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NOLo's
Nightmare Scenario
This afternoon I will
go through the web bot runs from earlier this year which made
some horrific predictions about what this year would bring:
13-million people homeless and marching North. I hate to
say it, but a nightmare scenario of multiple hurricanes could
destroy the oil and gas infrastructure in the gulf of Mexico and
could make things indescribably bad - perhaps so bad as to push
the world beyond the economic brink.
Here's the high level
view:
-
My daughter
Denise, who went through one "false alarm" evacuation from
new Orleans last year tells me that what should have been a
45 minute trip turned into a 6-hour nightmare then
and there's little reason to think things will be much
different now.
-
If people get
caught in the lowlands of Louisiana, there could be
thousands of deaths - and as Denise related in a
conversation this morning, there are 10's of thousands of
people who are in the lower economic strata who have a lot
of pride in the Big Easy and say things like "If my city
goes down, I'm going down with it..."
-
The feds will
likely have to move quickly to get people redistributed to
'reception centers" which will be set up in major cities
west, north, and east of the impact zone.
-
We have run some
numbers and see that if the city of NOL is substantially
destroyed, the unemployment rate could be pushed up 1 to 2%.
-
The unemployment
rate - now 5% could hit 7% to 8% by our reckoning due to the
ripple effects of the storm.
-
Look for
"restrictions on travel" a recurrent theme in the bot runs
to bust out into consciousness. Most critical of all
will be the cessation of oil and gas barging on the
Mississippi River upstream and finished goods and
agricultural products downstream.
This "nightmare
scenario" gets worse from here. Click over and
read the article in The Australian today which says a dollar
dumping festival breaking out globally could being down the
globe in a sort of financial September 11th.
The web bot forecasts
as best I can recall forecast 13-million people being displaced.
There was talk of two cities being destroyed - and one of these
is supposed to be on a hill and slide down (en masse) causing
horrific loss of life. In the April 10, 2005 run, there
was this prescient forecast based on linguistic shift:
"Within this
sections' data we note that our disaster scenario is picking
up some more details. We find that references to 'geese' and
other birds are strongly suggesting a North American
location. Further we find indications that the refugees from
this event will find (no) [solid] (ground/earth) as they
(try/attempt/seek to) (walk) from the (coast). Instead this
area is seen as [dangerous] in the extreme, presenting
(quivers/shakes) such that (every) (four/4) (steps)
(require/demand/insist) on (sitting)[down]. Yet this action
of (sitting)[down] will apparently be also very (dangerous)
such that (sitting) will be (spoken) [ill] (of).
The lexical sets
suggest that (three/3) (days) after the [city] (slides) into
the [mud], (refugees) will (arrive) at the [hills/mountains]
and begin to (coagulate) into a [scattered/distributed]
(nation). These refugees seek safety in the [solid] (rocks)
and (boulders) of the [hills], and apparently will consider
themselves lucky in spite of the problems that will develop
as a result of their place of refuge. We note that (no)
[food] is available there and that
(difficulties/obstacles/barriers) of all kinds spring up for
those attempting to provide assistance. First the area is
seen as so hilly as to prevent landing of aircraft. Further,
the aspects/attribute sets suggest that air drops of
supplies will be less than successful due to
(fierce/warring) [winds] and inclement weather of all kinds
from [fog] to (lashing)[rainstorms].
These storms are
also seen as causing the second set of problems for the
refugees, the [floods] that (carve) [ravines/cuts] into the
[hills], washing away topsoil and substrates. Again, as with
our previous interpretation we note that a surprising, and
consistent reference emerges to [gold] being (exposed) in
these storms. We do find that after the first of the
earthquake (induced) [storms] , a silver-lining will emerge
from the [floods] which will cover the (feet) of the
once-great coastal city, will at least provide [neighbors]
from the (other) [valley] to (raft)
(supplies/sustenance/resources) over to the [refugees] where
an apparent, impromptu party will happen, with everyone
(perched) on (large) [boulders], (happy), (eating) at
(leisure), and with (new)[companions].
These
[companions] have their entire lexical set hanging from
[boats] and the sub aspects are suggestive of many small
boats. For the former inhabitants of the coastal city, the
aspects/attributes do not offer a very plush future. Most
are seen as becoming permanent refugees. Within our lexical
processing we do get numbers that rise through the
filtering. When these do we pay attention to the specifics
of the situation, as we did with the 300,000 seen in last
years runs as being damaged by the earthquakes. Within this
data set, we note that (many) [years] will pass with the (scattered)[nation]
still in the [hills]. Our data suggests that it will be at
least 30 days before [officials] are able to be present on
the site, and that within this section of the data, there
are indications that these same [officials] or their
successors will still be (visiting) the (scattered) [nation]
in the [hills] some (three/3) years later.
We must note that
the use of the word 'years' is to be taken as meaning
something far less exact than a 365 day solar year. In
projecting the impact of emotional changes going forward, we
are assigning values for words, and word shifts, as to the
'emotional carry distance forward'. These guesses as to
emotive carrying power are then what make it through the
processing as our indications of 'impact value' and
'duration of impact'. So we end up with the duration of
impact values going over to the aspect of [year] within the
lexicon. We have our time and date values separated such
that it could have just as easily risen to the level of
[decades] or even up to [saeculum] which is taken as being
between 70 and 120 years {ed note: the range of the human
life span; in ancient Rome, the period of about 100 years}.
It would therefore make sense to interpret the '3 years'
above into something more along the lines of 'a long time,
perhaps longer than a year, but less than a decade'.
As a separate
area we find lexical clues indicating that the hurricanes to
strike the USofA this year will be [ten](years)
(worth/value/total/sum) of (storms). The lexicon suggests
that at some point the [confusion] of [colliding] (storms)
sends (evacuees/refugees) (back pedaling/backwards motion),
leaving many (trapped) (without/in absence of) (sight) due
to (winds) and (wind) (driven) [rain]. Further, the
[confusion] of [storms] will impact both the
(answering/responding) to [requests] for
(aid/assistance/help) as well as the (distribution) of
(aid/relief/supplies/sustenance) afterward. The value of the
impact duration is in the [decade] range. Supplies of all
kinds are seen as being restricted in both availability, and
movement once the storms are past. The image coming through
is one of 'feel lucky you got that much' kind of period.
There are some rising level of indicators suggesting that
our '10 years worth of hurricanes' will start the season
early, and will be led by a [surprising/shocking/attention
gathering] (lightning) storm.
Again we note a
rising number of references suggesting that this years
storms will come from very unexpected directions, in fact we
still see the France and Atlantic coast of France gaining
accretion values suggesting a very close link to the bespoke
[hurricanes] indicated to (crowd) in (with/having) (great)
[confusion] of (mass) and (energy). We also note that there
is an aspect/attribute set going to 'depletion of resources'
that is cross linked back to Populace and the sub set of
descriptors for 'terrorism'. The suggestion from the data
appears to be that the storm problems will delay or impede
such activities, reducing them to 'wet grass in the field',
a poetic way of saying 'non harvestable' or 'no good
result'. In fact, the extreme of that phrase within our
lexicon indicates the goal would lead to 'decay' or 'rotting
in the field'. The attributes here would seem to be
indicating that problems from weather cause problems all
over, even for would-be attackers."
In the April 23 run:
"Recognizing that
this is a very unusual time for the Eastern Seaboard to
receive storms, we nonetheless note that the [white flowers]
contain, 'spinning' and 'rotating' as primary attributes.
And other indicators to reinforce the occasional reference
to 'hurricane'. Also though, the images present within our
data suggest that unlike previous years, that a number of
these [white flowers] storms are seen as developing off the
coast of Europe, specifically France, and then moving toward
the East coast of the USofA. A most odd image indeed, and
that is why it is presented. There is very little to suggest
that these storms are merely early hurricanes which would
develop off the coast of North Africa and then move west.
Instead we get several sub aspect/attribute sets which
reference European Atlantic coast and specifically, France.
Within the [white
flowers] data we find cross links back internally to our
Terra entity and its view of 'ten wind storms'. Perhaps this
is indicative of some of these [white flowers] storms being
all or part of the ten wind storms seen through spring and
summer. There are also cross links within this data and
Populace which go back to BushCo and Markets indicating that
these storms will be happening as we proceed to the
financial storms detailed below.
Markets - Dollar
Roots Yanked, Day of Abandonment, Return to Well New data
within the Markets entity suggests that the global reliance
on the USofA dollar is waning. We note that for the period
of April through May {including our May 20th? event/change},
we find that the emotive values for the dollar resolve down
to a new primary aspect of [uprooted] in which the primary
descriptive attribute is [exterior].
We find that the
(new)[man] will (bring) (like kind/similar) people to
(discuss) the [situation], but that (hidden)[thoughts]
[uproot] the (meeting), and cause the [roots] to be (yanked)
from the dollar. We also note that a (three/3) day crisis
will emerge as a result of these (hidden)[thoughts] in which
[communications] will (fail) requiring [personal]
(emissaries) to be sent. These [emissaries] will (present)[face]
of (hooded/lidded)[anger] to the [neighbors]. Further
referencing the dollars' degradation we now have new
aspect/attribute sets, also affective within the April/May
period which go to the explicit statement of [no]
[confidence] in [unlimited](possibilities) which as repeated
attribute sets suggesting that the [unlimited](possibilities)
mentioned can be interpreted as meaning the 'unlimited'
nature of the USofA dollar. These aspect/attribute sets are
predominantly EU referencing, with some small number of
descriptors for Russia, and Asia. Within the Markets new
dollar [no] [confidence] data we have cross links going over
to the Populace entity where they connect to [common
people/plebes] (possess) (great) (capacities) to
(subordinate). Then, references to [neighbors] are (already/previously)[prepared/ready/anticipatory],
but are (subsumed/enveloped/covered) by (sea) of (angry)[arms].
We also find within the Markets entity direct references to
[riots], and [chaos], and [hanging/execution] all tied to
the (uprooting) of the [dollar]. Within the Markets entity
we find that the [plebes] are (viewed/considered)
(unreliable) in the [emergency/crisis] and viewed with
[trepidation]. A minor cross link back to Populace shows
that there will apparently be some level of awareness or
discussion about the [elite] being (afraid/fearful) of
(mingle/association) with [common][people]."
How close will these
predictions come to being correct? Check back later for
the exact forecast terms - and then match them up yourself in a
week or so.
As Cliff is fond of
saying - the only problem with seeing the future before it
springs into existence for the masses is getting it right...
(more as developments
warrant)
Saturday
Odd Saturday
Fed Speech
We found it odd to
receive a press release Saturday from the Federal Reserve.
I recommend you read it and draw your own conclusions:
Remarks by
Governor Donald L. Kohn
At a symposium sponsored by the Federal Reserve
Bank of Kansas City, Jackson Hole, Wyoming
August 27, 2005
Panel discussion:
Financial Markets, Financial Fragility, and Central
Banking
My perspective on this interesting and stimulating
paper by Raghu Rajan has been very much
influenced by observing Alan Greenspan's approach to
the development of financial systems and their
regulation over the past eighteen years.1
I believe that the Greenspan doctrine, if I may call
it that, has reflected the Chairman's analysis and
deeply held belief that private interest and
technological change, interacting in a stable
macroeconomic environment, will advance the general
economic welfare.2
Chairman Greenspan has welcomed the ability of
new technologies in financial markets to reduce
transactions costs, to allow the creation of new
instruments that enable risk and return to be
divided and priced to better meet the needs of
borrowers and lenders, to permit previously illiquid
obligations to be securitized and traded, and to
make obsolete previous divisions among types of
financial intermediaries and across the geographical
regions in which they operate. At the intersection
of market developments and monetary policy, he has
led the Federal Reserve's efforts to understand the
implications of changing financial technology, such
as the growing ease of housing equity extraction,
and to use the newly available information about
market expectations and the price of risk embodied
in market prices.
The Greenspan doctrine holds that these
developments, on balance, improve the functioning of
financial markets and the real economies they
support. By allowing institutions to diversify risk,
to choose their risk profiles more precisely, and to
improve the management of the risks they do take on,
they have made institutions more robust. By making
intermediaries more robust and by giving borrowers a
greater variety of lenders to tap for funds, these
developments have also made the financial system
more resilient and flexible--better able to absorb
shocks without increasing the effects of such shocks
on the real economy. And by facilitating the flow of
savings across markets and national boundaries,
these developments have contributed to a better
allocation of resources and have promoted growth.
That is not to say that the Greenspan doctrine
holds that private markets always get it right.
Prices in these markets are driven by the tendency
of human nature to project the recent past--to waves
of complacency and gloom--and hence are subject to
overshooting. And private parties, left entirely to
their own devices, do not always produce a market
structure and market relationships consistent with
adequate protection of financial stability. However,
the actions of private parties to protect
themselves--what Chairman Greenspan has called
private regulation--are generally quite effective.
Government regulation risks undermining private
regulation and financial stability itself by
distorting incentives through moral hazard and by
promising a more effective role in promoting
financial stability than it can deliver.
In this situation, government regulation has a
function but it should be based on clear objectives,
narrowly tailored to meet those objectives, and,
given the iron law of unintended consequences, it
should be clearly superior to private regulation.
Regulation can be justified if incentives for
private regulation are weak--perhaps because of
other government programs, such as deposit
insurance--or if market participants are likely to
be ineffective, as for example small savers and
borrowers. Regulation may also be justified to
promote greater flow of accurate information to
enable private participants to make better informed
decisions.
New technologies and changing market structures
imply that regulation should be constantly under
review; at times rolling back regulation--for
example, by lifting the Glass-Steagall restrictions
on banking organizations--will benefit competition
and help the financial sector deliver services more
efficiently and effectively. Moreover, regulation
itself can benefit from competition. Running
regulated and unregulated markets side by side gives
people a choice of whether they want protection and
helps to constrain regulation. Some of the same
purposes can be served by having multiple regulators
for the same function; in some circumstances, the
possible adverse consequences of competition in
laxity may be smaller than the potential for
regulatory conformity and regulator risk-aversion to
impinge on innovation and change.
The Greenspan doctrine has had a perceptible
influence on the evolution of markets and the
regulatory structure that applies to them. Raghu
Rajan voices some concerns about this evolution. In
particular, he posits that the shift from depository
intermediation to professional asset management has
increased tail risk to socially excessive levels and
has left the world more vulnerable to rare but
potentially very serious tail events; he suggests
some ways in which regulation should be increased.
In assessing this argument, we might find it
useful to separate the question of whether the world
is riskier from the question of whether systemic
risk has risen. The increased ability to disentangle
risk and tailor risk profiles should mean that risk
has come to be lodged more in line with investor
appetites, a change that has probably tended to
reduce the price of risk and encouraged riskier
capital projects to be funded. But individual
investors at greater risk need not imply increased
systemic risk--fatter tails and greater potential
for losses feeding back on the macroeconomy.
In fact, industrial economies have been marked by
much less variability in output and inflation over
the past twenty years. Many reasons have been given
for this so-called great moderation, but
developments in financial markets have likely played
a role in making the economy more resilient. As a
consequence of greater diversification of risks and
of sources of funds, problems in the financial
sector are less likely to intensify shocks hitting
the economy and financial market .
The experience of 2001-03 is instructive.
Unusually large declines in equity prices and
increases in defaults and risk spreads--surely tail
events by most definitions--reduced wealth and
raised the cost of capital but did not aggravate the
downturn by impinging on the flow of funds.
Financial intermediaries were not so troubled as to
cut off the provision of credit, and in any case,
many borrowers had alternative sources of funds.
In addition, we have not seen a clear upward
trend in volatility of financial asset prices over
the past twenty-five years, as one might expect if
herding had increased in importance. Judging from
options prices, market participants are expecting
the volatility of financial asset prices to be
damped in the future; they are also requiring
lower-term premiums for placing funds for longer
terms.
I do not share Raghu's nostalgia for the
systemic-risk implications of bank-dominated
finance. Old-style crises involving impaired
depository institutions had substantial spillover
effects; their repair took time, during which
economic activity was affected; and emergency
measures to deal with them often involved moral
hazard because they were aimed at stabilizing ailing
intermediaries. I think we would all agree that the
industrial economy that has suffered the greatest
systemic strains from problems in the financial
sector in the past fifteen years is that of Japan,
which remained tied to the commercial bank model
Raghu finds safest. The macroeconomic effects of
new-style crises involving market liquidity, as in
1998, or outsized movements in asset prices may be
more readily cushioned by monetary policies aimed at
bolstering the general level of liquidity and
reducing interest rates. Such policies also carry
less risk of increasing moral hazard.
Although investment managers receive substantial
funds directly from households, many of their
counterparties are sophisticated investors in
positions of fiduciary responsibility. In addition,
most asset managers are employees of
institutions--mutual fund families, bank holding
companies--that are in the market for the long haul.
It is not in their interest to reach for short-run
gains at the expense of longer-term risk, to
disguise the degree of risk they are taking for
their customers, or otherwise to endanger their
reputations. I would expect these counterparties and
employers to enforce compensation schemes that
foster their objectives. As a consequence, I did not
find convincing the discussion of market failure
that would require government intervention in
compensation. Moreover, compensation regulation is
likely to be easily evaded and fraught with risks of
untoward consequences. One only has to recall the
congressional action of 1993 that, by imposing
less-favorable tax treatment on some forms of
executive compensation, fostered the shift to stock
options that in turn was thought to have contributed
to some of the transparency and corporate governance
problems of the late 1990s.
Regulatory and supervisory systems do need to
evolve to reflect the shift to market-based
transactions. As intermediation shifts from
depositories, with their specialized knowledge of
borrowers, to markets, disclosure and transparency
become more important to allow diverse private
parties to assess risk properly, exert appropriate
discipline, and contribute to the efficient
allocation of resources. Greater reliance on markets
also elevates the importance of the safety of
clearing and settlement systems. Private-sector
participants have every incentive to demand these
disclosures and to ensure that their trades go
through as contracted. But government may need to
act in concert with private parties to arrive at
collective decisions that strengthen markets and
reduce systemic risk but might not be in the
interest of individuals acting separately. And with
more of the fluctuations in asset prices passing
through to a large number and wide variety of
households, educating people to make informed
choices and protecting retail customers from abusive
practices remain key governmental functions.
A particularly interesting strand of the debate
about excessive risk-taking concerns the interaction
of monetary policy and perceptions of risk in
financial markets. Some analysts are concerned that
several aspects of the conduct of monetary policy in
the United States have induced market participants
to reduce their expectations about risk too far,
setting up the financial markets and the economy for
an unpleasant and possibly destabilizing surprise.
In this view, the low short-term interest rates
that policymakers have thought were required over
the past few years to meet macroeconomic objectives
are said to have encouraged reaching for
yield--settling for risk compensation that the
investors themselves view as probably inadequate but
which they feel compelled to accept, perhaps to
achieve targeted levels of real or nominal returns.
The tendency of policy to react strongly to sharp
declines in key asset prices, and thereby limiting
the extent of the decreases, has been thought to
induce risk-taking by imparting an asymmetry to
asset price movements. Finally, a concern is that
the fairly new practice of telling the public about
our expectations for the path of the federal funds
rate may have given market participants a false
sense of security about the future path of policy.
These practices have been the result of a
monetary policy focused on price and economic
stability over the intermediate term interacting
with the particular characteristics of the economy.
The global decline of inflation and spending induced
a global reduction in interest rates to unusually
low levels in recent years. Those low rates were, in
fact, intended to stimulate risk-taking and
investment when private agents pulled back. The
tendency for asset prices to fall more quickly than
they rise has largely produced the more rapid and
noticeable response of stabilizing monetary policy
to declines than to increases. And the importance
for economic performance of more-accurate
expectations about monetary policy, along with the
unusually low policy rates, led the Federal Open
Market Committee to undertake a more extended
discussion of its policy expectations.
To the extent that these policy strategies reduce
the amplitude of fluctuations in output and prices
and contain financial crises, risks are genuinely
lower, and that development should be reflected in
the prices of assets. To the extent that the central
bank can convey something useful about its
intentions, markets that take account of these
intentions will be priced more accurately.
The risk is that private agents overestimate the
ability or willingness of central banks to damp
volatility in asset prices or the economy, or that
they fail to appreciate that future policy actions
depend on an imperfectly predictable economic
outlook. But developments should have partially
alleviated some of these concerns. Investors have
had an opportunity to observe that policy actions in
1987, 1998, and 2001-03 cushioned the economy, but
they did not stop major declines in the prices of
equity in 1987 and 2001 or of risky credits in 1998.
Short-term rates have risen substantially in the
past year, reducing the profitability of "carry
trades" without triggering an unwinding that drove
long-term interest rates higher or widened risk
premiums. And expectations that policy tightening
would remain gradual over the near-term have not
stopped long-term rates from fluctuating
substantially in response to incoming data; the
movements of future or forward rates out the yield
curve after surprises in data have been at least as
large since 2003 as they were before.
That is not to say that we have nothing to worry
about. As I already noted, Alan Greenspan, himself,
has often been concerned about market
complacency--as recently as his latest monetary
policy testimony. People may well perceive the
economy as more stable than it is or central banks
with greater power than we have to smooth the
economy or to foresee our own actions.
Clearly, reminders to the public of the inherent
uncertainty in economic developments and policy
responses are appropriate and should have some
effect. The question is whether these warnings
should be supplemented by actions to inject
uncertainty into policy pronouncements by saying
less than we can or into the economy by shifting our
objectives away from seeking the best outcome for
the economy over the intermediate term. In my view,
such policies would result in less accurate asset
pricing, reduce public welfare on balance, and
definitely be at odds with the tradition of policy
excellence of the person whose era we are examining
at this conference.
Footnotes
1. The views are my own and do not necessarily
reflect other members of the Board or its staff. I
thank Athanasios Orphanides, Matthew Pritsker,
Patrick Parkinson, and Vincent Reinhart, of the
Board's staff, for valuable comments.
Return to text
2. Chairman Greenspan has spelled out his views
on markets and regulation in many places, and much
of what follows is my synthesis of this material.
His remarks on
"Government Regulation and Derivative Contracts"
on February 21, 1997 are an especially valuable
source for his approach to government regulation of
financial markets.
Return to text |
My take on it? More
Greenspan deification. In my view, St. Al is just bumbling
around with no policy, other than market intervention.
Moreover, I read Fed pronouncements with the eye of a skeptic
who translates paragraphs like this one:
Chairman
Greenspan has welcomed the ability of new technologies in
financial markets to reduce transactions costs, to allow the
creation of new instruments that enable risk and return to
be divided and priced to better meet the needs of borrowers
and lenders, to permit previously illiquid obligations to be
securitized and traded, and to make obsolete previous
divisions among types of financial intermediaries and across
the geographical regions in which they operate. At the
intersection of market developments and monetary policy, he
has led the Federal Reserve's efforts to understand the
implications of changing financial technology, such as the
growing ease of housing equity extraction, and to use the
newly available information about market expectations and
the price of risk embodied in market prices.
Into a more
intellectually honest statement like this:
Chairman
Greenspan has no grasp of new technologies in financial
markets except they permit previously illiquid obligations
to be securitized and traded, and make manipulation
necessary. To do this, he has led the Federal Reserve's
efforts to pimp the growing ease of housing equity
extraction, to use the newly available money to hold
up market prices.
Deity? Ask me
in December. Doctrine? I smell Carl Rove. And "ease
of housing equity extract6ion" sounds more and more like
"getting people to ruin their savings" so we bankers can own
their asses forever, thanks to our new bankruptcy laws going
into effect in 45 days.
There
s also reference to
the "general economic welfare" - when it's U.S.A. peoplenomics
that matter - not the private bankster globalist cabal that runs
the Fed, thanks.
When Kohn says "The
risk is that private agents overestimate the ability or
willingness of central banks to damp volatility in asset prices
or the economy..." He is code talking to his bankster buddies
"We may not be able to keep a lid on the market if it gets too
wild."
No kidding.
Hang On Monday
Three huge events
took place on Friday which bear amplification, and even perhaps
a little bit of nail biting if you care to, over the weekend.
The
first is that Hurricane
Katrina may have decided to fill in my neighbor's new pond in
East Texas by taking a sudden tack southward. The
problem is that at the present projections, the storm could hit
the Louisiana Coast, or worse, could come storming up the
Houston ship channel and up into East Texas. But we should
have a better bead on that Sunday.
The second thing that
might give you that tightening sphincter feeling is that the
market closed with a negative tick - down to more than -200 on
the close. This is no doubt driven by Alan Greenspan's
confusion over what to do next as upward interest pressures are
being short circuited by crashing consumer confidence which
dropped more than 7 points in a month.
The third thing, and
it's maybe a bit "out there" is the outlook of our fractal whiz
who says "Hang on" for potentially rough sledding Monday:
"George, an ideal Fibonacci ratio length third fractal
growth sequence was completed on Friday 26 August 2005.
The fractal evolution since October 2002 strongly
suggests that there are very real and very simple quantum
number fractal laws that underlie the macroeconomy. This
discovery will be little consolation to the turmoil that is
about to unfold over the next decade.
August 24 (Wednesday's) and August 25 (Thursday's)
trading days once again demonstrated on a 5 minute unit
fractal level, the recurrent precise fractal theme of
x/2.5x/2x-2.5x - that pervades the economic universe.
For the Wilshire 5000 the base was about 17 five minute
units. The three sequential growth fractals were 17/42/34 of
34 before the fall on Friday morning. The lateral 'skeletonized'
evolution of this fractal sequence suggests the final lower
(very lower) high is close at hand. Friday August 26 is the
Fibonacci 85th day of a 52/130/85 daily sequence dating
since August 2004.
1.62 times 52 equals 84.24 days.... If growth sequences
follow idealized Fibonacci related fractals, Monday 29
August 2005 will see a nonlinear lower break in the
equities.
For oil next week, week 52 will complete its third growth
fractal and its ideal maximal growth fractal sequence:
21/52/52 of 42-52. This maximal growth fractal will be
coincidentally timed with Katrina's hurricane winds slamming
into US gulf oil rigs. Timed with Katrina is an evolving
economic deluge. Gary Lammert
http://www.economicfractalist.com/ "
Letters We
Love
Occasionally, we see
decisive evidence that there is creativity and serious mental
horsepower still on the loose among the American Public as
evidenced in this great reader letter of the Week:
"Guys,
What do you make of Hurricane Katrina? The National
Weather Service is having a devil of a time trying to
predict where it is going. Their prediction has jumped 3
states to the west in about 24 hours. The only place they
haven't predicted it hitting is Texas or Mexico. Maybe we'll
see that tomorrow?
(Cliff) From your earlier web bot runs, there were some
reference to the summer shakes, and repeated references to
SOLAR radiation & events as being the cause. You had a
prediction of 3 big quakes and as many as 13 million people
displaced before Sep 21st.
Here is one for you to ponder in reference to your web
bot predictions: The New Madrid Fault and the previous
activity around Little Rock, Arkansas. My concern is the
hurricane being pulled to the west like a magnet towards the
Mississippi River, and how that might affect the already
stressed area around the fault. If you correlate some of the
news stories such as the thousands of dead fish washing up
on shore (
http://abclocal.go.com/ktrk/news/080405_local_fish.html
) and the "Fish Parade" (
http://www.sun-herald.com/NewsArchive2/080505/ew11.htm?date=080505&story=ew11.htm
) and maybe even the Copperhead Gathering (
http://enews.earthlink.net/article/str?guid=20050816/430164c0_3ca6_15526200508161028495521
)
it is obvious that events and weather patterns are
changing - in a big way. I've seen some of the analysis or
opinions expressed indicating that the fish behaviors are
related to the earth's geophysical stress, which is causing
massive amounts of CO2 to be expelled up from the ocean
floor. That creates "Dead Zones" where the fish asphyxiate
if they stick around, or they migrate to waters that are
alive with oxygen (the parade). [I threw in the copperheads
just for grins!]
Now look at the geomagnetic storms of recent days (
http://n3kl.org/sun/noaa.html ) and the unbelievable
string of recent gamma ray bursts (
http://grb.sonoma.edu/index.php ), and you can see a
clear picture of geophysical related events that are
unfolding. Maybe increasing in intensity is a better
description, especially the recent solar activity. Look at
the headlines around the world about the weather for the
past couple of days, right after the Kp Index pegged the
scale at a "9" and you'll see what I mean.
So, I'm seeing a very unpredictable hurricane, which is
scheduled to make landfall right as we approach what
Marshall Smith (
http://www.brojon.org/frontpage/WHAT_REALLY_KILLED_THE_DINOSAURS.html
) says is the peak angular momentum geophysical stress
period (earthquakes) for August on the 29th. I'd say that
the New Madrid Fault is worth watching for the next few days
in light of the web bot predictions, angular momentum
predictions, torrential rain and storm surge adding to the
pressure, and of course the weird animal behavior such as we
saw in the Sumatra Quake.
Well, what do you guys make of all this? If you have any
brain cells to spin on the subject, I'd appreciate your
thoughts - even if you just comment in your respective
online publications.
George, I've got two kids (17 and 20) that I haven't been
able to convince them to leave Pensacola, Florida even when
it looks almost as ugly as Los Angeles. Hopefully, I can get
them out of there before too much longer.
Keep up the good work - I subscribe to or purchase just
about everything you guys publish.
Both Cliff (
www.halfpasthuman.com
)_ and I appreciate the kind word. In answer to the
specifics, here is some real grist for the mill:
-
Just because we
use a future event predictive technology that Cliff has
developed, doesn't mean that we have precise insight
into the future. For example, using subtle changes in
language 4-5 months before an event, we were all scratching
our heads about something like "electric waters rising" in
August '04 long before the Dec. '05 quake itself.
Linguistically, it's a hell of a short jump from electric
water rising to "shocking water rise".
-
The same kind of
thing happens with the blind crippled lady and her "dred
companion." While I have taken this to be Cindy
Sheehan (so far) that doesn't by any means rule out
Hurricane Lee becoming an unheard of Category 6, striking
Jamaica (ergo "dred") and then wrecking the Gulf Coast.
That would certainly "fit". (Cliff doesn't think the
"dark aspect woman" is Sheehan, BTW.) That's probably
why DoD turned down our development proposal when we
submitted the Web Bots as a project under the Broad Area
Announcements program in October '01. Just not
specific enough at that time.
-
What we do
have is a very good sense of what the future will "feel
like" emotionally. That means in general between now
and early to mid December, we are in a period of quickly
riding tensions and these will see some kind of "release" in
December. But before you plan a hugely extravagant New
Year's party, they seem to resume building again into '06
after the December "release."
Cliff is a truly
modest sort of fellow who aptly points out that the only danger
with predicting the future is being right. We have no
doubt that we have been right about key aspects of the future
time and time again, but no, the way the technology works, we
don't have the kind of precision necessary to say "Go out and do
this one thing to change the course of history..." Things
only work out that way in science fiction movies. The web
bots aren't saying anything about Monday because the size of the
stream coming in between runs (1105 has ended and 1305 is just
organizing) is not large enough to draw conclusions.
Nevertheless, if I
were guessing, I would say Monday won't be the end of the
financial world - that comes later. But if the market were
to drop a bit (a couple of hundred points or so) that wouldn't
surprise us either. After all, we're in a period of
building tensions through December and nothing adds to tensions
like major disasters and being broke.
George, great reader letter re anomalous animal
behavior in environs of New Madrid Fault, esp. re
copperheads!
I got this book through local library database. Heck of
a read.
Regards,
(reader name withheld)
Table of Contents and Sample Chapters
Two days before an earthquake
struck Helice, Greece, in 373 B.C., the snakes, weasels,
and worms deserted the city. Minutes before the Naples
quake of 1805, oxen, sheep, dogs, and geese cried out in
unison. A herd of horses tore loose and ran off in panic
just prior to the San Francisco earthquake of 1906.
Helmut Tributsch thinks that these accounts are more
than mere superstition and old wives' tales. In this
book, he presents the first plausible explanation of why
animals behave in unusual ways prior to the onset of an
earthquake. Scientists and nonscientists alike will find
fascinating reading in his unusual study.
Crack Babies
Buy and Hold
I haven't been
hearing much for the "buy and hold" for the long term crowd
lately. When I was more purely focused on long wave
economics, I incurred the wrath of many "investment geniuses"
when I pointed out that if you had bought and held at the top in
1929, you would not have made back even your original investment
until well after World War II. That would, on a weekly basis, be
390.33 on 9/6/1929.
With the market down
only 3.3% YTD 2005 (excluding dividends), it would be very rude
of me to point out - precisely as we warned) that the Dow is
down 11.3% (ex dividends) since late 1999. Still,
that would be better than investing in the Tech Bubble, which
since March 2000 (5048) has dropped to 2120.77, a 59.94% drop -
something I warned you of well in advance and which is right
there in the 1999 archives of the internet for anyone who is a
skeptic to read:
http://web.archive.org/web/20000708211202/www.urbansurvival.com/dvdc.htm
We find it a
remarkable coincidence that
www.yahoo.com historical numbers suddenly aren't working
(
http://finance.yahoo.com/q/hp?s=%5EDJI&a=09&b=1&c=1950&d=07&e=27&f=1955&g=w
) and you will see for yourself unless they have fixed it.
Moreover, in what will not doubt be passed off as a web
"redesign" previously available side-by-side comparisons to
international indices have also disappeared. In fact, I can't
seem to get past Dec 31 1969 all of a sudden.
If I were paranoid,
I'd bet the farm that something big is coming. And yes,
paranoia these days is a survival skill.
If you Read
Nothing Else
This weekend, you
have to click over to the Northern Trust web site and
read the commentary INXS. It's a scary look at the
towering Twin Deficits (government and consumer).
If, after reading it,
you consider me less of a nutjob, ask your health care provider
to up your meds.
Jobs Where?
Just suppose for a
moment the economy decided to keel over and play dead all of a
sudden due to some massive oil shock, or pick any number of
other causes (housing bubble pops, US discovers that it has no
manufacturing jobs, there are lots of choices). Take it a
step further and imagine government completely blowing its
response. Now close your eyes and think about the jobs
that would be left. That's our personal planning update
this weekend over at our subscription site,
www.peoplenomics.com.
Our
www.peoplenomics.com
report available to subscribers this week looks at some of the factors driving kids over 20
to move back in to their parent's homes. Hint: prices are one.
For
subscription information, click here. Folks tell me
it's worth many times the $30/year subscription. Upcoming this
weekend, we explore boom and bust coping strategies.
Bookstore
We have a number of
interesting books at our bookstore.
Top seller at
the moment is "How to live on $10,000 a year - or less..."
We will be adding the book on Alzheimer's prevention tomorrow.
But you can get titles like the "For Sales by Owner Coach" right
now.
Pass it On
If you enjoy this
site (which we hope you do), please
recommend it to all your friends by clicking here.
Friday
Jittery
Greenspan
We have maintained
for some time that Fed boss Al Greenspan can spin the market
this way or that with a few well-chosen words. Such was
the case this morning as the world's most powerful private
banker (The fed isn't a government agency) got up in front of a
Jackson Hole Wyoming audience:
Remarks by
Chairman Alan Greenspan
Reflections on central banking
At a symposium sponsored by the Federal Reserve
Bank of Kansas City, Jackson Hole, Wyoming
August 26, 2005
In the spirit of this conference, I asked myself
what developments in the past eighteen years--both
in the economy and in the economics profession--were
most important in changing the way we at the Federal
Reserve have approached and implemented monetary
policy.
The Federal Reserve System was created in 1913 to
counter the recurrent credit stringencies that had
so frequently been experienced in earlier decades.
As lender of last resort, we had a mandate that, at
least viewed from today's perspective, was limited.
We did not engage in Systemwide open market
operations until the 1920s. And as recently as the
1950s, the framework within which those open market
operations were formulated was still being
developed. Credit was eased when the economy
weakened and tightened when inflation threatened,
but largely in an ad hoc manner. As a consequence,
the Federal Reserve was perceived by some as often
accentuating, rather than damping, cycles in prices
and activity. Importantly, however, the surge in
prices that followed the removal of wage and price
controls after World War II and again after the
Korean War kept monetary policymakers wary of the
threat of inflation.
But concern that the monetary restraint of the
1950s had led to unnecessarily high unemployment
persuaded the Federal Open Market Committee to adopt
a more stimulative policy stance in the mid-1960s.
Those actions appear to have been predicated, in
part, on an acceptance of the then-prevalent view
that a long-term tradeoff existed between inflation
and unemployment.1
Subsequently, however, the experience of
stagflation in the 1970s and intellectual advances
in understanding the importance of
expectations--which built on the earlier work of
Friedman and Phelps--undermined the notion of a
long-run tradeoff.2
Inflation again became widely viewed as being
detrimental to financial stability and macroeconomic
performance. And as the decade progressed, a keener
appreciation for the monetary roots of inflation
emerged both in the profession at large and at
central banks. Indeed, the insights from the work of
Friedman and Schwartz a decade earlier gained
greater prominence in the realm of practical policy.3
These events, both economic and intellectual,
significantly influenced the tool kits employed by
macroeconomists inside and outside policymaking
institutions. The large-scale macromodels that had
been the focus of so much work in the 1960s came
under attack on two fronts.
Most prominently, greater recognition of the
importance of expectations suggested that those
models, which for the most part incorporated
autoregressive expectations, were excessively
reduced-form and backward-looking in nature and thus
insensitive to changes in economic structure and the
policy process. In addition, some researchers
observed that simple time-series models often
produced better forecasts than the large macromodels
of that period.4
One prescription was to focus on uncovering, at a
more fundamental level, the structural parameters of
the economy. Needless to say, this task has proven
to be a very tall order that has yet to be filled.
Partly in response to these difficulties, a
substantial body of research focused on improvements
in empirical modeling, such as vector
autoregressions for forecasting, and in some cases,
for policy analysis.
Each one of these approaches has proven useful,
and their descendants are currently employed in
various forms in central banks throughout the world.
But as yet, none of these approaches is capable of
addressing the full range of policymakers' needs.
At various points in time, some analysts have
held out hope that a single indicator variable--such
as commodity prices, the yield curve, nominal
income, and of course, the monetary
aggregates--could be used to reliably guide the
conduct of monetary policy. If it were the case that
an indicator variable or a relatively simple
equation could extract the essence of key economic
relationships from an exceedingly complex and
dynamic real world, then broader issues of economic
causality could be set aside, and the tools of
policy could be directed at fostering a path for
this variable consistent with the attainment of the
ultimate policy objective.
M1 was the focus of policy for a brief period in
the late 1970s and early 1980s. That episode proved
key to breaking the inflation spiral that had
developed over the 1970s, but policymakers soon came
to question the viability over the longer haul of
targeting the monetary aggregates. The relationships
of the monetary aggregates to income and prices were
eroded significantly over the course of the 1980s
and into the early 1990s by financial deregulation,
innovation, and globalization. For example, the
previously stable relationship of M2 to nominal
gross domestic product and the opportunity cost of
holding M2 deposits underwent a major structural
shift in the early 1990s because of the increasing
prevalence of competing forms of intermediation and
financial instruments.
In the absence of a single variable, or at most a
few, that can serve as a reliable guide,
policymakers have been forced to fall back on an
approach that entails the interpretation of the full
range of economic and financial data. Policy is
implemented through nominal and, implicitly, real
short-term interest rates. However, reflecting the
progress in economic understanding, our actions are
now better informed about the pitfalls associated
with relying on nominal interest rates to set policy
and the important role played by inflation
expectations in gauging the stance of monetary
policy.
Our appreciation of the importance of
expectations has also shaped our increasing
transparency about policy actions and their
rationale. We have moved toward greater transparency
at a "measured pace" in part because we were
concerned about potential feedback on the policy
process and about being misinterpreted--as indeed we
were from time to time. I do not intend this brief
and necessarily incomplete review of events to
illustrate how far we have come or to despair of how
far we have to go. Rather, I believe it demonstrates
the inevitable and ongoing uncertainty faced by
policymakers.
Despite extensive efforts to capture and quantify
what we perceive as the key macroeconomic
relationships, our knowledge about many critical
linkages is far from complete and, in all
likelihood, will remain so. Every model, no matter
how detailed or how well conceived, designed, and
implemented, is a vastly simplified representation
of the world, with all of the intricacies we
experience on a day-to-day basis.
Formal models are a necessary, but not
sufficient, system of analysis. To be sure, models
discipline forecasts by requiring, among many
restraints, that identities are indeed equal,
inventories non-negative, and marginal propensities
to consume positive. But we all temper the outputs
of our models and test their results against the
ongoing evaluations of a whole array of observations
that we do not capture in either the data input or
the structure of our models. We are particularly
sensitive to observations that appear inconsistent
with the causal relationships of our formal models.
Tentative revisions of that structure are reflected
in our add factors.
Given our inevitably incomplete knowledge about
key structural aspects of an ever-changing economy
and the sometimes asymmetric costs or benefits of
particular outcomes, the paradigm on which we have
settled has come to involve, at its core, crucial
elements of risk management. In this approach, a
central bank needs to consider not only the most
likely future path for the economy but also the
distribution of possible outcomes about that path.
The decisionmakers then need to reach a judgment
about the probabilities, costs, and benefits of
various possible outcomes under alternative choices
for policy.
The risk-management approach has gained greater
traction as a consequence of the step-up in
globalization and the technological changes of the
1990s, which found us adjusting to events without
the comfort of relevant history to guide us.
Forecasts of change in the global economic
structure--for that is what we are now required to
construct--can usefully be described only in
probabalistic terms. In other words, point forecasts
need to be supplemented by a clear understanding of
the nature and magnitude of the risks that surround
them.
In effect, we strive to construct a spectrum of
forecasts from which, at least conceptually,
specific policy action is determined through the
tradeoffs implied by a loss-function. In the summer
of 2003, for example, the Federal Open Market
Committee viewed as very small the probability that
the then-gradual decline in inflation would
accelerate into a more consequential deflation. But
because the implications for the economy were so
dire should that scenario play out, we chose to
counter it with unusually low interest rates.
The product of a low-probability event and a
potentially severe outcome was judged a more serious
threat to economic performance than the higher
inflation that might ensue in the more probable
scenario. Moreover, the risk of a sizable jump in
inflation seemed limited at the time, largely
because increased productivity growth was resulting
in only modest advances in unit labor costs and
because heightened competition, driven by
globalization, was limiting employers' ability to
pass through those cost increases into prices. Given
the potentially severe consequences of deflation,
the expected benefits of the unusual policy action
were judged to outweigh its expected costs.
* * *
The structure of our economy will doubtless
change in the years ahead. In particular, our
analysis of economic developments almost surely will
need to deal in greater detail with balance sheet
considerations than was the case in the earlier
decades of the postwar period. The determination of
global economic activity in recent years has been
influenced importantly by capital gains on various
types of assets, and the liabilities that finance
them. Our forecasts and hence policy are becoming
increasingly driven by asset price changes.
The steep rise in the ratio of household net
worth to disposable income in the mid-1990s, after a
half-century of stability, is a case in point.
Although the ratio fell with the collapse of equity
prices in 2000, it has rebounded noticeably over the
past couple of years, reflecting the rise in the
prices of equities and houses.
Whether the currently elevated level of the
wealth-to-income ratio will be sustained in the
longer run remains to be seen. But arguably, the
growing stability of the world economy over the past
decade may have encouraged investors to accept
increasingly lower levels of compensation for risk.
They are exhibiting a seeming willingness to project
stability and commit over an ever more extended time
horizon.
The lowered risk premiums--the apparent
consequence of a long period of economic
stability--coupled with greater productivity growth
have propelled asset prices higher.5
The rising prices of stocks, bonds and, more
recently, of homes, have engendered a large increase
in the market value of claims which, when converted
to cash, are a source of purchasing power. Financial
intermediaries, of course, routinely convert capital
gains in stocks, bonds, and homes into cash for
businesses and households to facilitate purchase
transactions.6
The conversions have been markedly facilitated by
the financial innovation that has greatly reduced
the cost of such transactions.
Thus, this vast increase in the market value of
asset claims is in part the indirect result of
investors accepting lower compensation for risk.
Such an increase in market value is too often viewed
by market participants as structural and permanent.
To some extent, those higher values may be
reflecting the increased flexibility and resilience
of our economy. But what they perceive as newly
abundant liquidity can readily disappear. Any onset
of increased investor caution elevates risk premiums
and, as a consequence, lowers asset values and
promotes the liquidation of the debt that supported
higher prices. This is the reason that history has
not dealt kindly with the aftermath of protracted
periods of low risk premiums.
* * *
Broad economic forces are continuously at work,
shaping the environment in which the Federal Reserve
makes monetary policy. In recent years, the U.S.
economy has prospered notably from the increase in
productivity growth that began in the mid-1990s and
the enhanced competition engendered by
globalization. Innovation, spurred by competition,
has nurtured the continual scrapping of old
technologies to make way for the new. Standards of
living have risen because depreciation and other
cash flows generated by industries employing older,
increasingly obsolescent technologies have been
reinvested to finance newly produced capital assets
that embody cutting-edge technologies.
But there is also no doubt that this transition
to the new high-tech economy, of which expanding
global trade is a part, is proving difficult for a
segment of our workforce that interfaces day by day
with our rapidly changing capital stock. This
difficulty is most evident in the increased fear of
job-skill obsolescence that has induced significant
numbers of our population to resist the competitive
pressures inherent in globalization from workers in
the major newly emerging market economies. It is
important that these understandable fears be
addressed through education and training and not by
restraining the competitive forces that are so
essential to overall rising standards of living of
the great majority of our population. A fear of the
changes necessary for economic progress is all too
evident in the current stymieing of international
trade negotiations. Fear of change is also reflected
in a hesitancy to face up to the difficult choices
that will be required to resolve our looming fiscal
problems.
The developing protectionism regarding trade and
our reluctance to place fiscal policy on a more
sustainable path are threatening what may well be
our most valued policy asset: the increased
flexibility of our economy, which has fostered our
extraordinary resilience to shocks. If we can
maintain an adequate degree of flexibility, some of
America's economic imbalances, most notably the
large current account deficit and the housing boom,
can be rectified by adjustments in prices, interest
rates, and exchange rates rather than through
more-wrenching changes in output, incomes, and
employment.
The more flexible an economy, the greater its
ability to self-correct in response to inevitable,
often unanticipated, disturbances. That process of
correction limits the size and the consequences of
cyclical imbalances. Enhanced flexibility provides
the advantage of allowing the economy to adjust
automatically, reducing the reliance on the actions
of monetary and other policymakers, which have often
come too late or been misguided.
In fact, the performance of the U.S. economy in
recent years, despite shocks that in the past would
have surely produced marked economic contraction,
offers the clearest evidence that we have benefited
from an enhanced resilience and flexibility.
We weathered a decline on October 19, 1987 of a
fifth of the market value of U.S. equities with
little evidence of subsequent macroeconomic
stress--an episode that provided an early hint that
adjustment dynamics might be changing. The credit
crunch of the early 1990s and the bursting of the
stock market bubble in 2000 were absorbed with the
shallowest recessions in the post-World War II
period. And the economic fallout from the tragic
events of September 11, 2001, was limited by market
forces, with severe economic weakness evident for
only a few weeks. Most recently, the flexibility of
our market-driven economy has allowed us, thus far,
to weather reasonably well the steep rise in spot
and futures prices for crude oil and natural gas
that we have experienced over the past two years.
* * *
This morning I have tried to outline my
perceptions of the key developments that have
influenced the conduct of monetary policy over the
past eighteen years. I acknowledge that monetary
policy itself has been an important contributor to
the decline in inflation and inflation expectations
over the past quarter-century. Indeed, the Federal
Reserve under Paul Volcker's leadership starting in
1979 did the very heavy lifting against inflation.
The major contribution of the Federal Reserve to
fashioning the events of the past decade or so, I
believe, was to recognize that the U.S. and global
economies were evolving in profound ways and to
calibrate inflation-containing policies to gain most
effectively from those changes.
For reasons that may not be too obscure, I will
pay close attention to, and hope to learn from, the
deliberations of the next couple of days. I have
been asked to make a few closing remarks tomorrow
about some of the unresolved challenges facing
policymakers in the year ahead and about my
experiences living inside the Federal Reserve for
nearly two decades, after so many years of observing
our institution from afar.
Footnotes
1. See Romer, Christina D. and
David H. Romer,
"The Evolution of Economic Understanding and Postwar
Stabilization Policy", NBER Working Paper No.
9274 (October 2002), p. 39.
Return to text
2. Friedman, Milton. "The Role
of Monetary Policy", American Economic Review,
vol. 58, No. 1 (March 1968) pp. 1-17. Phelps,
Edmunds. "The New Microeconomics in Inflation and
Unemployment Theory", American Economic Review
(May 1969) pp. 147-160.
Return to text
3. Friedman, Milton and Anna
Jacobsen Schwartz. A Monetary History of the
United States, 1867-1960. Princeton University
Press, Princeton, NJ, 1963.
Return to text
4. Sims, Christopher A.
"Macroeconomics and Reality". Econometrics,
vol. 48, No. 1 (January 1980). pp. 1-48.
Return to text
5. Despite the two-year bear
market following the stock market collapse of 2000,
equity prices have risen at an annual rate of 10
percent since 1995.
Return to text
6. Capital gains do not add to
GDP. The higher prices of plant and equipment and
homes are reflected in an economy's cost structure,
which directly or indirectly increases prices of
goods and services, leaving real output largely
unaffected. Capital gains, of course, cannot supply
any of the saving required to finance gross domestic
investment. |
Consumers
Don't Buy It
All the happy talk
from Sir Alan aside, we notice that
Consumer Confidence plummeted 7.4 points in the latest
University of Michigan study out this morning.
Considering that the "economists" were calling for a drop of
about 4- points, we'd call this an economic train wreck - but
then our discipline is Peoplenomics which holds that bankster
clowns can't keep screwing the little guy and expect the vast
majority of Americans to swallow financial chain jerking ad
nausea. Look for the mainstream media to gloss over the
train wreck.
We also don't need to
remind most economically aware people that the road to hell is
paved with bad paper - something Ford and GM debt holders are
learning the slow painful way...
Iraq Teetering
It's difficult to pin
an emotion on reading today's headlines out of Iraq - that the
constitutional talks have predictably failed again.
The Sunnis feel marginalized and the Shiites are about to ignore
everyone desiring to incorporate all factions into the
government. The result is, as before, no progress and
a milder take by the happy-talk cheer leading section.
Pragmatically, we
have to ask again - because it's both an intellectual as well as
emotional question - can someone tell me again what we are
buying with the blood of our finest sons and daughters and
$300-billion dollars?
Accuracy
in Media has issued a report this week saying the war is
threatening a Vietnam style outcome.
We see the Swiss have
decided to screw neutrality
by selling APC's to the UAE so they can be drop shipped to Iraq.
Good going, banking gnome host country! Like anyone won't
figure out the switch, right?
One thing we hear
today is that what some people call
Britain's
leading liar is taking a job with the Carlyle Group when his
term ends. We look at this "ex-president's club" arrangement and
wonder how many "high minded public servants" would serve if
they had to take a mandatory 5-year cooling off period after
public service. rather than cash in right away when they were
"hot."
Ten
Hut! We salute as a real American patriot
republican
Congressman Jim Leach of Iowa who has decided to break ranks
with the lockstep right-wingers to join the Resolution of
Inquiry into Bush Administration Communication with Lying Tony's
boyz around Downing Street memo time. thank God for those
left with conscience.
At the other extreme,
the dodge and smear machine of you-know-who is going after Cindy
Sheehan with a vengeance.
Ecuadorian
People Win - a bit
The oil protests in
Ecuador have tapered off and things are returning to
"normal" as the government, protesters, and Big Oil have comes
to an uneasy set of terms. In the deal - which is not
clear yet - reportedly the provincial areas (the people) will
get a bigger slice of the oil company taxes.
Anger at the
Pumps
Gas station workers are becoming more often targets of theft and
drive-offs as the price of gasoline lingers around $3.00 in
many parts of the country in spite of a momentary halt in the
march to $75 a barrel oil. Even if oil moderates this
week, remember the supply chain is long and driving over Labor
Day will be expensive.
Still, millions will take to the road.
Post Your Gas
Prices
Spontaneously, people
on our free discussion site are posting their local gasoline
prices. Want to see where gas is cheap?
Check it out and post your own. Scroll down a bit and
check out some of the old gas prices posted. Who would
have ever thought of 2004 as the "good old days"?
All kinds of travel
deals out there for destinations like Las Vegas, notes Elaine,
who is starting to think about packing up our household goods in
Burbank as we prepare for our return to the Texas ranch October
1st. I think she mentioned $28 a night Vegas hotel rooms
(good ones, at that) because of soft reservations.
Because we have
scheduled October 2 through 9th for the drive, our route is
looking more like Zorro gone mad over a map of the Southwest.
San Diego, Phoenix, Gallup, and the hill country up a ways from
San Antonio are among possible stops. Our daily updates
October 3-7 should be interesting because being on the road
amplifies and improves our perspective on things and provides
grist for the mill.
Fire and Rain
At the risk of
sounding like the old James Taylor song,
we notice that the rain is easing in Europe - although the
Swiss are still mopping up and in all 40-odd people have died.
And about those fires in Portugal from extremely dry conditions?
Turns out firefighters have gained the upper hand there.
Speaking of rain,
nearly a million people were without power while Tropical wet
spot Katrina sat on Florida last night. The good news is
that
forecasters now think the danger to oil and gas operations in
the Gulf of Mexico (GOM for those in the oil business) will be
minimal as the storm track looks to head northwest up the
Florida coastline rather than head toward Baytown (LA) and other
key oil transshipment points. We
expect a modest rally early in today's market.
The University of
Michigan sentiment indicator is due to be released today - and
if down less than expected (e.g. things are not going to hell as
quickly as possible) the bulls should rally things a bit.
Colombia
Congress Riding "Rails"
Reports out of
Colombia are that
some members of their government have used coke within the
Congress itself. Not that we should point fingers, as
I wouldn't place bets on the personal habits of everyone in the
US CONgress, myself.
Terror's Next
Target
Standing around the
water cooler placing bets on where the next terrorist event is
sick, but if you were to find the conversation heading that way,
I would suggest two choices. First, there's growing
speculation that something financial in Asia would be a dandy
target, although we continue to shade our bets toward
Chicago where the Fitzgerald Grand Jury is reportedly planning
to issue sweeping indictments in the wake of the 9/11 event,
cover-up, whitewash and what has gone both before and after,
including the Iraq War.
Bio Leak?
Some interesting
speculation is floating about over this week's outbreak of a
rare rabbit fever in Russia. Is it a natural occurrence, or
something more sinister like a bioweapon plant leaking?
Friction
Induced Warming?
A new bit of
science out says the core of the earth is spinning faster than
the crust on which we live. An interesting snippet and
if our recall of friction is right, we have to wonder how much
of the earth's heating is brought about by the internal liquids
spinning faster than the crust causing friction. Just a
thought, but friction equals heat at some level.
Thursday
Stockgate to
Pop?
Some serious odors
are developing around the financial industry's practice of doing
naked puts and calls (as the mood suits them) with stock they
don't own. And now, the Fed is calling a meeting on credit
derivatives and pointing out how extreme the risk is.
Some good reports are surfacing around the edges, but as we see
if, the derivatives bubble, like it's kin the housing
bubble, may be too big now for regulators to do anything about
other than try - as Alan Greedspan is - to manage the problem so
when it pops it will be after his watch is over. That way
he will go into the history books without footnotes like mine
that will point out that he and his cronies are the reason the
second leg down of the Second Depression will be so much greater
than the first - it's as usual a tale of lust and greed - and oh
yeah, leverage to extremes.
Also worth seeing:
The
John Embry/Sprott Asset Management interview on gold.
Call Noah?
If there is something
a bit out of the ordinary in the weather this Summer, it may
well be that "rivers of rain" are falling from the skies in
several parts of the world. Not that this should come to
any surprise to a reader of the future-scanning
web bot technology.
We have been looking for rain - and gobs of it based on the
linguistic shifts on the internet that haven been picked up for
more than 9 months. It has been one thing after another
with
the latest flooding candidate looking like Florida when Tropical
mess Katrina lands. May be a bit late to buy orange
juice calls, though.
Then there is
flooding in Europe where at least 34 deaths have been attributed
to flooding -
and Switzerland is a mess, for sure. As a result, the
wheat crop in Germany will be down almost 7% reports
Gloomberg, and we expect more yield problems elsewhere although
they may not surface in mainstream media here.
The web bots seem to
do OK with rain. The January 1, 2005 report accurately
forecast the heavy rains in January/February in southern
California:
"In this case,
the aspects associated with the California specific
references show that a series of (devastaing/damaging)
[rains/rainfall/storms] - {ed: perhaps already started} will
continue such that the [ground/earth] will (change/alter)
[color/appearance] to the point that it will be
(unrecognizable/unknown/not seen). Many indications for
[sinking] and [subsiding] exist, all of which cross-link
back to [water/rain/deluge] attribute sets."
If you
click to the back issues of this site, you'll find the web bots
were spectacularly right on India as we noted in the July 30,
2005 update:
We have been watching the developing tragedy in India's
financial center, Mumbai with considerable concern, not only
for the loss of life, but for the apparent fulfillment of
another one of those stories which has been tracked this
spring and summer by the web bot project.
The June 16, 2005 ALTA 905_1 run makes specific reference
to huge and damaging rainfall;
"The sense that appears out of the various layers of
attribute sets would seem to support the earlier ALTA
reports about the 'oceans of water' to be carried north
in the atmosphere. In this case, our values have a
higher level of immediacy and a slightly better level of
detail, if we assume the detail interpretation is not
misleading. Please note that we had 'electric water' =
storm for the tsunami, when the same data set clearly
had 'force driven water/wave'. So our interpretation can
easily be wide the mark, however the current data set
has nearly 200 thousand references and so presentation
of any amount would be meaningless. In this case though,
our details suggest that shortly after the 'thunder
shock' that 'ripples the wind', we will get the 'rain
storm' that was seen in earlier reports. In this case,
we are now getting indications that the rains will begin
in the mountains, and will scour the hills clean on
their way down. Then as the winds shift, again bear in
mind that this image is replete with 'reversal of
movement', the rains begin to move over the plains, and
the 'five river valleys' until they, the rivers, over
flow in to one mass watery blockage which will induce
the 'restricted movement' seen in earlier reports."
So where are the "five rivers" if Mumbai's disastrous
flooding it a hit? Here's a site that describes five rivers
near Mumbai this way:
"Mahableshwar is one of the most popular
hill-stations around Mumbai. Situated at an altitude of
1372 metres, it is the ideal vacation spot for a relaxed
(and maybe an extended) weekend. The hill-station has an
interesting connection with history, the Pratapgad Fort
- where Shivaji used his "tiger claw" on Afzal Khan -
being 24 kms away. The development of Mahableshwar as a
hill-station began since the days of the British. The
place is the origin of the five rivers - Krishna, Koyna,
Venna, Savitri, and Gayatri, and derives its name from
the Mahableshwar Temple. "
What's next? We are continuously thinking in background
about the imagery of a blind and crippled woman who directs
a male who is described by her "dread companion." Could the
blind crippled woman be an archetypical representation of
"Justice"? Could the 'dread companion" be something akin to
an "enforcer?"
We had in ALTA 605 a vision of this "dread companion" in
the London financial district about a month ahead of the
7/7/ bombings. Now, we see the 'dread companion' coming up
as imagery associated with the "southeast" of presumably the
US. Therefore, we will be paying special attention to the
Southeast U.S. and especially terrorism training exercises
which might coincide with the next real attack."
Not bad, considering the events hadn't happened yet...
About Sheehan
As we now know, the
"blind and crippled woman" did indeed turn out to be a
representative of "justice" -
Cindy Sheehan has predictably returned to the Southeast part of
the country after taking some private time to be with her ailing
mother here in the Los Angeles area. What's clear is
that the "dred companion" is Sheehan's son (linguistically) and
"dred" because a dead son is indeed something to be dreaded by
policymakers.
What's so amazing to
us - verging on mind boggling - is that while our technology
doesn't get the precise presentation of the future, it
does get the general outline close enough so that we know
where to follow along and what to cover. Emotionally,
we're not taken by surprise, either. We're pleased as hell
that the next run should give us insight into the huge emotional
tension starting to build now and which the time-piercing
technology reports is scheduled for release around the first
week of December.
Iraq Bait and
Switch
The British press is
reporting that
Major General Douglas Lute is forecasting a significant troop
reduction from Iraq over the next year. But while the
General says one thing, the reports are that at least in the
short run, more forces are heading to Iraq.
1500+ to help with election security.
Of course, it's
possible that Major General Lute is just trying to hang on to
his job. There's
much being made of the firings and
retirings of any generals that get in the way of the neocon
agenda in Washington.
What is most
significant to us is that the Bush administration is planning to
bring a significant number of non-citizens into the ranks of the
US military - perhaps upwards of 50,000. In the case of
one recently retired general, the idea of training a bunch of
non-Americans (who may not even speak English) was apparently a
major factor in his quitting.
We see reports in serious media that suggest the plan to staff
US armed forces with foreigners is more than just an internet
rumor.
What does it mean?
We think back to studies nearly a decade old that ask whether US
(e.g. American born/English speaking)
troops would fire on American civilian populations.**
[**The
source document at has been deleted but we found the
source docs in cache. Don't want too many dots for people to
connect...]
The answer was that
many simply would refuse. Thus,
when we read
about the military's increasing interest in non-lethal weapons
and now the notion of bringing tons of foreigners into US ranks,
we have to wonder if the "paranoid"
writers who raised the question of a totalitarian take over of
US Constitutional government weren't wrong - but instead were
merely prescient.
All of this is a long
lead-in to the continuing Federal Grand Jury investigation in
Chicago into the
Valerie Plame affair because it threatens to involve Karl Rove,
Dick Cheney and perhaps even George Bush. But we doubt it
will come to that. We think Chicago is the most likely
terrorist target on earth right now and when playing at the
Watergate level, U.S. Attorney Patrick Fitzgerald should be the
most cautious man alive.
Do Elections
Matter?
Not that we need to
hold elections in Iraq. Why? Because in the big spin
of things, we know that the neocons controlled the presidential
election here, and aside from those voting irregularities in
Florida,
the irregularities in Ohio just won't go away.
I'd like to go on the
record of being the low bidder for delivering the outcome of the
Iraq elections. For just $1,200 I will present the same
election outcome in Iraq as we will get for our $200 billion and
2,000 dead, and I'll do it for a case of whiskey and a quick
poll of the people in the country. The outcome would be the same
either way, we figure. The results must
give the Shiites enough votes to feel represented, enough
for the Sunnis to win the majority, and enough people voting to
put up a good series of photo ops.
Are we in
Sweeps?
If CBS runs a
reported piece which Drudge headlines as "Anti
War Protester Target Wounded at Army Hospital" we can only
assume (rating) sweeps are underway, or CNS is desperate for
ratings to keep ad revenue from falling (faster).
Robertson
Repents
Why in God's name
anyone would follow
supposedly "religious" preaching of an assassination promoting
scoundrel like Pat Robertson is beyond me. Either that
or we have material in our Bible that's not in his. We'd
like to congratulate Aaron Brown of CNN for playing videotape of
Robertson saying "assassinate" (Hugo Chavez, president of
Venezuela) and then turning and then turning to Robertson live -
with an impressively straight face - saying that he didn't
really say that. Brown must have gotten to him earlier
than did Reuters, which reported that Robertson apologized.
Here's an
UrbanSurvival tip: Don't follow advise from anyone who
has to repent, retract, redact, or restate.
There's an old joke
about politicians that I can now extended to include Robertson:
"How do you know a (fill in the blank) is lying? Their
mouth is open. And in Robertson's case, he smiled.
In
poker, we call this a "tell". (*Robertson to my eyes
flunked tells 2 and 9 min the CNN interview.)
Manic Markets
We expect an
up opening on faint good news about jobs this morning.
Not that it will come as any comfort
to the 900 new Kodak employees being let go. And
oil, which we expect to stay high has momentarily dropped a bit
which anymore causes spontaneous dancing to break out on Wall
Street.
Wednesday
Durable Goods
Tumble
Let's see how the
markets put a positive spin on this one:
Durable goods have collapsed by the biggest level since January
of 2004 in the latest report out this morning. Orders
excluding transportation (which always bounces around a lot)
dropped 3.2% for the month. But in a section that has to
worry the productivity-obsessed folks at the (not really)
Federal Reserve, we see that sales of computer and electronic
equipment were down 5.9 percent while orders for machinery
orders plummeted - down 6.2%/
Now, I don't want to
sound like a wet dish rag here, but because the original (and
continuing) purpose of this site is to keep a long wave economic
view on things, let's recall that auto sales collapsed in August
of 1929. So, after all the hyperbole is done, we have to
wonder what the combined effect of auto sales reports along with
the crack in the Housing Bubble reported yesterday will add up
to later this year.
One bet? A
20-40% decline in the Dow (which makes a bigger move down in the
NASDAQ an even less wild prediction) between now and the middle
of March 2006.
This longer view of
things leaves us in an interesting conundrum:
-
If we have a
moderate economic collapse, the Housing Bubble will land
millions of people in debtor's hell because the new
bankruptcy laws pressed by the Big Money folks go into
effect on October 17th (date corrected) if I remember the date correctly.
So, if you have a mortgage, and get "caught out:" when the
bubble pops, you may be required to turn in your passport so
you can't leave the USA... and you did
read Tuesday's story about existing home sales dropping a
bit, right?
-
On the other
hand, a good-sized collapse (if that's not an oxymoron)
would immediately solve the energy crisis and leave all
kinds of energy available - cheaply - for the ruling class
of people who are unconsciously moving events in that
direction. Lower incomes mean lower consumption.
When I read about the
$10,000 bet between
Matt Simmons (Peak Oil prognosticator) and John Tierney of the
Sunday New York Times, I was reminded that Simmons himself
said something to the effect that "The only thing that will save
us is a good depression." Seems maybe the NY Times crowd
may have a good bet going, particularly since they might have
some sense of things from the NY Money Mobs.
I'll map out this
huge tipping point this weekend in greater detail for
subscribers to our
www.peoplenomic.com reports (a mere
$30 a year
if you're not a subscriber). One question which I keep
getting is "What are the jobs that one should have in the next
Depression, if things go that way?" The answers and
discussion for subscribers...
One thing seems safe:
The market won't be able to cast this report (Durables down) off
easily at the open on spin. It's too big a drop to be
ignored.
Weather Watch
We notice this
morning that a tropical storm is brewing off the Bahamas.
And, if you click over to the
tracking maps around Tropical Depression 12, you will see
that it seems to be taking direct aim at this country's oil and
gas production centers. I don't know about the "official"
location of the center, but if it hits anywhere from Bay Town LA
to Houston TX, I'd have to expect that we'll have some
additional fears pumped into the oil market,
which is back above $66 this morning, which means perhaps
another soft day ahead for the market.
Summer Shakes
We are not too
worried about the little 2.9 earthquake here in Southern
Kalifornia yesterday. However, we're watching the
continuing series of big quakes in
Japan, where a 5.6 and a 6.0 hit near Honshu again. We
continue anxiously awaiting our day of three 8.0 (or larger) in
a single day which seems to be out.
Bot Hit
I don't think the
folks at
www.halfpasthuman.com with their proprietary web bot
technology would mind me passing on a couple of items.
First, here's another "hit" by the future sensing technology.
You will remember
that the web bots have been going off for a couple of months now
on something happening in the Antarctic - and more
recently, we have had indications that NASA will be coming under
fire in the period from September 3 forward for something having
to do with disclosures and hidden information. Well, it
turns out that there's now a report that NASA has a massive
"secret" salvage operation going in the Antarctic involving a
31-year old Mars probe that went missing:
"CAPE
CANAVERAL, Florida (AMP) — The United States for the
first time admitted it is engaged in a "salvage operation"
in Antarctica and says that a recently discovered "anomaly"
two miles beneath the ice is a NASA Mars module lost during
an ill-fated training mission 31 years ago."
We can't be sure, but
if the report is not a hoax, and it could be part of an e-book
sold on the site, but if it begins to blow up as a legit story because of
the possible presence of a low-powered nuclear reactor on the
module, then that would sure raise the dickens with NASA,
wouldn't it?
Then there is a
question about whether the Pat Robertson call to assassinate
Huge Chavez of Venezuela wasn't a bot hit, too. As one
reader writes:
"As was suggested in a recent Bot run a member or
supporter linked to the administration would express
extremist views that would upset people. I think Pat
Robertson's statements come under the rubric of extremism.
And given that the Dominionists are the only voting block
still behind Bush, this is actually bad news for the
President.
http://www.bloomberg.com/apps/news?pid=10000086&sid=aHRr2U
l10eC0&refer=latin _america
Also, the Bots prediction of power failures seems to be
pointing to the whole of Asia basically. Indonesia had a
huge failure last week. Iraq and China have ongoing power
issues."
Last, but not least,
there will be an ALTA 13 series and data collection on that run
will start shortly with the first report due out around
September 4th. See
www.halfpasthuman.com for subscription details and pricing.
Cindy
Returning
Despite what the
president may want, it looks like
Cindy Sheehan is heading back to Texas, which just about
cinches the notion that tensions will continue to build near
Waco (the president's place is not far from there). And
speaking of war dissent, a reader sends along this advisory:
George, you can check out the wonderful earpiece that
once of our wonderful veterans wore at Bush's speech
yesterday in Idaho.
Thank God, you're one of the best BS "Detectors" out
there.
http://craphound.com/images/bullshitdeflector.jpg
Thanks for being a
news tip reporter - when you see news happening, click over to
our "News Tip
Line" and send it along. We've been buried in our
never-ending battles on the work front, but high on our agenda
when we get back to the ranch in early October is completion of
the expanded booklet "How to be a Reporter" which will have lots
of inside scoop on writing - applicable in business and school
regardless of whether you ever make a byline.
Speaking of which:
I have been polling experts in the field wondering if the
www.peoplenomics.com/bookstore.htm site should have its own
brand. (Meaning: own site name) One group of experts says
a flashy name for our cheap and short "How to Books" would
increase sales. The other group of experts says branding
doesn't mean anything on the internet, and the bookstore would
do just as well if there were simply links from
www.independencejournal.com,
www.peoplenomics.com,
and here. If you think our bookstore should be a separate
site with a catchy name, or without, click here to weigh in.
Also when we get back
to Texas, I will work on tuning up our discussion groups which
are free and located at
http://urbansurvival.com/cgi-bin/discus/discus.cgi. I notice
not too many people post often perhaps because I don't make it
clear enough that you can just click "Enter as Guest" and
explore and post...
Tuesday
Home Sales
Drop!
From the National
Association of Realtors:
Home Resales Down from Record, Price Gains Continue to
Roll - NAR
WASHINGTON--(BUSINESS WIRE)--Aug. 23, 2005--Existing-home
sales declined in July from a record in June, but home
prices continue to rise at double-digit rates, according to
the National Association of Realtors(R).
Total existing-home sales - including single-family,
townhomes, condominiums and co-ops - slipped 2.6 percent in
July to a seasonally adjusted annual rate(a) of 7.16 million
from an upwardly revised record of 7.35 million in June.
Sales were 4.7 percent higher than the 6.84 million-unit
pace in July 2004.
David Lereah, NAR's chief economist, said home sales
remain in historic territory. "The level of existing-home
sales in July was the third highest on record," he said.
"This is a big number any way you slice it, and housing is
continuing to stimulate the overall economy." The second
highest level of sales activity ever recorded was in April
of this year, with a pace of 7.18 million units.
The national median existing-home price for all housing
types was $218,000 in July, up 14.1 percent from July 2004
when the median price was $191,000. The median is a typical
market price where half of the homes sold for more and half
sold for less.
Lereah noted that the strongest rates of price growth
tend to move geographically. "In examining the hottest
markets for home price appreciation, we see a rolling boom
moving from one metro area to another over time, as well as
a spillover effect into nearby areas with lower home
prices," he said. "This is spreading the wealth of housing
returns, with a natural easing of appreciation in areas
following a period of extraordinary price growth. Even after
slowing in a given area, prices typically have continued to
rise faster than historic norms." Over the last
four-and-a-half years of record home sales, no area that has
experienced a sustained period of double-digit price growth
has later seen a price decline.
NAR President Al Mansell of Salt Lake City said the rate
of price growth is a simple reflection of supply and demand.
"Housing inventory levels improved in July, but they're
still quite lean by historic standards," he said. "If the
supply of homes rises, it should reduce competition between
buyers and take some of the pressure off of prices. Even so,
we expect home price appreciation to remain above normal
over the next year."
Total housing inventory levels rose 2.6 percent at the
end of July to 2.75 million existing homes available for
sale, which represents a 4.6-month supply at the current
sales pace.
According to Freddie Mac, the national average commitment
rate for a 30-year, conventional, fixed-rate mortgage was
5.70 percent in July, up from 5.58 percent in June; the rate
was 6.06 percent in July 2004.
After hitting four consecutive monthly records, existing
condominium and cooperative housing sales declined 5.0
percent to a seasonally adjusted annual rate of 915,000
units from an upwardly revised level of 963,000 in June.
Last month's sales pace remained 8.4 percent above the
844,000-unit level in July 2004. The median condo price was
$219,300, up 11.3 percent from a year ago.
Single-family home sales eased by 2.3 percent to a
seasonally adjusted annual rate of 6.24 million in July from
an upwardly revised record of 6.39 million in June, and were
4.0 percent above the 6.00 million-unit pace in July 2004.
The median single-family home price was $217,900 in July, up
14.6 percent from a year ago.
Regionally, total existing-home sales in the South were
unchanged in July, holding at a record level of 2.74 million
units, and were 5.0 percent higher than a year earlier. The
median price of an existing home in the South was $187,000,
up 7.5 percent from July 2004.
Existing-home sales in the Midwest slipped 1.8 percent to
an annual sales rate of 1.61 million in July, and were 2.5
percent higher than July 2004. The median price in the
Midwest was $178,000, which was 11.9 percent higher than a
year ago.
Total existing-home sales in the Northeast declined 3.3
percent to an annual pace of 1.19 million in July, and were
6.3 percent above the same month a year ago. The median
existing-home price in the Northeast was $251,000, up 13.1
percent from July 2004.
In the West, existing-home sales fell 7.5 percent to a
level of 1.61 million units in July, and were 3.2 percent
higher than July 2004. The median existing-home price in the
West was $319,000, up 16.0 percent in the last year.
The National Association of Realtors(R), "The Voice for
Real Estate," is America's largest trade association,
representing more than 1 million members involved in all
aspects of the residential and commercial real estate
industries.
(a) The annual rate for a particular month represents
what the total number of actual sales for a year would be if
the relative pace for that month were maintained for 12
consecutive months. Seasonally adjusted annual rates are
used in reporting monthly data to factor out seasonal
variations in resale activity. For example, home sales
volume is normally higher in the summer than in the winter,
primarily because of differences in the weather and family
buying patterns.
Existing-home sales, which include single-family,
townhomes, condominiums and co-ops, are based on transaction
closings. This differs from the U.S. Census Bureau's series
on new single-family home sales, which are based on
contracts or the acceptance of a deposit. Because of these
differences, it is not uncommon for each series to move in
different directions in the same month. In addition,
existing-home sales, which generally account for 85 percent
of total home sales, are based on a much larger sample -
nearly 40 percent of multiple listing service data each
month - and typically are not subject to large prior-month
revisions.
Because there is a concentration of condos in high-cost
metro areas, the national median condo price is higher than
the median single-family price. In a given market area,
condos typically cost less than single-family homes.
Existing-home sales for August will be released September
26. The next Pending Home Sales Index will be on September 1
and the forecast will be revised September 7.
Information about NAR is available at
http://www.realtor.org
. This and other news releases are posted in the Web site's
"News Media" section in the NAR Media Center. Statistical
data, charts and surveys also may be found in the NAR Media
Center by clicking on Economic & Housing Statistics.
Do you hear a slight hissing noise - like a bit of air coming
out of a balloon? We don't expect a big housing decline
till later this year, but the report today certainly means
something, although we expect the markets to put a positive spin
on things like "Oh cool, see housing prices are just normally
fluctuating..."
Mass Layoffs
Up
New figures out from
the Department of Labor are due out this morning are sure not to
get much attention in the mainstream media because they don't
paint a picture of the vibrant job growing economy that DC likes
to talk about.
In
July 2005, employers took 1,249 mass layoff actions,
seasonally adjusted, as measured by new filings for
unemployment insurance benefits during the month, the Bureau
of Labor Statistics of the U.S. Department of Labor reported
today. Each action involved at least 50 persons from a
single establishment, and the number of workers involved
totaled 131,326, on a seasonally adjusted basis. (See table
1.) The number of layoff events in July rose by 74, and the
number of associated initial claims increased by 3,439 from
June. In the manufacturing sector, 360 mass layoff events
were reported during July 2005, seasonally adjusted,
resulting in 48,967 initial claims. The number of mass
layoff events in manufacturing was somewhat higher than a
month earlier, while the number of initial claims was lower.
(See table 1.)
From January through July 2005, the total number of
events (seasonally adjusted), at 8,673, and initial claims
(seasonally adjusted), at 924,343, were lower than in
January-July 2004 (9,381 and 959,018, respectively).
Industry Distribution (Not Seasonally Adjusted)
In July, the 10 industries reporting the highest number
of mass-layoff initial claims, not seasonally adjusted,
accounted for 83,882 initial claims, 34 percent of the
total. (See table A.) The two industries with the highest
number of initial claims were temporary help services, with
16,237, and light truck and utility vehicle manufacturing
with 13,434. Together these two industries accounted for 12
percent of all initial claims during the month.
The manufacturing sector accounted for 43 percent of all
mass layoff events and 56 percent of all initial claims
filed in July 2005. A year earlier, manufacturing comprised
42 percent of events and 57 percent of initial claims.
Within manufacturing, the number of claimants in July 2005
was highest in transportation equipment (69,393, mostly
automotive- related), followed by plastics and rubber
products (9,202) and primary metals (7,984). (See table 3.)
Administrative and waste services accounted for 12
percent of events and 10 percent of initial claims filed in
July, with layoffs mostly from temporary help services. Six
percent of all layoff events and 5 percent of initial claims
filed during the month were from transportation and
warehousing, mainly from school and employee bus
transportation. Retail trade accounted for 5 percent of
events and 4 percent of initial claims in July, primarily
from general merchandise stores. Agriculture, forestry,
fishing and hunting accounted for an additional 5 percent of
events and 4 percent of initial claims during the month,
largely among farm labor contractors and crew leaders.
Government establishments accounted for 7 percent of
events and 5 per- cent of initial claims filed in July,
mostly from educational services as the school year ended.
Over the year, the number of layoff events declined by
113 and the num- ber of associated initial claims fell by
9,713 (not seasonally adjusted). The largest decreases in
initial claims were reported in plastics and rubber products
manufacturing (-3,851), transportation equipment
manufacturing (-3,163), and apparel manufacturing (-2,855).
The largest over-the-year increases in initial claims were
reported in transit and ground passenger transportation
(+2,630), general merchandise stores (+1,783), and in elec-
trical equipment and appliance manufacturing (+1,748).
Geographic Distribution (Not Seasonally Adjusted)
Among the four census regions, the highest number of
initial claims in July due to mass layoffs was in the
Midwest (114,158). (See table 5.) Transportation equipment
manufacturing accounted for over half of the Midwest total.
The West had the next largest number of initial claims
(52,105), followed by the South (44,995) and the Northeast
(32,958).
The number of initial claimants from mass layoffs
decreased over the year in three of the four regions. The
largest decrease occurred in the South (-10,409), followed
by the Midwest (-4,755) and West (-307). The Northeast had
the only over-the-year increase (+5,758). Five of the nine
geographic divisions had over-the-year decreases in the
number of initial claims associated with mass layoffs, with
the largest in the East North Central division, -5,255. The
Middle Atlantic (+4,172) and New England (+1,586) divisions
reported the largest over-the-year increases.
Among the states, California recorded the highest number
of initial claims filed due to mass layoff events in July
(41,741), mostly in administrative and support services and
educational services. Michigan was next, with 34,561 initial
claims, followed by Ohio (25,306) and Indiana (15,176).
These four states accounted for 45 percent of all mass
layoff events and 48 percent of all initial claims for
unemployment insurance. (See table 6.)
Indiana had the largest over-the-year decrease in the
number of initial claims (-5,259), followed by South
Carolina (-5,216). The largest over-the- year increases
occurred in Wisconsin (+4,121) and Minnesota (+2,689).
From January to July, California reported 230,425
mass-layoff initial claims, 22 percent of the national
total. This was California's lowest share for a
January-to-July period since 1996. Ohio had the next largest
number of claims over this period (84,390), followed by
Michigan (83,620), New York (61,265), and Pennsylvania
(59,138).
As we see it, the
mass layoffs are only a simply symptom of a complex
socioeconomic problem. The problem is that the world is in
what I'd have to call "Last days in the Agar mode."
If you think back to junior or senior high school biology, one
of the experiments often used is to make some nutrition media
(called "agar")
and then introduce a bacterial into it. What happens?
Well, at first, the agar supplies the nutrition and the bacteria
grows like wildfire - soon encompassing the entire surface of
the agar media.
But then, a funny
thing happens: the bacteria finishes eating all the available
nutrients and the whole dish dies off. So it goes with
last-ditch capitalism. Rather than focus on spreading
around the wealth and the work behind it, America has become
engaged in "end of agar" behavior which means eating up all
remaining industrial nutrients. Which brings us to..
Kill Chavez
When Pat Robertson
speaks, millions listen. However, when he calls for the
assassination of a foreign leader of government,
as he had done in the care of president Chavez of Venezuela,
we think there's something seriously amiss. Even if you get past
the lack of moral leadership displayed by throwing out the "Thou
Shalt Not Kill" Commandment, there should be legal sanctions
against Robertson, in our view. Why? Well, if a
person of another faith were to call for the assassination of
another foreign leader (say, someone in Israel. for example) we
expect that the full force of (neocon) government would be
applied against them. So....Why a different standard
should be applied to
the Dominionists is beyond our understanding. Obviously, our
copy of the Good Book reads differently than Robertson's. But
then again, maybe he drives an SUV.
Oil Crazy
Not that Pat
Robertson is alone is his extreme reaction to the reality of
expensive energy. I took a little poll at the office
yesterday to see what folks expect by Christmas. By initials
only, BB said $2,20, DH voted for $2.40, KA suggested $2.80 and
LT said $3.05. In other words, my co-workers expect
essentially no change. I was the lone crazy at
$4.50 to $5.
On the other hand, I
just went through the process of ordering propane for the ranch
for the coming winter. We topped off the 400 gallon tank
last year (two years worth on hand all the time) for $1.72 a
gallon. This year, even with my "over 55" discount again t
was $2.32. If you're short on math skills, that's a 34.8%
increase in a year. My inflation forecast of 13% for 2005 sure
looks accurate according to my checkbook. I wonder why
government isn't reporting it?
Moreover, the price
of oil doesn't reflect the current crude prices. In fact,
one could say that reflect prices of crude more than 60 days
back which would put us in the $50 a barrel range. So as I
see it, by the fall, we should be paying over $3.00 everywhere,
including Texas where we were paying $1.56 to $1.73 at this time
a year ago. Panama Bates reports from the ranch that it's
around $2.75. Thank heaven we live a half mile from an oil
rig.
With all this going
on in background (and without trying to make this report as
lengthy as one of our Peoplenomics reports) we have to note that
on Russia's southern tier,
China
is busy shopping for more energy suppliers.
Iraq, meanwhile has
recovered partially from the power problems that shut off
production over the weekend. Not a big flow, but
something is better than nothing.
Iraq's
political situation is still smoldering over the new
constitution - and no, we're not placing bets one way or the
other on that.
We don't look for any
improvement as
hurricane season looks to send another storm toward our Gulf of
Mexico.
Markets: Soft
The
pre-open futures were
looking a bit downcast this morning an hour or so before the
open with expectations that new data coming out would not be
healthy for the bulls (wherever they are).
Media Mystery
There
was another special segment about the missing firl in Aruba on
one of the news channels we monitored last night. Yet this
morning, when local media here in LA are covering a story about
a quadruple murder - suicide (5 dead in all) not a mention in
national media. Say, you don't suppose it's because the
story happened in Inglewood, do you?
Naked
Government Power
The following news
release from the Gold Anti-Trust Action group caught our
attention this morning:
"Treasury Department Claims Power to Seize Gold,
Silver--and Everything Else, GATA Says
MANCHESTER, Conn.--(BUSINESS WIRE)--Aug. 22, 2005--The
U.S. Government has the authority to prohibit the private
possession of gold and silver coin and bullion by U.S.
citizens during wartime, and, during wartime and declared
emergencies, to freeze their ownership of shares of mining
companies, the Treasury Department has told the Gold
Anti-Trust Action Committee.
But gold and silver owners aren't alone in such jeopardy.
For the U.S. Government claims the authority in declared
emergencies to seize or freeze just about everything else
that might be considered a financial instrument.
The Treasury Department's assertions came in a letter to
GATA dated August 12 and written by Sean M. Thornton, chief
counsel for the department's Office of Foreign Assets
Control, who replied to questions GATA posed to the
department in January. It took GATA six months and some
prodding to get answers from the Treasury, but the
Treasury's reply, when it came, was remarkably comprehensive
and candid.
The government's authority to interfere with the
ownership of gold, silver, and mining shares arises,
Thornton wrote, from the Trading With the Enemy Act, which
became law in 1917 during World War I and applies during
declared wars, and from 1977's International Emergency
Economic Powers Act, which can be applied without declared
wars.
While the Trading With the Enemy Act authorizes the
government to interfere with the ownership of gold and
silver particularly, it also applies to all forms of
currency and all securities. So the Treasury official
stressed in his letter to GATA that the act could be applied
not just to shares of gold and silver mining companies but
to the shares of all companies in which there is a foreign
ownership interest.
Further, there is no requirement in the law that the
targets of the government's interference must have some
connection to the declared enemies of the United States, nor
even some connection to foreign ownership. Anything that can
be construed as a financial instrument, no matter how
innocently it has been used, is subject to seizure under the
Trading With the Enemy Act and the International Emergency
Economic Powers Act.
Having just gone through a controversy about a Supreme
Court decision about government's power of eminent domain,
most Americans may be surprised to learn that the Trading
With the Enemy Act and the International Emergency Economic
Powers Act could expropriate them instantly and far more
broadly without any of the due process extended to parties
in eminent domain cases. All that is needed is a
presidential proclamation of an emergency of some kind --
and of course Americans lately have been living in a state
of perpetual emergency.
When the Trading With the Enemy Act was passed in 1917,
gold and silver formed part of the official currency of the
United States and were essential to ordinary commerce, so
perhaps an argument could be made then against "hoarding,"
even if "hoarding" could not be well defined. That is no
longer the case; the United States has officially disavowed
gold and silver as money and they no longer have a
meaningful role in commerce. (GATA is working on that.) So
gold and silver investors may want to ask their members of
Congress to seek repeal of the statutes that give the
government the authority to interfere with the private
ownership of gold and silver, emergencies or not.
And ordinary citizens with no particular interest in gold
and silver may want to ask their members of Congress to
reconsider these statutes simply for being wildly
tyrannical.
GATA's correspondence with the Treasury Department is
posted on the Internet here:
http://groups.yahoo.com/group/gata/message/3276
"
This doesn't change
our opinion about the value of hanging on to gold and silver.
It just makes us no longer talk about any personal holdings...
Missing River
We are reading a lot
of small reports here and there about the earth heating up,
but this one is an eye popper - a river gone missing.
The Santa Cruz River has apparently gone underground.
Media Habits
Changing
One of the biggest
media changes in history is underway before our eyes and ears -
and it's starting to show up in front of the living room Cyclops
(the TV, for the less literate). The story out today in
Variety bemoaning the loss of audience is only a tip of the
iceberg.
We don't have a lot
of data points, but consider these:
We can't be sure what
to make of it, but the traditional American mass media
super-size tendency
may be resulting in some degree of overload. But,
when we read how smart businessmen like Carl Icahn are thinking
about putting Time-Warner cable off on its own, we wonder if
broadband and picture phones and Netflix will continue
putting pressure on old media.
Oil Colony
Notes
As the
Constitution deadline approaches in Iraq, we read yet
another story today about the
oil
exports from Iraq have been halted - this time by electricity
going off. There was some
speculation in the oil pits today that the outage would not last
long.
Insurgents in Iraq
meantime are no doubt becoming aware of
Saddam Hussein's open letter in which he throws in with forces
resisting gunpoint democracy.
Speaking of oil
colonies,
Venezuelan president Hugo Chavez, meeting with Fidel Castro in
Cuba is blaming the U.S. (not his own interests) for
destabilizing Bolivia where a people's uprising about having
their resources ripped off by corporate interests is bordering
on rebellion.
Chavez also says his country will lend Ecuador oil during
protests. Bet me who's behind those protests?
Meanwhile, there's
some suggestion that
higher gas prices may be putting the brakes on demand.
At a practical level, Elaine has noticed freeway traffic here in
L.A. is a bit lighter than it has been in recent months.
People changing their habits? Maybe...
Stock Thinking
Look for an
up move at the open on merger talks, but as our fractal whiz
reminds us, glory may be fleeting...
"George, valuation fractals represent a composite
integration of primarily six elements in the complex
economic system: cash and savings, debt, wages, assets,
lending practices, and prevailing interest rates. Each of
these six broad parameters has its own complex internal
dynamics and summation characteristics. In a very
mechanistic fashion, following simple near-quantum and
near-quantum related Fibonacci numbers, valuation fractals
'grow' to buying saturation levels and thereafter 'decay' to
lower selling saturation levels. The fundamental point is
that the daily, weekly, monthly, and yearly valuation
fractals represent the sum total integration of those six
elements and their complex interactive relationships. Pour
into the economic vat: cash for daily transactions, savings
available for money to be borrowed at given interest rates
using prevailing lending practices for both major purchases
and minor credit card purchases, balanced by on-going wages
and debt servicing obligations, balanced by relative
valuation of assets and their relative state of consumption,
mix it up on a daily, weekly, etc. basis - and - from the
vat flows forth the daily, weekly, etc. summation fractals.
While lower order time unit fractals such as minutes and
hours represent trading valuation saturation points,
intermediate fractals represent the larger picture of on
going velocity of money growth percolating through the
system. The higher order or 4-yearly, 17-18 yearly and 70
year fractals represent both business cycle and asset and
debt saturation levels at the basic consumer level.
There are three sequential identified ideal growth
fractals followed by a decay fractal. The near quantum
number time units for the three cycles are x, 2-2.5x and 2x,
respectively. A nonlinear devaluation typically
characterizes the second growth fractal somewhere between
the 2x and 2.5x time period. The third growth fractal which
ideally is 2x in length can have an extension to 2.5x. This
extension of the third growth fractal has characterized both
the current US equity and heavily invested commodity areas,
particularly oil and gold, for the entire 128 week duration
of the March 2000 secondary growth period.
Just as the complex system is an integrative process,
valuation fractals which exactly represent them are likewise
composite nonlinear integrations. Fractals incorporate the
terminal portion of the preceding decay fractal into the
beginning of the follow-on growth fractal. An elegant
pristine example of this rolling integration was the
40/100/100 day cycle exactly x/2.5x/2.5x that resulted in
the March 2005 top for the DJIA. The first two fractals were
'declining' growth fractals with a very characteristic
nonlinear break at the end of the second fractal in August
2004. That second fractal was likewise elegant in its
evolution in that it was composed of a 29/72 day x/2.5x sub
fractal sequence. The probability that these precise
sequences are random numerical sequential events approaches
zero and elevates fractal analysis, reciprocally, to a high
probability real science descriptive of the complex macro
economy.
The subsequent growth fractals dating from August 2004
likewise have followed the same very precise fractal growth
evolution with a 52/130 (x/2.5x) day first and second
fractal growth sequence with the typical nonlinear drop
between 2x and 2.5x of the second fractal. Anyone can verify
this pattern using any of the major US or European indices.
The third fractal US equity sequence has been a 12/30-31/28
day sequence, approaching the extended ideal form of
x/2.5x/2.5x growth pattern. The major European indices
,e.g., the FTSE, DAX, and CAC have a slightly different mix
of the six aforementioned underlying elements and have
extended their growth - but are still confined within the
52/130/104 theoretical maximum and the theoretical Fibonacci
maximum of 52/130/(1.62 X 52 = 84-85) days. These recurrent
numerically ideal patterns since August 2004 once again lend
substantial credibility to the notion that the complex
macroeconomy operates according to some relatively precise
laws of fractal design.
What are the rate limiting factors that result in growth
saturation points or asymptotes, decay selling saturation
points or asymptotes, and the general nature of fractal
patterning? Each of the six controlling parameters- assets,
ongoing wages, lending practices, prevailing interest rates,
debt load, and cash and savings - contribute to the
saturation areas. Some are more important than others in
determining cycle lengths and saturation points.
Assets have two important elements: relative valuations
and saturation ownership. If the valuation becomes too high
or too overly consumed, demand will decease. The timing for
this decrease is exactly represented by an asymptotic
valuation saturation level or a single high valuation point
followed by lower valuations. The valuation curves provide
precise barometric information on demand relative to
valuation level and relative to the consumption level. Some
assets such as gas and oil must be purchased to maintain
livelihood. As global consumption for the this finite
resource increases, resulting price increases squeeze the
null saving US consumer, far too many living from paycheck
to paycheck, to the financial breakpoint. Unnecessarily
expensive US healthcare, 25 percent of the value of which
goes to third party insurers and the non-value added bill
collection system, can be considered yet another consumable
asset, that, like 'uninsured equivalent' gasoline prices, is
driving many to insolvency.
Ongoing wages and just as important the jobs that support
those wages are perhaps the most important rate limiting
factor in determining valuation saturation points. In the US
jobs sphere, high paying manufacturing jobs with the
exception of the housing industry have been significantly
outsourced. As the housing bubble crests, overcapacity will
become evident and high paying home construction jobs will
contract. A considerable subset of jobs in America have
questionable value-added real economic worth and will be
lightened during consumer retrenchment. It is easy to image
using the 1930's as a template of a positive feedback
contracting system, where decreased ,e.g., construction jobs
lead to decreased consumer spending leading to further job
contraction leading to further spending contraction and so
forth.
Lending practices and prevailing interesting rates, the
latter a Federal Reserve controlled parameter, work in
synergy to foster money creation and asset inflation.
Fractional reserve lending practices amplify the bank and
money market savings used as a reserve base for lending.
Extremely low interest rates, i.e., a Fed fund rate of 1
percent coupled with a lending practice of LIBOR type loans,
no money down and interest only payments creates the
interesting situation in which the interest cost of money is
far below the real asset inflation rate. Not to borrow is to
lose money that would be made with the expected inflation.
Saving money under these interest rate and lending practice
guidelines results in loss of purchasing power. Credit card
interest rates reflect the needed higher interest rates to
overcome the default rate. The last year of higher Fed Fund
interest rates have resulted in both increased mortgage
payments and decreased bank profitability secondary to the
contracting spread of long term verses short term interest
rates.
Ongoing debt load and the requirement to service that
debt diminishes cash available for asset consumption and
investment. Percentage wise the total debt load relative to
wages and GDP has had very small incremental increases - a
fact which has mistakenly reassured many linear thinking
economists. Debt load becomes a primary factor in the
fractal decay process, where assets are liquated in an
attempt to pay down debt. This results in a mechanistic
deflationary process, lowering the value of nearly all non
cash or non-cash equivalent assets.
Cash is the money that is represented by greenbacks in
circulation and greenback equivalent readily convertible
debt instruments such as treasuries, notes, bonds, bank
deposits, and money market funds. In short cash represents
the dollars in circulation and savings. The savings rate,
which the Federal Reserve has bemoaned to be dangerously low
and was reported to be zero in July, reflects the
competition of the the various Investment areas. With
interest rates below the real(which includes housing) asset
inflation rates, deposited money in saving instruments loses
its purchasing power value its week that it is malinvested.
Deposited money in saving instruments has been generally a
bad investment in the last few years. During the decay
fractal process, this scenario will be reversed with money
from ongoing asset liquidation flowing into cash and cash
equivalents, whose purchase power value will increase
relation to asset devaluation.
These are the lumped six broad elements that are
interacting with each other to create the summation and
integration valuation points, curves, saturation inflection
asymptotes and fractals that respectively describe the real
instantaneous state, the trending state, the saturation
areas, and importantly the expected fractal nonlinearities
of the complex macro economic system. Gary Lammert
http://www.economicfractalist.com/ "
Big Calendar
Item
We are anxious to see
what tomorrow's Mass Layoff Report from the Labor Department
looks like. It's one measure of how the economy is doing -
and with so many reports recently, the declining trend may be
set to reverse course.
Taser Suit
We read the reports
that more than 7,000 police agencies worldwide were using Tasers
and come to find out that they may not be completely harmless.
In fact, a police chief is suing the company. As
always, there are two sides to the story, but we can't help but
wonder if police won't have some huge liability in the future
if, for example, they Tase someone with a heart condition, or a
pacemaker for that matter. 30-cases going on nationally
according to the report.
Speed of Light
Now Variable
It may not seem like
a big deal on the surface, but researchers are reporting the
limited ability to control the speed of light in the fiber optic
environment. There's still not enough control for a
computing breakthrough, but things seem headed that way.
News from
Elliott Wave International
On to Our Charts!
Write when you get
rich,
George Ure, The People's Economist
|
Sunday
August 28, 2005 11:00 A PDT
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