Succinct summation of week’s events (11/04/2011)
Succinct summation of week’s events:
Positives:
1) While Oct job gains were only 80k, the weakest in 4 months, the prior two months were revised up by a net 102k
2) Initial claims below 400k at 397k
3) Oct Vehicle sales in line with estimates but best level since Feb
4) China service indices mixed relative to expectations but both firmly above 50
5) Inida mfr’g PMI rises to 52 from 50.4 and South Korea rises a touch although remains below 50
6) RB of Australia cuts interest rates 25 bps to 4.5% to help economic growth as one of the only responsible central banks in the world gave themselves bullets over the past few years
7) ECB cuts rates to help economy but inflation is their mandate, Phillips Curve faith
Negatives:
1) Within payrolls, avg hourly earnings up only 1.9% y/o/y vs CPI near 4%
2) ISM mfr’g and services both slightly below forecasts
3) US Oct retail comps light
4) Canada reports unexpected sharp drop in jobs
5) Papandreou creates chaotic situation in Greece with referendum call. I’m all for democracy but that’s what elections are for and he made a deal with his EU counterparts
6) Italian gov’t losing the faith of the markets to liberalize their economy, yields spike across their yield curve
7) EFSF can’t sell bonds, an embarrassment for this supposed AAA paper
8) German Sept factory orders unexpectedly fall for a 3rd straight month
9) Euro zone mfr’g and services composite index revised down to 46.5 with Italian mfr’g specifically down to 43.3 and services at 43.9
10) Euro zone CPI at 3%, holding at highest since Oct ’08, ECB bets it’s not sustainable with slowing economic growth, we’ll see
11) China mfr’g PMI falls to 50.4 from 51.2, Taiwan drops to 43.7
12) Bernanke officially lays groundwork for QE3. I say he is the most dangerous impediment to sound economic growth, more so than Congress that he has enabled and financed to spend the way they have.
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November 4th, 2011 at 4:02 pm
Seven positives; 12 negatives. Guess I need to add weigh the import of each point to assess further.
Re: 12 neg–don’t disagree. Wonder what would happen if Fed announced first and then actually raised rates even a 1/4 point.
November 4th, 2011 at 4:03 pm
I would have thought one of the Fed’s PDs going tits up 1 week after giving positive guidance on the firms activities would have warranted a mention.
November 4th, 2011 at 4:32 pm
“actually raised rates then what would happen if Fed” .. umm .. how much bigger would our interest debt payment be .. umm “not my job”
November 4th, 2011 at 5:14 pm
@BR
“5) Papandreou creates chaotic situation in Greece with referendum call. I’m all for democracy but that’s what elections are for and he made a deal with his EU counterparts”
But he made a deal with his voters before the EU deal so which one does he keep? Or the only deal worth keeping are the ones that make the bankers rich? I say go the Iceland way
“Mr Papandreou has promised stimulus of up to €3 billion ($4.4 billion) to accelerate recovery. As part of the package he is likely to keep a campaign promise of above-inflation increases in wages and benefits for public-sector workers. Mr Papandreou claims that he will find the funds by cracking down on tax evaders (as most incoming governments promise) and increasing the tax burden on the rich. Unless he can improve Greece’s economy soon he could well face the social unrest that blighted the latter part of his predecessor’s term in office. “
November 4th, 2011 at 5:37 pm
BR,
Couldn’t agree more with #12. When confidence is lacking in the market a Fed that constantly telegraphs its accommodative policy causes erosion to whatever little confidence has been built and just encourages the same risk on, risk off ridiculousness.
November 4th, 2011 at 5:43 pm
Bank of America is running Ads on network TV bragging about $8.5 billion lent to small business. I think that it is ridiculous that they are bragging about such a small number (They reserved more than $4 billion for bonus!!)
Why would they lend? Why not keep lending it back to Fed and continue making the spread? Why take the risk in lending to real business and god forbid perform its real function in the economy?
November 4th, 2011 at 5:49 pm
Agree on Bernanke- point 12. The most dangerous man in the U.S.. He has systematically destablilized the economy. He helped create the crisis. Instead of resigning, he is doubling down on his theoretical structure.
The Fed itself has turned the financial community into Pavlov’s dogs.
Agree with Molesworth on weighting. In my book: positives- light; negatives- heavy.
The Fed and it’s ilk watch core inflation for systemic inflation while it’s headline inflation where people live and I have watched it crush people.
All the numbers are so unreal unless viewed in the context of the debt required to achieve them. Unless the numbers are debt weighted we are focusing on how many angels can dance on the head of a pin.
It doesn’t matter what the Greek gov’t does. The population’s stance is passive aggressive: say “yes”, then do “no”. Whatever is agreed to, even by referendum will be undermined. Just Give Us the Money!
November 4th, 2011 at 7:27 pm
What, people don’t want to buy AAA-rated EFSF paper? Couldn’t have anything to do with their previous AAA-ratings experience.
November 4th, 2011 at 7:50 pm
Well, it looks like Bernanke must be the devil himself so let’s give him some sympathy: Most of what he has done (but not all) is consistent with a basic model of the economy that has proven a hell of lot more accurate* the past several years than prognostications based on supply-side theory never mind invocations of confidence fairies, contractionary expansion, invisible bond vigilantes, imminent hyperinflation (any day now) and the virtues of purging (for other people).
*Sufficiently accurate that I made quite a bit of money just betting with the trends it indicated were most probable, such as continued collapse in interest rates and likelihood of $USD strength, and there is no better evidence than that for this investor.
November 4th, 2011 at 8:10 pm
“12) Bernanke officially lays groundwork for QE3. I say he is the most dangerous impediment to sound economic growth, more so than Congress that he has enabled and financed to spend the way they have.”
Since a lot of people seem to agree with this, can someone please explain this to me? Like, I want real details, not just “it’s about confidence!” I’m trying to understand the process, here – so how, exactly, has Fed policy been such a dangerous impediment to economic growth? Take me through step by step, and explain to me what good policy would be, and bring me through the step by step process that leads to sound economic growth under this different good policy and a lack of growth under the current policy. I’m not understanding where this is coming from, so I’m curious about the explanation?
November 4th, 2011 at 8:34 pm
BTUR, don’t worry you won’t get an answer because there isn’t one. People just like to foam at the mouth while saying words like “Bernanke!” “Fiat!” “Irresponsible!” “ZIRP!” etc etc while, as RW intelligently said, if you just followed what he was doing in your investing, you probably made a pile of money while the people who kept screaming “hyperinflation!”"bond vigilantes!” and “sell treasuries!” (I’m talking about you Bill Gross) got slaughtered while reality marched on ignoring them.
Again, it’s always a good idea to put the politics aside and go with normal sound principles. Also, if put politics aside and read Krugman regularly you’ll make a lot of money. Because he’s been right about the economy all along.
November 4th, 2011 at 9:39 pm
Adding in this week’s data releases, the The TRENDLines Recession Indicator projects a GDP trough of o.6% in February … en route to a 3.9% business cycle crest in 2014Q4. There are a dozen weeks of troubling economic releases yet to endure, but the phantom ECRI Recession appears to have little merit.
TRI chart: http://trendlines.ca/free/economics/RecessionIndicatorUSA/USA-TRI.htm
November 4th, 2011 at 11:23 pm
“…put politics aside and read Krugman regularly” Drum roll cymbal crash! That’s talent. And calling out Bill Gross in the same post…. impressive.
November 5th, 2011 at 8:54 am
https://wikispooks.com/ISGP/index.html
https://wikispooks.com/ISGP/organisations/Bohemian_Grove.htm
can’t tell the players without a scorecard
Enjoy your weekend.