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Thursday, May 05, 2011

Well, There It Is - Bomba!

Initial claims 474K (Advance April 30th), last week's revised up to 431K. That takes the four week moving average to 431,250, into recession territory. The four-week average for initial claims last year was only 465,750, so this truly ain't good. Initial claims this week were higher than the prior year's comparable week. Not a good sign!!!

I still believe that part of this is related to Japanese supply-line problems, but not all. Oh, no, not all. I could go up to 40K, but not past that.

Ah, yes. Such is the life of a non-WS elf. Here's a wild guess - Treasuries will do well today and oil will not, and frankly, if you were playing with silver you need painkillers.

Because we are seeing a sudden pulse, tomorrow's employment report will be pretty good, but the outlook for May's is looking pretty negative. We're coming up on survey week.

I would not have the guts to be playing with oil - I think the fall will be hard and fast. German manufacturing orders also were reported down today.

Oil would have to retract to something near $70, given the price of food and the further price increases in the pipeline, to give this much of a strong push up. And even as oil falls, you are not going to see big falls in diesel/gas prices, so this is going to be a squeaker. Groceries have been so price-constrained that although wholesale prices are falling on certain items, retail prices aren't falling in tandem.

I hesitate to write this, but I am really more worried about Europe than I am about NA. Next week's initial claims should drop, but to what? I guess I am going to be waiting tensely until then.

A further explanation: It is true that this week's initial claims were affected by some unusual factors, but unadjusted claims were higher than last year's, and some of these factors just move claims from one place to another, i.e., they show up now, but should have shown up a couple of weeks before, so the movement doesn't change the four week average much.

Next week and the week after we have to deal with the onslaught of tornado claims! So the question is how much this week's moving average will drop over the next couple of week's, and it may not drop much. The Oregon extension resulted in over 22K extra claims, all of which did not show up in this week's numbers. That is a one-time pulse spread over April.

The impact of the tornadoes will extend for several months but should produce a short, sharp boost in claims. My rule is that if the building is gone, the paycheck is gone. It is not clear how quickly the Japanese supply-chain problems will be redressed, and there should be a further boost related to that issue.

After that, by the fall there will be more unemployed schoolteachers, which will drive up unemployment numbers later in the year. I don't think that should change initial claims that much until August, and perhaps not much even then.

The tornadoes will have more impact than most now realize, the Japanese supply issues are ongoing, and most of all, service businesses around the nation are going to see real pain as long as these gas prices remain high. The issue really is how much of a whack we take altogether on this. Unfortunately the economy is vulnerable.

So anything can happen at the Fed. If they do QE3 gas doesn't fall and commodities could go higher; if they don't we sit and wait to see what is going to happen. In many ways it would be

I'd lay odds that Congress extends the FICA cut at the end of this year; that will make Republican protestations of fiscal conservatism very laughable indeed.

In the meantime, because we have high structural unemployment in many areas, and because Congress didn't extend unemployment benefits past the 99 weeks, a lot of people are losing unemployment benefits without getting jobs. This doesn't help. The stimulus this year was very frontloaded, the further we get to the end of the year the less impact it has.

Heard an auto parts story last night from a mechanic friend.

Supplies are so tight that dealerships with parts inventory are telling their networks that they DON'T have parts even though they do. They simply don't want to spare them unless they get a premium for them so they will only use them for their own customer repair jobs or preferred dealers/mechanics.
I can believe that!

"...if you were playing with silver you need painkillers."

For what it is worth, I wrote the following in an email two days ago.

I was reading the SLV board today and one investor wanted everyone to grow a pair of balls. He said he was "all in" @ $40 on SLV call options. Embrace the leverage apparently.
As a side note, CNBC was really pumping silver yesterday. I flipped the TV on and they just couldn't stop talking about how bright its industrial future was.

This is the most amusing/depressing word verification ever in my opinion.


No need to even offer a joke on this one. I think it speaks for itself.
The auto market reflects a 50's economic focus that has been spiked with government dollars to keep the doors open and provide the consumer leveraged financing, the reality is that auto is a dead end market spare parts availability or not.
Housing is getting ready to make a historic down leg in pricing and it has little to do with the number of foreclosed properties available rather speculator dollars have been chasing easy money in commodities which has created a large dollar vacuum in the RE market that even low down FHA buyers cannot overcome! Here in Calif price to rent ratio's have been out of whack for decades but professional economic forecasters tell us that home afford ability should drive the market higher but they continue to key on the wrong data sets missing the reality that home prices need to reflect economic realities other then inflation and speculation.
Don't forget the flooding on the Mississippi.
Casinos in Tunica are shut down indefinitely
due to anticipated flooding. Several thousand
out of jobs and a loss of state revenue. We have
a government that caters to corporations but
is increasingly hostile to the citizens it is supposed
to serve.


"...and oil will not..."

You sure nailed that one.
Mark - well, let's just say that the "irrational exuberance" has been knocked out of the equation.

Suddenly, investors were reminded that gravity exists.
Ron - "home prices need to reflect economic realities other than inflation and speculation"

Yes, but don't worry. It will happen. Home prices are locally determined, and where jobs and real incomes are good prices will do pretty well. It's just that this really doesn't comprehend that much of the nation!
Spork - I am considering the flood and the tornadoes as one event, just as I consider the quake/tsunami as one event.

But you are most definitely correct that the impact is significant. We have weeks more of flooding on the Mississippi. Transportation will be disrupted, the economy will be disrupted, and for that matter crop planting is badly disrupted by the weather pattern producing tornadoes, flooding and cold soil temps.

It's weird, because I usually have at least one anomaly a year to stick into the db. This year it's as if I have one gigantic, growing blob of anomaly that spans months! I was contemplating that this morning over coffee.

I think the tornado/flood/frost and the quake/tsunami are large enough events to change direction, if we are not careful.

I'm depressed or sort of horrified - yesterday I read the three Fed speeches, and they don't come off well. So far the Fed has only managed to disrupt the economic signalling system, but they don't want to admit it, and multiple Fed heads have come back over the last six months to advocating more risk lending.
Wow, the markets went crazy. Commodities and equities got whacked, even the agriculturals. Not what I expected, given the late planting.

M_O_M, I think this is partly due to the crazy amount of leverage in silver. There were a bunch of margin hikes over the weekend, and I'd bet that one or more big over-leveraged hedge funds blew up today, had to sell out everything indiscriminately to make margin. Shades of LTCM.

Either that, or we're looking at the deflation trade, back with a vengeance. But this was awfully sudden to be a change in psychology like that.
A week ago market experts were touting silver. What they forgot was that the margins can be increased. Silver has a bright future (actually always has had) as an industrial metal, but excessive speculation (silver up from around $25 in six months) does not reflect the utility of the metal.

I got in at $33 and out at $44. Do I feel like a genius? No, just fortunate that my trailing stop worked.

Last week all was well with the world. IBD - "Market in a confirmed uptrend." Their accumulation/distribution grades were Bs. The talking heads on CNBC were all wondering how far the bull would run. Suddenly, it seems, storm clouds have appeared. But anyone who believes, as I do, that oil and energy prices are extremely important to our economy saw the clouds gathering as oil ran up. It is the way of the world now. Technology has brought us many wonderful benefits, but vast amounts of information at our fingertips, electronic trading, interlocked economies, money sloshing around in vast quantities, and much more have brought volatility and risk that makes life more, shall we say, "interesting."
So MOM (and her commenters)
What does this mean? Obviously the economy is not on track. We won't have nice steady growth with normal, well controlled inflation. But is the economy just bogged down, and in the ditch so to speak? Is money going to be tight for everyone and we are in another deflationary rut of a recession? Or are the wheels coming off the economy completely? Are we looking at hyperinflation? Is this the end of the American economy for this generation? I am really confused because there seem to be fewer dollars available to consumer (deflation) with retail and commodity prices going up (inflation). Which is it? And if we can't tell yet, what are the telltales to be watching?
I've updated my silver to aluminum ratio chart. Silver still looks plenty frothy to me.
Anon at 2:45

It's called stagflation.
It's called stagflation.
Yes and if you lived through the Carter years, it holds SUCH a special place in your heart! I'm continually amazed at how little you get for $100 in the grocery store these days.

Do you think the Repubs will have sense enough to go with that "are you better off now than four years ago?" tag?
Teri said, "Do you think the Repubs will have sense enough to go with that "are you better off now than four years ago?" tag?"

I watched the Republican debate last night. Herman Cain was very impressive. (Many viewers thought he was the star.) One of his best remarks of the night: (Paraphrased) "No, I'm not a politician and have never held office. Most of the people in Washington are politicians. How's that working out for you?" So, I think they are thinking along the right track

Also, they need to keep contrasting Obama's statements that he is working night and day to create jobs with the results. Cain emphasized that he was a business man who has created jobs and that it wasn't government who created jobs, but businesses.
So now I have to look up Herman Cain?

Well, I will. I can't say I'm enthused at the prospect of next year's election, but it is going to matter.
--- Herman Cain summary ---

(1:10 http://www.youtube.com/watch?v=qQdXoRlJNP8&feature=related)

previously on Federal Reserve board (Bank of Kansas City, 1995-1996)
(5:20 http://www.youtube.com/watch?v=qQdXoRlJNP8&feature=related)
against audit of the Fed

yet another fool trotting out energy independence
when talking about what drives oil price, he leaves "demand" out of "supply and demand", but includes "speculators"
(5:30 http://www.youtube.com/watch?v=qQdXoRlJNP8&feature=related)
he thinks you can trick speculators into driving the oil price down -- and then LOW OIL PRICES WILL ENCOURAGE THE BUILD-OUT OF PRODUCTION IN THE USA -- economically speaking, this guy sounds like a moron; he did get applause for that -- but most people in this country are economic morons as well so that's not much of a surprise

"every family deserves a prebate"
(4:46 http://www.youtube.com/watch?v=-MLmakvy2c0&feature=related)
I don't like the sound of that. It's not about deserving, it's about what's politically doable. But then again, I think everyone deserves to not be robbed, but that option's not being discussed.

multiple instances:
gives non-answers (basically doesn't have a position yet, or at least doesn't want to commit)

his closing comments made me want to barf
(5:40 http://www.youtube.com/watch?v=JdaUqDFGA9I&feature=related)

--- a short take on the others ---

Gary Johnson
isn't so much for liberty but for lower costs?
(5:00 http://www.youtube.com/watch?v=BAiwMEhfFTg&feature=related)
it came up again in his closing comments -- contrast to Ron Paul's -- Paul is correct that it's not an accounting issue but a philosophical one (though maybe it's an accounting one at least in that too many people don't seem to understand that TANSTAAFL) -- Johnson comes off as a bean counting weanie

Rick Santorum
literally goes from liberty to fascism in 15 seconds flat
(5:30..5:55 http://www.youtube.com/watch?v=eToBYuMqo7Y&feature=related)

Tim Pawlenty
"intelligent" design... enough said
(9:55 http://www.youtube.com/watch?v=eToBYuMqo7Y&feature=related)

Ron Paul
nothing bad to point at
The "Top Comments" section for all 7 parts contain pro Ron Paul comments.
Might have something to do with him being right, principled and consistent, and voting that way.
Wholy crap!

Cain doesn't even know what the hell it means for something to be unconstitutional. He thinks if congress passes a law, it's automatically constitutional!:

(first 40 seconds -- caution: audio level is really high on this recording -- turn your speaker down before starting)
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