm (in Jodhpur, India). My father thought that at the age of 8 he was nowhere as good as I was (I was an arithmetic wiz kid and could easily do compound interest calculations on client accounts at the age of 8). I chose a different career than what my family wanted me to. Everyone around me thought that I would be the smartest lawyer! (My nickname at the age of 10 was sir lawyer).
Anyway, to answer your question accounting in the US by public companies is a sham. Most of the companies have no need to go public except for scamming the public! My bearishness on corporate America began with Scam Options abuse in mid-1990s and how the political system supported it.
I cannot over-emphasize the importance of honest and proper accounting to our system. In 1990s the accountants were corrupted (money corrupts!) and it is all down hill from there. Crooks can hire and own almost anyone and they know it.
Jas
Well I'm hoping that was the real General Glut and we hear more from him.
In the meantime, I know its a hard one to leave behind but the Unemployment rate needs to be given the special attention we gave the illegal aliens.
Heckofajob Jose and horde (dang these people are profitable!) and in their wake, ruinous BLS stats...so take that UE 4.7->5.0% increase with a grain of salt ( an illegal alien shovelful).
So the BLS will just look bad for awhile until regulations are enforced that enable them to measure labor performance...and not just take subprime-like guesses, yes?
Since I have a day job my comments are no doubt late and may be echoed elaswhere. However,what should be of real concern is the fact that the Birth Death model is now responsible for over 70% of the jobs created in the economy. Consequently, we dont really know what the true employment picture is, making it extremely difficult to know what the right policy should be, not that Benji & Pauli would have a clue. Perhaps Kudlow's the greatest economic story never told, is actually now beginning to betold. This could also explain why well over 50% of Americans believe we are already in a recession.
Conjure Bag has entered the building ... wearing his Elton John sunglasses.
RThomas-
I understand and agree basically with what you said. Also agree the current system is be gamed.
What I am suggesting is that there seems to be chonic manipulation regarding Q-O-Q & Y-O-Y comparisons that are generally manipulated to influence short-term profits, bonuses, dividends and stock prices.
Thus, there is a need for more accounting transparency on a more frequent basis. Hisitoric data can be rehashed for investors and presented to compare it to an improved, modern 21st century accounting system that is not strictly year-over-year based that is being gamed.
Hopefully, the current one will become extinct if this really get ugly.
Not DH
You forgot oil shale, which we have in the US in amounts that equal 3 saudi arabia's worth of oil.
Seems like it's even more than that, stealthwii! We've got 2 trillion barrels (out of 2.6 worldwide!). Compared to Saudi Arabia's 264 billion barrels gives the US 7.5x as much.
Oops, only 800 billion of the 2 trillion is recoverable. You were right, stealthwii, it's 3 Saudi Arabia's worth...
Mike in Oz,
Check out the process requirements before you get too excited, as well as the EROEI for shale oil - as previously stated, educate yourself - the issue is actually more about how fast can you produce that oil than how much of it there may (or may not) be there.
Additionally, the economic and social dislocations required to bring oil shale (or even more exotic alternatives like gas hydrates) on line are non-trivial.
Conservation and the more efficient utilization of existing convetional hydrocarbons is absolutely going to be a requirement. But we aren't going to get there waving our arms, building straw men and name calling. I've heard that Step 1 to solving a problem is acknowledging that one exists...
It is glaringly obvious by now: the residential employment numbers are totally whacked.
None of the explanations offered so far, or any combination of them, really explains how far out in space that number is. This means that, should housing eventually reverse in a few years, the number will simply be useless, even as a relative indicator. Either the methods of sampling need to be revised or the number might as well be scrapped.
Mike in AZ, I specified, "One example is Iran." I regret you are unwilling to take the opportunity to review YOUR OWN RESOURCE to see where other examples might be.
I will point out that I didn't say BP was lying, but rather that I didn't trust the number from (in this case) Iran. I explained why. Allow me to supplement.
If you identify the 'explosive growth in reserves' nations and separate them, you will notice three tendencies. First, all the non-explosive reserve nations - which provide over 3/4 of total reserves - have declining reserves. Second, the explosive growth nations themselves divide into two general categories. First there are the nations that had zero or near-zero reserves in 1996 but suddenly have them now. A bit of research will show that these nations have a fairly decent record of the surveys being accessible - that is, the tests done to determine reserves exist can be verified independently. The remaining explosions, however, come from nations which refuse to allow outside access to their surveys. They are all saying, "trust us". If these are replaced with the 1996 numbers - stagnant instead of declining as all the other known locations - the production to reserve value drops below that 40 percent line you reference.
You asked why they would lie - though you asked of BP, and I say it's possibly the producing nations. The answer boils down to the desire to keep the price from exploding too high. If the price of oil goes too high, other energy strategies and resources become interesting and viable. OPEC learned this in the 1970s. There is a 'sweet spot' in all pricing - a high point in the total profit curve. It is in the best interest of a producer to remain in that sweet spot however easy it may be to demand more profit per item -- and subsequently price oneself out of the market.
Again, I did not say BP was lying. I said I did not trust the numbers of certain nations in the report. They had extraordinary jumps in proven reserves at a time when the price of oil was moving out of the sweet spot, and ask their customers to trust them that the surveys are valid.
One last small point. BP - or rather it's chief economics officer - says the peak oil theory isn't valid. On the other hand, the CEOs of Total and Conoco-Phillips plus the chief economics officer of the International Energy Agency say it's valid and (variously) approaching fast or we've passed the point. Adding just a bit more to the fire, the CEO of BP said at an oil production conference in November that "about half" the oil reserves of the world have been extracted -- which is the essential core of peak oil (the point at which half the oil available for extraction has been so).
Oil sands? They were in your referenced report - and form a negligible increase. It's at least close to breakeven on energy return on investment, unlike (as mentioned) shale oil.
Coal is, indeed, plentiful. It's also got a low retur
Mike in Oz,
Conservation and the more efficient utilization of existing convetional hydrocarbons is absolutely going to be a requirement. But we aren't going to get there waving our arms, building straw men and name calling. I've heard that Step 1 to solving a problem is acknowledging that one exists...
energyecon, maybe you should read my post at 3:31PM. Then I will be happy to accept your apology :^)
Mike in Oz,
You will have a long wait - you still have a lot of basic research to do - keep trying though, you will get there if you do your homework.