Lately, anywhere we look, there seems to be a pattern emerging: those economic thinkers who actually construct and run their own macro models (not the glorified powerpoint presenter variety) and actually do independent analysis and tracing of the money flow, instead of relying on Wall Street forecasts that have as much credibility as a Moody’s home price hockey stick from 2006, almost inevitably end up having a very dire outlook on the economy. One such person is and has pretty much always been Shadowstats‘ John Williams, whose "shadow" economic recreation puts the BLS data fudging dilettantes to shame. That said any reader of Zero Hedge who has been with us for more than a few weeks, knows all too well our eagerness to ridicule the increasingly more incoherent lies coming out of the US department of truth, so no surprise there. Yet another aspect over which there is much agreement is that no matter how one slices the data, the outcome for the US currency is a very grim one. Which is why Williams over the past several years has become a major fan of the shiny metal. Below we recreate portions of his latest observations on the upcoming currency collapse, courtesy of King World News.
John Williams today was dispatching information regarding gold, silver, M3, nearby massive selling of dollars and inflation. Here is a portion from his commentary, “Despite November 9th’s historic high gold price of $1,421.00 per troy ounce (London afternoon fix) and the multi-decade high silver price of $30.50 per troy ounce (London fix) on December 7th, gold and silver prices have yet to approach their historic high levels, adjusted for inflation.”
Real Money Supply M3: The signal of the still unfolding double-dip recession, based on annual contraction in the real (inflation-adjusted) broad money supply (M3), continues and is graphed (above). Based on today’s CPI-U report and the latest estimate on the November SGS-Ongoing M3 Estimate, that annual contraction in November 2010 was 4.0%, narrower than October’s 4.5% contraction, and May’s post-World War II record annual decline of 7.9%.
Incidentally, if there is one thing we disagree with John on is that the broadest aggregate (M3 for Williams, Shadow Banking for Zero Hedge) is declining. That said, an expansion in the most critical broad money signal is merely the missing piece of the puzzle that we…
The August 2010 Consumer Price Index for Urban Consumers (CPI-U) is 218.312. The annualized inflation rate computed from this number is 1.15%, which marks the tenth month of mild inflation after a streak of eight consecutive months of deflation. The annualized inflation rate is well below the 3.99% average since the end of World War II.
The Bureau of Labor Statistics (BLS) has compiled CPI data since 1913 (BLS historic data). Our chart now shows inflation back to 1872 by adding Warren and Pearson’s price index for the earlier years. The spliced series is available at Yale Professor Robert Shiller’s website. This look further back into the past dramatically illustrates the extreme oscillation between inflation and deflation during the first 70 years of our timeline. Click here for additional perspectives on inflation and the shrinking value of the dollar.
As I’ve expressed elsewhere, my opinion is that the optimum method for calculating consumer prices is probably somewhere between the revised BLS method and the historic method preserved by Williams. However, government policy, the Federal Funds Rate, interest rates in general and decades of major business decisions have been fundamentally driven by the official BLS inflation data, not the alternate CPI. For this reason I think it best to take the alternate inflation data as a interesting, but not authoritative.
Just what is the true rate of unemployment in our country? Our headline U-3 rate is currently 9.5%. Our U-6 rate, more broadly defined, is 16.5%.
Many people are aware of the differences between U-3 and U-6; however, renowned economist John Williams takes our analysis to an entirely new level. Williams is far ahead of the curve in his work.
William is likely not a regular on the Washington cocktail circuit. Why’s that? He goes far deeper in his work and exposes inconsistencies, if not worse, in government statistics. Let’s learn more about Williams and his work at Shadow Government Statistics:
Walter J. “John” Williams was born in 1949. He received an A.B. in Economics, cum laude, from Dartmouth College in 1971, and was awarded a M.B.A. from Dartmouth’s Amos Tuck School of Business Administration in 1972, where he was named an Edward Tuck Scholar. During his career as a consulting economist, John has worked with individuals as well as Fortune 500 companies.
Formally known as Walter J. Williams, my friends call me John. For nearly 30 years, I have been a private consulting economist and, out of necessity, had to become a specialist in government economic reporting.
One of my early clients was a large manufacturer of commercial airplanes, who had developed an econometric model for predicting revenue passenger miles. The level of revenue passenger miles was their primary sales forecasting tool, and the model was heavily dependent on the GNP (now GDP) as reported by the Department of Commerce.
Suddenly, their model stopped working, and they asked me if I could fix it. I realized the GNP numbers were faulty, corrected them for my client (official reporting was similarly revised a couple of years later) and the model worked again, at least for a while, until GNP methodological changes eventually made the underlying data worthless.
That began a lengthy process of exploring the history and nature of economic reporting and in interviewing key people involved in the process from the early days of government reporting through the present.
For a number of years I conducted surveys among business economists as to the quality of government statistics (the vast majority thought it was pretty bad), and my results led to front page stories in the New York
If large businesses are not hiring and small businesses do not increase hiring (or worse yet stop hiring), it’s quite hard to be optimistic about jobs.
Hiring Not Improving
One of the things in the ADP report that caught my eyes was this short paragraph:
"July’s rise in private employment was the sixth consecutive monthly gain. However, over those six months increases have averaged a modest 37,000, with no evidence of acceleration."
The key words in that paragraph are "no evidence of acceleration". It is consistent with the small business surveys mentioned above.
ADP vs. BLS Reports
Inquiring minds may be interested in seeing a comparison between ADP and the BLS (government) reports.
A direct number to number comparison using the standard BLS report is inaccurate because ADP reports private nonfarm jobs while the BLS reports all nonfarm jobs. The latter is tremendously skewed this year by census hiring and firing. It is also skewed by normal government hiring and firing.
Fortunately, the BLS does provide the private numbers in Excel format, so with minimal work an accurate comparison is possible.
Let’s go back to January and see what the data looks like year to date.
A shrinking number of jobs and a growing supply of apartments will continue to push the Puget Sound region’s rents down next year as vacancy rates climb, industry experts predict.
Job losses killed our market, and development buried it," Mike Scott, of Dupre + Scott Apartment Advisors, told landlords at an industry conference Tuesday.
The average monthly rent across all apartment types in King, Pierce and Snohomish counties fell from $988 to $959 during the 12 months ending in September, and a continuing decline through 2011 will further cut that figure to $889, Dupre + Scott projects.
While demand for apartments is falling, the supply is rising.
So far, 4,100 new units have opened this year, and more than 2,000 others are expected to become available by year-end, according to Dupre + Scott.
The firm estimates that about 20 percent of the 6,000 condos completed in the past three years are also on the rental market now.
The combination of job losses and new units has upped the region’s vacancy rates from 6.6 percent last spring to 7.2 percent now, and heading toward 9 percent next year, the firm said.
For the past three years, the biggest argument supporters of Obamacare would trot out every single time when faced with opposition to the mandatory tax, would be that despite widespread predictions of soaring prices, US medical care service costs had remained low and even, on occasion, declined (we leave aside the lack of discussion about soaring deductibles which are recurring "one-time" charges incurred whenever anyone does need medical care, and whose weighted impact on overall medical outlays is dramatic).
A big reason for this delayed increase in prices is that many insurers were unable to gauge the full base-effect impact of Obamacare on their P&L: after all, effective...
Note: This commentary has been updated to include the April data for Real Retail Sales.
Official recession calls are the responsibility of the NBER Business Cycle Dating Committee, which is understandably vague about the specific indicators on which they base their decisions. This committee statement is about as close as they get to identifying their method.
There is, however, a general belief that there are four big indicators that the committee weighs heavily in their cycle identification process. They are:
Real Personal Income (excluding Transfer Receipts)
Congratulations are in order for team Bush and team Obama for another stunning US foreign policy success: Isis Controls Half of Syria after Palmyra Seizure. Fighters from the Islamic State of Iraq and the Levant (Isis) have seized the Syrian city of Palmyra, home to a Unesco world heritage site, putting nearly half of Syrian territory in the jihadi group’s hands and sparking fears that treasured antiquities may be destroyed.
Isis announced it had “complete control” of the city on Thursday, and state television said President Bashar al-Assad’s forces had withdrawn from the city, which is known to most Syrians by its Arabic name Tadmur.
Ancient Palmyra is known to the world for its iconic avenue ...
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Understanding the new normal of a business model is key to the success of any company. The managment of companies need to adapt to the changing demand, but first they must recognize what changes are taking place. Big Pharma's business model is changing rapidly, and much like the airline industry, there will be but a handful of pharma companies left at the end of this path.
Most Big Pharma companies have traditionally done everything from research and development (R&D) through to commercialisation themselves. Research was proprietary, and diseases were cherry picked on the back of academic research that was done using NIH grants. This was in the heyday of research, where multiple companies had drugs for the same target (Mevocor, Zocor, Crestor, Lipitor), and could reap the rewards on multiple scales. However, in the c...
Stocks closed last week on a strong note, with the S&P 500 notching a new high, despite lackluster economic data and growth. I have been suggesting in previous articles that stocks appeared to be coiling for a significant move but that the ingredients were not yet in place for either a major breakout or a corrective selloff. However, bulls appear to be losing patience awaiting their next definitive catalyst, and the higher-likelihood upside move may now be underway. Yet despite the bullish technical picture, this week’s fundamentals-based Outlook rankings look even more defensive.
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Bitcoin, the virtual digital currency, has been called the future of banking, a dangerous fad, and almost everything in between, but we're finally about to get some solid data to help settle the debate.
On Monday, the Nasdaq (NDAQ) stock exchange said it would ...
Chris Kimble likes the idea of shorting the US dollar if it bounces higher. Phil's likes the dollar better long here. These views are not inconsistent, actually, the dollar could bounce and drop again. We'll be watching.
Phil writes: If the Fed begins to tighten OR if Greece defaults OR if China begins to fall apart OR if Japan begins to unwind, then the Dollar could move 10% higher. Without any of those things happening – you still have the Fed pursuing a relatively stronger currency policy than the rest of the G8. So, if anything, I think the pressure should be up, not down.
UNLESS that 95 line does ultimately fail (as opposed to this being bullish consolidation at the prior breakout point), then I'd prefer to sell the UUP Jan $25 puts for $0.85 and buy the Sept $24 call...
Back in December, I wrote a post on my blog where I compared the performances of various ETFs related to the oil industry. I was looking for the best possible proxy to match the moves of oil prices if you didn't want to play with futures. At the time, I concluded that for medium term trades, USO and the leveraged ETFs UCO and SCO were the most promising. Longer term, broader ETFs like OIH and XLE might make better investment if oil prices do recover to more profitable prices since ETF linked to futures like USO, UCO and SCO do suffer from decay. It also seemed that DIG and DUG could be promising if OIH could recover as it should with the price of oil, but that they don't make a good proxy for the price of oil itself.
Kim Parlee interviews Phil on Money Talk. Be sure to watch the replays if you missed the show live on Wednesday night (it was recorded on Monday). As usual, Phil provides an excellent program packed with macro analysis, important lessons and trading ideas. ~ Ilene
The replay is now available on BNN's website. For the three part series, click on the links below.
Part 1 is here (discussing the macro outlook for the markets)
Part 2 is here. (discussing our main trading strategies)
Part 3 is here. (reviewing our pick of th...
This is a non-trading topic, but I wanted to post it during trading hours so as many eyes can see it as possible. Feel free to contact me directly at firstname.lastname@example.org with any questions.
Last fall there was some discussion on the PSW board regarding setting up a YouCaring donation page for a PSW member, Shadowfax. Since then, we have been looking into ways to help get him additional medical services and to pay down his medical debts. After following those leads, we are ready to move ahead with the YouCaring site. (Link is posted below.) Any help you can give will be greatly appreciated; not only to help aid in his medical bill debt, but to also show what a great community this group is.
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