Posts filed under “Think Tank”

New Classifications for Personal Consumption Expenditures (Wonky)

Today, we get the Bureau of Economic Analysis (BEA)  comprehen­sive, or benchmark, revision of the national income and product accounts (NIPAs). The last such revision was released in December 2003. ture components of gross domestic product (GDP) and some of the income components.

For those of you who want more info, consider the following sources:

Floyd Norris does a nice job providing an overview of the impact of the benchmarking:

Revisionist History, by the Numbers
Floyd Norris
High and Low Finance, July 30, 2009, 5:32 PM

The WSJ’sReal Time Economics notes that

GDP Revisions: Deeper 2008-09 Contraction, Milder 2001 Recession The latest recession, it turns out, is even worse than previously reported. And the 2001 downturn that plagued the job market for years? It now barely registers as a sustained contraction in economic output.

The update moves the current recession past the late-1950s downturn as the worst (in GDP terms) since the Great Depression. (Of course, the 2009 data could be revised next summer so you can’t say for sure.) The BEA now says inflation-adjusted GDP increased just 0.4% in 2008. Earlier estimates had put the growth at 1.1%. GDP is now shown dropping in last year’s first quarter (reported earlier as a gain), posting a smaller gain in the second quarter than shown earlier, a larger drop in the third quarter and a slightly-less-large tumble in the fourth quarter. From the fourth quarter of 2007 to fourth quarter of 2008, real GDP is shown dropping at a 1.9% annual rate compared with the earlier estimate of 0.8%.

The BEA explains its own 2009 revision in (agonizing) details:

On July 31, 2009, the Bureau of Economic Analysis (BEA) will release the results of a comprehensive, or benchmark, revision of the national income and product accounts (NIPAs).  The comprehensive revision will incorporate the results of the 2002 benchmark input-output (I-O) accounts as well as changes in definitions, classifications, statistical methods, source data, and presentation.

Advance information about the comprehensive revision will be posted here as it becomes available.

A few white papers detail the changes

Preview of the 2009 Comprehensive Revision  of the NIPAs Statistical Changes by Clinton P. McCully and Steven Payson describe the statistical changes being made. (BEA, May  2009)

Preview of the 2009 Comprehensive Revision of the National Income and Product Accounts by Clinton P. McCully and Teresita D. Teensma provides de­tailed explanation of the new classification system. (BEA, May  2008)

Preview of the 2009 Comprehensive Revision of the NIPAs Changes in Definitions and Presentations by Eugene P. Seskin and Shelly Smith discusses  major changes in definitions and classifications (BEA, March  2009)

Category: Economy, Think Tank

Backbone Not Likely in Fed’s Exit Strategy Toolkit

Good Evening: Just when market participants had grown used to the stock market’s recent pattern of falling in the morning and rising in the afternoon, U.S. share prices pulled a George Costanza and did the opposite today (if you are unsure what this “Seinfeld” reference means, click here). Higher markets overseas, some decent earnings reports,…Read More

Category: Markets, Think Tank

7 year note auction

The 7 year note auction was good as the yield was about 3 bps less than expected. The bid to cover of 2.63 was above the average seen in the previous 5 of 2.4 but below the June auction of 2.82. The level of indirect bidders totaled 62.5%, below the 67.2% seen in June which…Read More

Category: MacroNotes

RSI in the NDX, highest since Jan 2000

With another run today higher, the 14 day RSI (relative strength index) in the NDX is now at the highest level since Jan 2000. Momentum such as this that brings us overbought can keep us overbought for a continued period of time so it’s never a one stop timing measurement but it at least brings…Read More

Category: MacroNotes

Has the housing market hit bottom?

Tim Iacono is a retired software engineer and writes the financial blog “The Mess That Greenspan Made” which chronicles the many and varied after-effects of the Greenspan term at the Federal Reserve. Tim is also the founder of the investment website “Iacono Research” that provides weekly updates to subscribers on the economy, natural resources, and financial markets.

Today, he looks at the question of whether the Housing market has bottomed or not  yet . . .


Now that a number of recent housing reports are generating some incredibly positive headlines and the global economy appears to be slowly digging its way out of an enormous hole that was created last fall when the world nearly came to an end, the burning question on the minds of millions of people is … Has the housing market hit bottom?

There is no shortage of answers.

Unfortunately, most of them are far too simple and, in most cases, the individual or organization providing the answer has a bias of some sort.

I’m no exception.

We sold our house about five years ago and have been renting ever since.

We plan to buy again, but not until at least next year and we hope to get a lot more house for our money than we could today.

That’s the soonest that I think the bottom in home prices is likely to occur around here in the price range we’re looking, though a bottom in home sales may already be behind us, and this is what makes the recent discussion of a housing bottom so complicated – “hitting bottom” means different things to different people living in different parts of the country.

The discourse on this subject is full of misinformation and deception from parties with vested interests that will inevitably lead people to make horrendously bad decisions that they’ll regret in another year or two while others may postpone decisions that would be best made today.

With my biases out of the way, a few thoughts on a housing market bottom are offered here. In this article, regional differences will largely be set aside and the focus will be on three sets of national housing data – new home sales, existing home sales, and existing home prices.

New Home Sales Have Bottomed

First, let’s look at the home building industry, which, up until a couple years ago had accounted for about 10 to 15 percent of all home sales. Then, the homebuilders’ share gradually sank to about half that amount as waves of foreclosures started hitting the market at much lower prices, cutting into their business dramatically.

Ironically, many of these foreclosure sales were homes that the builders had built and sold a couple years prior. Disgruntled home buyers who, in 2006 and 2007, complained about how builders were slashing prices on Phase III after they bought in Phase II ultimately had the last laugh in 2008 and 2009 when they walked away from their almost-brand-new home and the bank sold it at a 40 percent discount to the going prices for Phase III.

Don’t feel too sorry for the homebuilders – they had a few very good years.

Read More

Category: Real Estate, Think Tank

claims data

Initial Jobless Claims totaled 584k, 9k higher than expected and the prior week was revised up by 5k to 559k. This should be the first clean number in weeks where it’s not influenced by the seasonal distortions that was brought by the differing time schedules of auto plant shutdowns. The insured unemployment rate was unchanged…Read More

Category: MacroNotes

That was a short correction

After a 5% drubbing, the Shanghai index bounced back 1.7% as the PBOC quelled concerns that monetary policy would change much. Good earnings reports in Japan also helped to lift spirits. European stocks rallied after the July Euro Zone economic confidence # rose almost 3 points from June and was 1 point more than estimated….Read More

Category: MacroNotes

Settling For Less in the New Normal

Good Evening: Just as they have during 9 of the past 10 sessions, U.S. stocks suffered a setback in the morning, only to rally late in the day. Unlike so many recent sessions, however, all the major averages remained in the red as the closing bell rang on Wednesday. A sell off in China, some…Read More

Category: Markets, Think Tank

Being in the Sweet Spot (twice)

David R. Kotok co-founded Cumberland Advisors in 1973 and has been its Chief Investment Officer since inception. He holds a B.S. in Economics from The Wharton School of the University of Pennsylvania, an M.S. in Organizational Dynamics from The School of Arts and Sciences at the University of Pennsylvania, and a Masters in Philosophy from the University of Pennsylvania. Mr. Kotok’s articles and financial market commentary have appeared in The New York Times, The Wall Street Journal, Barron’s, and other publications. He is a frequent contributor to CNBC programs. Mr. Kotok is also a member of the National Business Economics Issues Council (NBEIC), the National Association for Business Economics (NABE), the Philadelphia Council for Business Economics (PCBE), and the Philadelphia Financial Economists Group (PFEG).


Being in the Sweet Spot (twice)
July 29, 2009

At the moment we are in the “sweet spot” in markets and soon, in Maine. We must enjoy it while it lasts. Some bullets follow.

1. Fed policy is on hold at Quantitative Easing (QE), which means short-term interest rates near zero and plenty of liquidity in the financial system. The Fed has said it will continue this posture for a period of time. Markets do not expect any change until well in to 2010 at the earliest.

2. The much-feared Obama healthcare initiative seems to be stalled. Markets are relieved, because this initiative, as it was presented, amounted to a huge transfer payment that would be funded by future tax increases. The tax hikes would come on top of those already discounted by markets. Lifting the double tax whammy has given stocks a boost.

3. Foreigners are buying US Treasury securities again, and that has quieted the fearmongers who have been crying that the US will be abandoned and the dollar will face a crisis. That may still occur, but the day of reckoning for our fiscal profligacy seems to be postponed. Markets like dodging this bullet.

4. Markets have not priced in any risk premium on the Bernanke-stays or Bernanke-goes debate. Markets are also not pricing any risk premium on how and when the Fed will exit the QE strategy. Right or wrong, markets are now powered higher by bullish momentum coupled with positive economic signs. The Fed and other central banks in the world are on hold. Markets like stasis and have it for the time being.

Read More

Category: Think Tank

China hiccups

After an amazing 100% run from the early Nov ’08 lows, the Shanghai index took its biggest one day hit since the rally began, by 5%. There is talk that the Chinese may raise bank reserve requirements and the stamp duty tax on stock executions to prevent overheating in the economy. To quantify, new Yuan…Read More

Category: MacroNotes