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Thursday, September 27, 2012

Another Donnerstag

Well, let's start with the good. Initial claims this week headline at a more optimistic 359K. Last week revised up to 385K. Current moving average 374K. That moving average just doesn't want to change. But at least it is below 400K, huh?

And then the kicks in the 'nads, which I kinda knew were coming, but were worse than I expected.

A) Eurozone retail stuck in contraction in September. Whole darn thing is just sliding slowly down the cliff. Austria manufacturing (one of the last expansion holdouts) took another tumble this month. The trajectory here is not good - the entire region is just converging negatively. 

B) Durables (advance). This is for August.The big weakness is in planes, but a drop of 13.2% in durable orders is shockingly bad. Ex-transportation new orders decreased 1.6%. Shipments dropped 3%; ex-transportation shipments dropped 0.9%. I wouldn't recommend reading this thing - the string of minus signs burns out your eyeballs. About the only good thing I could find in here was non-defense capital goods ex-aircraft. Shipments declined 0.9%, but new orders rose 1.1%. However even that is not good, because on a YoY basis orders in that category have declined from 61,719 to 58,606. 

If you are such a masochist as to try to read this entire report, you will find no comfort in the second page where we get to inventories and unfilled orders. Inventories rising, unfilled orders dropping, the beatings will continue until morale improves. 

C) GDP. Q2 was revised downward to 1.3%. Unexpectedly. If you look at tables 11 and 12, you'll see that domestic industry profits are dropping, and that's one reason why we have such nasty forward indicators. There's not much joy in this report - private inventories are probably rising now, which will help Q3, but doesn't provide much hope for the future. Domestic income gains are slowing rapidly.

And then we have to deal with the tax cut expirations next year. This is a formidable wall. Externally things keep slowing and we have internal brakes set as well.

China, btw, turned in another big fall in industrial profits.  Noda said Japan ain't backing down.

Pending home sales dropped. ATA trucking tonnage index for August dropped SA 0.9%. Read link.

Kansas weakened:
The month-over-month composite index was 2 in September, down from 8 in August and 5 in July, and the lowest in nine months (Tables 1 & 2, Chart). The composite index is an average of the production, new orders, employment, supplier delivery time, and raw materials inventory indexes. Manufacturing growth decreased at most durable- and nondurable goods-producing plants, with the exception of metal and transportation products which posted a slight increase. Most other month-over-month indexes also fell in September. The production index dropped from 7 to - 4, and the shipments, new orders, and order backlog indexes also moved into negative territory. The employment index eased from 2 to 1, while the new orders for export index inched higher but remained below zero. Both inventory indexes eased but were still in positive territory.

Comments:
I continue to laugh at how reports like these are shrugged off whenever ANY not so bad news comes in. Of course, the people doing the shrugging are all people earning in the top quintile - and they surround themselves with people also earning in the top quintile so they simply have no clue as to how the other 80% are living.


 
Charles - WHIMPER.

I know my recession call is right, but I find myself deeply depressed over it. Part of the problem is that next year we simply must face up to our problems.

We need to raise payroll taxes, but it's very hard to do in an economy like this.

Also I keep grinding away tooth enamel over Obama's "private economy doing just fine" comment. Until the election is over, we cannot even know what type of political compromise may be achieved over the fiscal issues.

The defense cuts alone are enough to put us down like old dogs, but realistically, we need them.

If I weren't so depressed, I would post on the banking issues (very bad) and the results of the defense cuts.
 
Yes, we desperately need cuts in Defense, and I would not be so sure that they will cause any problems. The question is whether the insane rhetoric over the National Debt and deficit is actually affecting national psychology more than the income/spending of DOD employees. I don't have a good answer for that, but I know which one it should be all other things being equal.

Defense spending gets blindingly terrible returns on investment. It's not nearly as stimulative as many other forms of spending. We could do other things with that money and be better off. But we won't, which makes it a question.
 
I just spent a few confusing minutes looking at defense spending at http://www.usfederalbudget.us/. If we do have the big defense cut, it's going to hurt operations a lot more than some folks realize. Right now about 14 percent of the defense budget goes to spending on veterans. It's due to rise to 18 percent by 2014, and that percentage will keep rising. Sort of the same problem we have with welfare programs crowding out other spending in the budget overall.

Cutting veterans' programs won't be popular, but I'm sure it will be done. That probably means I'll lose my VA health coverage, since I rank somewhere below service dogs on the priority list.

See, I had orders to Fort Benning back in 1983. I would have been one of the first to parachute into Grenada, and I would have received the Bronze Star (really!). Having taken some desultory AK fire over my head, I would thus be a combat vet, and my priority would be way high. I could also claim PTSD, and collect $3K plus per month.

But the dang Air Force changed my orders at the last minute, and I went to Grand Forks AFB instead. One doesn't get PTSD for surviving the Blizzard of '84 (okay, I slept through it, but still!).
 
Laying off people in armed services just puts them on unemployment and welfare so spending remains the same but at least we got something out of it when they were on active duty. Much of defense spending on procurement has a multiplier effect.

One sub contractor used its learned technologies to be the sole company to be able to manufacture a solar panel that is 14% more efficient than existing panels due to reducing the loss of energy inherent in the panels. Rolling out these panels was delayed when China reduced the price of their solar panels so much that the 14% efficiency was lost in the economics. But you see my point.

Soon Chinese people will be able to go anywhere in the world while U.S. citizens will not be able to go far and wide because jihadists will kill them. I know, lets import more Muslims so the jihadists will see we are nice guys, just like Europeans did who have no military to speak of.

Military bases around the world lead the way for U.S. businesses to move in. There is a multiplier effect, quite indirect, but it exists.

Gordon, I am priority 2 at the VA for being disabled (but not too badly). While my co-pays are lower than yours, even non-existent in many cases), the wait times for some things has grown to 4 months.

 
Joseph,

I'm sure the actuaries, or some facsimile thereof, have figured out how VA care in the future is going to be quite different from what it was ten years ago. We have a lot of folks who survived serious wounding. In previous wars, they wouldn't have, but they will have lifelong lingering effects.

If I lose my coverage so that theirs can continue, I won't complain. But I'd be happier if the feds weren't spending money on bike paths.
 
MOM,

Extreme Initial Claims Danger v.16

It mark's the 65th straight upward revision to the previous week's data.

65 is quite the streak!

And in other news, I just saw the best excuse ever for the weak GDP report.

The GDP Dog and Pony Show v.3

...the downward revision was mainly due to a drough-related decline in farm inventories...

Drough-related? Hahaha!

I had no idea what drough was until I looked. Very amusing! I'll give you a hint. The stoners can't be very happy, lol.
 
Mark - it's like a bad cough, but really, really dry. I suppose.
 
I know my recession call is right, but I find myself deeply depressed over it. Part of the problem is that next year we simply must face up to our problems.

You're recession call is right; hell, IMHO we're still in a depression.

NWIH they'll "face up to our problems", though. The very first thing they'll do after the election is compromise to kick the can on fiscal cliff.
 
MOM,

Mark - it's like a bad cough, but really, really dry. I suppose.

So it is like the dry humor found in a deadpan economy?

Phlegm

Phlegm (play /ˈflɛm/; Greek: φλέγμα "inflammation, humour caused by heat") is a liquid secreted by the mucous membranes of mammalians.

Phlegmonomics is secreted by PhD mammalians from ivory towers. Inflame that economy with high oil prices! Inflame it!

Humourism is an ancient theory that the human body is filled with four basic substances, called the four humours, which are held in balance when a person is healthy.

Gallows humourism for the win!
 
I know my recession call is right, but I find myself deeply depressed over it.

Your depression won't last too long because you are willing to face reality. Those who avoid reality to make themselves feel better now are only in for a longer, harder depression later.

While I feel the same as you, I've turned to CNBC for comic relief. They've had some recent interviews about the "Death Of the PC" and the analysis is 100% wrong!

PC sales are down at the consumer level, but realistically that was inevitable as people maxed out their usefulness - they only need so much processing power for the few things they use the computer for. While tablets have eaten some of that market, the extreme cannibalization of the PC market is at the business end - the processing power is so great right now that a typical Intel box can run several virtual machines and terminal services - the typical business desktop is now a slightly more powerful graphical/video version of a dumb terminal. Or I should say "terminals" as the typical use of a desktop PC in the office is to run multiple displays.

But these desktop PC's are generally upgraded rather than replaced - businesses are extending as much life out of these machines as they can because there simply is so much capital savings by going that route. I'm a software developer and managed to get 8 years (!) out of my XP machine and finally replaced it a few weeks ago with a Win7 PC that has such much power I am running my old XP environment as a virtual machine on it with plenty of room to add a couple more virtuals if necessary.

But the clueless on CNBC are looking as if lower PC sales are killing Intel and Microsoft when it is actually the quality of the Intel and MS products that are enabling more productivity with fewer devices - it's the box assemblers that are shrinking, not the suppliers of the major "components".
 
I'm hearing you on that, Charles.

In a slow-growth economy, the bias shifts towards efficiency.
 
The topic of "cuts to defense spending" sure leaves ME feeling uneasy.

[ An aside- Yes, I've read of the competition among the various armed services for more-and-more, newer-and-better, "war toys". Like every other federal program, I'm certain there's plenty of "waste, fraud, and mismanagement" in Defense that COULD be addressed -- but the W-F-&-M somehow never goes away. ]

Back to the point, though, which is: our enemies keep watching, waiting, and probing our defenses. We've sent a worrisome signal by allowing ourselves to get bogged down in "nation-building" and that "hearts-and-minds" nonsense; and as the years drag by with no Official Victory announced, we've been losing enthusiasm for the notion of "military intervention" in general.

If I belonged to a group intent on getting jihadi bonus points for tweaking the Great Satan, I'd pick a time when the people were tired of war, the country's economy was shaky, and the Defense Dept's budget had just been slashed. Like seems to be happening in the USA just-about-now.

So - these budget cuts could be inviting some devastating Unintended Consequences. I'd like to be sure our Ruling Elites have thought this through reeeeally caaaarefully (and that they have a Plan B just in case).

Just sayin'.
 
The topic of "cuts to defense spending" sure leaves ME feeling uneasy.

[ An aside- Yes, I've read of the competition among the various armed services for more-and-more, newer-and-better, "war toys". Like every other federal program, I'm certain there's plenty of "waste, fraud, and mismanagement" in Defense that COULD be addressed -- but the W-F-&-M somehow never goes away. ]

Back to the point, though, which is: our enemies keep watching, waiting, and probing our defenses. We've sent a worrisome signal by allowing ourselves to get bogged down in "nation-building" and that "hearts-and-minds" nonsense; and as the years drag by with no Official Victory announced, we've been losing enthusiasm for the notion of "military intervention" in general.

If I belonged to a group intent on getting jihadi bonus points for tweaking the Great Satan, I'd pick a time when the people were tired of war, the country's economy was shaky, and the Defense Dept's budget had just been slashed. Like seems to be happening in the USA just-about-now.

So - these budget cuts could be inviting some devastating Unintended Consequences. I'd like to be sure our Ruling Elites have thought this through reeeeally caaaarefully (and that they have a Plan B just in case).

Just sayin'.
 
Regarding defense cuts, I am constantly amazed at how, to many conservatives, the defense budget is some sacred cow.

If there is waste and redundancy in the rest of the federal budget, this certainly applies as well to the defense budget. For example, do we need every one of the hundreds of overseas bases?

Let's cut ALL the budgets.
 
The military is inefficient because we won't let them be efficient. From an economic standpoint, if your mission is to kill people and break things, nukes are far and away the most efficient way to do that.

The rules of engagement currently require inefficiency, and the wounding of far too many soldiers.

Add in things like the Army's irrationally insisting on using un-armed medivacs that delay response as a turf-war tactic, and, inefficiencies grow,(both in dollars and in casualties), adding to the cost.
 
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