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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: zonder who wrote (11181)	8/31/2004 9:37:11 AM
From: mishedlo	Read Replies (3) \| Respond to of 116555

Merrill Lynch on the Household Survey We continue to be amazed at how much time and energy the ‘pundits’ spend in trying to explain away the last couple of nonfarm payroll reports – again, many in the ‘Pollyanna’ crowd would rather point to the 629k job gain as per the household survey as opposed to the paltry 32k increase contained in the nonfarm survey. But those pundits did not articulate that 95% of that ‘entrepreneurial’ related employment jump in the household poll was in parttime jobs. And these pundits also did not tell you that even the BLS said that the nonfarm survey is the more reliable of the two. What nobody seems to question in that 600k+ household survey is, how that in July those over the age of 45 saw job gains of 400k, and those between the ages of 16 and 24 saw job increases of 170k, but the ‘breadwinners’ cohort (in the key 25-44) posted a job LOSS of 27k? This bi-modal distribution does, however, line up with the fact that 95% of that blowout household employment gain was in parttime … sonny was mowing lawns and granny was selling pies. Finally, we see research folks at the Fed published a report that totally refutes the notion that we should be paying close attention to the Household Survey, ostensibly because it will make us feel better. The San Francisco Fed just published a study titled “Two Measures of Employment: How Different Are They.” This is a must-read for the truth-seekers among us. The report notes that the ballyhooed household Survey contains “a large number of ‘proxy responses’ by household members who may have incomplete information on the employment status of other family members.” As a result of this and the puny sample size, “the household survey has drawbacks that may induce larger biases than the payroll survey.” How often have you heard that the nonfarm survey ‘fails’ to pick up all those entrepreneurs called ‘self-employed’ that all the growth-bulls cite as a missing link? Well, the San Francisco Fed has an answer – “self-employment should be countercyclical.” That’s right – when the economy is strong, we should be seeing fewer folks being forced to set up shop in the basement as companies step up the hiring process. The report actually concludes that “increases in self-employment … reported in the household survey may indicate a weak rather than improving labor market, suggesting that the household survey may send a false signal of employment strength”. So we think the fact that nearly one out of every three non-agricultural jobs that have been ‘created’ out of the beloved Household survey since April was in the “self-employed” category may not be something the ‘growth-bulls’ should be crowing about. A Growing Share of the Workforce Is In Part-time and Temp Employment. [Is that a good thing? - mish]

To: zonder who wrote (11181)	8/31/2004 9:40:01 AM
From: mishedlo	Respond to of 116555

Japanese industrial production has failed to expand for a second month in succession, official data has shown. The nation's industrial output in July remained unchanged from June, according to the below-expectation figures. July's 0% month-on-month figure follows June's 1.3% fall - another sign that Japan's economy could be slowing down. Analysts had expected a 1% increase for July, and the release of the data helped see the Nikkei drop 1.18% by afternoon trading in Tokyo on Tuesday. The Japanese government has also recently reported that householder spending fell in July for a third straight month, while last month's jobless rate jumped to 4.9% from 4.6% in June. news.bbc.co.uk

To: zonder who wrote (11181)	8/31/2004 9:45:14 AM
From: mishedlo	Respond to of 116555

BEST OF RICHARD RUSSELL www.dowtheoryletters.com August 30, 2004 I've been focusing on the movements of the commodities. They all appear to be under pressure. Declining tops, declining tops everywhere in commodities. At the same time the dollar is actually turning strong. And the bonds continue to creep higher. What is all this telling us? It's telling us that the Fed, despite its frantic money creation and low interest rates, is failing to hold back the forces of deflation. Yes, it's incredible but with twin US deficits adding up to a trillion dollars a year, the forces of deflation are active and more powerful than the actions of the Fed -- more powerful than the action of all the central banks taken together. The simple, basic fact is that there's too much supply in the global market, and not enough demand. That is the classic recipe for price deflation. The picture is changing very slowly, very subtly, unnoticed by most analysts. But I'm convinced that Greenspan is well aware of what's happening.. Greenspan has studied the Japanese situation carefully, and Greenspan knows that the great unseen monster of deflation is still very much alive. I also believe Greenspan has told George Bush about the specter of deflation, and for this reason you will see Bush avoid any talk about the enormous budget deficits. The truth, the unspoken truth, is that Bush wants deficits. Bush needs deficits to fight the forces of deflation. The easiest way to produce huge deficits is via defense spending. You can spend your bloody head off in defense and who can complain? Who dares complain, particularly with the nation in constant danger from terrorists? So watch for a coming huge build-up in government deficits -- most of it stemming from defense spending. Furthermore, Bush will constantly harp on the terrorist danger. This will allow him to spend and spend more on defense -- with any objectors branded as being anti-patriotic and close to treasonous. Kerry doesn't see or understand the situation. Nobody's told Kerry about the danger of deflation. Few people know about it. Kerry's talking about cutting the deficits. This is the path to economic disaster, as counter-intuitive as that seems. Subscribers who have no idea of what I'm talking should read Richard Koo's brilliant book, Balance Sheet Recession. I now believe Kerry will lose the election. He'll lose because he doesn't see the picture, and therefore he'll be talking the wrong talk. And advocating a policy of walking the wrong walk. The major problem entails the underlying forces of deflation. It's the deflationary background, I believe, that is holding gold and silver back. Forget manipulation -- the precious metals sense deflation. The Japanese survived decades of deflation because they are huge savers, and because Japan has a positive trade balance. The US has little or no savings and a giant negative trade balance. Therein lies the threat, therein lies the potential trouble. And we're going to experience incredible trouble when deflation hits. When prices collapse, bankruptcies will explode, and debt will become a dirty word. All the world's paper currencies are a product of debt, and as the rush for solvency and safety enters the picture, the intrinsic safety of true money, gold, will be recognized. The precious metals will come into their own as the forces of deflation ultimately hit prices across the board. investmentrarities.com

To: zonder who wrote (11181)	8/31/2004 9:54:07 AM
From: mishedlo	Read Replies (1) \| Respond to of 116555

The Monetary Economics of Thurston Howell III [This is interesting - especially the Iraqi Dinars - mish] mises.org

To: zonder who wrote (11181)	8/31/2004 9:58:15 AM
From: mishedlo	Read Replies (1) \| Respond to of 116555

German Finance Minister Hans Eichel has notified the EU Commission that he expects this year's public deficit to amount to 3.7 pct of GDP Public debt will amount to 66 pct of GDP, according to a finance ministry report to the commission Eichel also reiterated he wants to reduce the public deficit to below the stability and growth pact limit of 3 pct of GDP next year ====================================================================== Everyone says what they want to do but no one ever does anything about it Mish

To: zonder who wrote (11181)	8/31/2004 10:02:07 AM
From: mishedlo	Read Replies (1) \| Respond to of 116555

ICSC-UBS weekly retail index falls 0.2% Tuesday, August 31, 2004 12:01:49 PM WASHINGTON (AFX) -- U.S. retail chain store sales fell 0.2 percent last week, according to the weekly index released by the International Council of Shopping Centers and UBS. Sales were up 2.6 percent year-over-year, the weakest growth in just over a year. For August, ICSC chief economist Mike Niemira is now projecting same-store sales will rise 1.5 to 2 percent. "Overall, August has been a disappointing month as it was battered by a series of special factors - higher gasoline prices, Hurricane Charley, sales tax holidays throughout the country, and a shift in the date of Labor Day and its related promotions that largely, though not completely, pared reported sales growth," Niemira said ======================================================================= Sales tax holidays hurt retail sales? WTF? Mish

To: zonder who wrote (11181)	8/31/2004 10:05:34 AM
From: mishedlo	Respond to of 116555

UK Aug retail sales slumps to lowest level since March 2003 [Bad weather hits the UK as well - When is someone going to do something about bad weather? - Mish] Tuesday, August 31, 2004 11:14:30 AM (Updating with additional detail throughout) LONDON (AFX) - UK retail sales in August were the slowest since March 2003 as unpredictable weather conditions and the Bank of England's series of rate hikes took their toll, according to the Confederation of British Industry's latest distributive trades survey "The survey shows that July's unexpected slowdown in sales continued throughout August despite expectations of a pick-up," CBI said. Thirty-four pct of firms polled said sales were up on a year ago while 32 pct said they were down. The balance of plus 2 pct is the lowest since March 2003 and compares with plus 24 pct in the July survey. Retailers cut back on orders to try to bring stock levels down from the highs seen in July. Meanwhile prices increased only moderately in the year to August with the high level of imports limiting price gains. Firms also expect to reduce staff numbers a little next month. But not all the news was bad. Retailers said sales were average for the time of year and were optimistic for improvement in September. They were also mildly confident that the overall business situation will improve over the next three months. More firms are also planning to increase capital spending in the year ahead than they were three months ago. Digby Jones, CBI director-general, blamed the slow sales on the consecutive interest rate rises by the BoE. He added that further rate rises "could be put on hold". Grocers had a particularly poor month, with sales falling at the fastest rate since the survey began 21 years ago. Meanwhile, clothing sales, which are traditionally weather-related, were flat following strong growth earlier in the summer. Durable household goods, such as TVs and fridges slowed after seven months of strong growth, while sales of furniture and carpets were strong for the fifth consecutive month, probably assisted by heavy discounting. fxstreet.com

To: zonder who wrote (11181)	8/31/2004 10:09:54 AM
From: mishedlo	Respond to of 116555

China´s economic slowdown could trigger new wave of bad loans - Fitch Tuesday, August 31, 2004 10:49:00 AM China's economic slowdown could trigger new wave of bad loans - Fitch BEIJING (AFX) - China's moves to slow its frenetic pace of economic growth could lead to a new wave of non-performing loans (NPL) over the next few years, international credit ratings agency Fitch Ratings said Even a "soft landing" of the economy could trigger a 5-10 pct increase in bad loans and is one of the reasons China's sovereign ratings were unchanged in the latest review, the agency said "Until we have greater confidence that the economic growth trajectory is going through a smooth one, we are reluctant to see China's ratings go up to the next level," said Brian Coulton, senior director of Fitch's Asia Pacific Sovereigns Group during a conference call with analysts and reporters China's NPLs accounted for 20 pct of gross domestic product at the end of 2003 and mostly belong to state-owned enterprises, the agency said Last week, the agency affirmed the mainland's long-term foreign currency rating of "A-" with a positive outlook, and its long-term local currency ratings of "A" with a stable outlook The agency also affirmed the "F1" rating of the country's short-term foreign currency The ratings affirmation reflects China's strong external balance sheet, efforts to liberalize trade, significant improvements in the way state-owned enterprises are operated and the massive reforms of the beleaguered banking sector, Coulton said However, China's high level of investment as a percentage of GDP, the rapid expansion of credit growth over the last few years and a heavy reliance on administrative measures to slow the economy were constraining the country's ratings, Coulton added China's policy makers have introduced a string of tightening measures to slow the economy, which has shown an average 9.3 growth since 1990 amid fears it would overheat and derail the country's development, and lead to social unrest So far, the government has employed administrative measures to clamp down on investment, such as restricting bank lending to red-hot sectors and raising bank reserve requirements, instead of raising interest rates and removing the currency's long-standing peg to the US dollar Government officials and some economists say the measures seem to be taking effect so far, with most economic and financial indicators, such as money supply and new lending, showing signs of slowing down over the last few months However, some analysts are concerned that the slowdown has been too sharp and is causing a credit squeeze, especially for small and medium-sized enterprises which have been cut off from working capital and short-term loans. Coulton said he expects to see an interest rate hike pushed out to the fourth quarter as the central bank tries to convince the State Council that an adjustment in monetary policy is necessary to rein in inflation The consumer price index rose to 5.3 pct in July, the highest level in seven years, from 5.0 pct in June, on the back of continued growth in food prices Earlier this year, the central bank said a 5 pct increase in CPI would trigger an interest rate hike. However, the central bank is expected to hold it off until it has seen CPI figures for the third quarter, when year-on-year growth is expected to no longer be distorted by the low comparative base due to the SARS outbreak, Coulton said. fxstreet.com

To: zonder who wrote (11181)	8/31/2004 10:16:53 AM
From: mishedlo	Respond to of 116555

EU Commission to soften stability Pact rules [LMAO - This just HAD to happen. over half the countries in the EU were in perpetual violation of the rules. Obviously the rules had to be changed cause no one wanted to do what it took to achieve "stability". Why will these new rules be any better? Who will enforce them? - mish] Tuesday, August 31, 2004 9:42:11 AM (Updates with further detail, background) FRANKFURT (AFX) - The EU Commission plans to soften the European Stability and Growth Pact so that it is no longer so strictly applied in times of economic weakness, the Handelsblatt newspaper reported citing a draft report by EU Monetary Affairs Commissioner Joaquin Almunia It said that under the planned new application of the rules, member states in breach of the pact's deficit rules will be given more leeway during times of weak economic growth The Financial Times Deutschland, citing Commission sources, said this means countries will be given more time to reduce their deficits during economic downturns than was previously the case It said the "extraordinary circumstances" under which member states are permitted to remain temporarily in breach of deficit rules are to be re-defined Previously, a member state was allowed to breach deficit rules only if it sank into a deep recession, with economic growth contracting at least 2 pct compared with the previous year, the FTD said In future, a prolonged period of stagnation will be considered an extraordinary circumstance The new rules, which Almunia will present in to finance ministers on Friday, should put an end to a dispute between the Commission and member states over how the pact should be applied, the papers said Finance ministers decided last November not to apply financial sanctions against France and Germany, even though they have repeatedly breached the pact's 3 pct of GDP deficit ceiling The Commission had argued for sanctions and appealed in the European Court of Justice against the ministers' action. The court ruled in favour of the Commission, but also said that ministers have the right to ignore Commission recommendations and can suspend sanctions against member states if they follow the correct procedures The FTD said under the new rules, the pact's deficit limit will remain at 3 pct of GDP, but it will no longer be applied so "mechanistically". The nature of a country's debt will be taken into account, it said More emphasis will be put on pushing reforms that promote economic growth, it added

To: zonder who wrote (11181)	8/31/2004 10:21:53 AM
From: mishedlo	Respond to of 116555

Japanese govt bonds higher on lower-than-expected ouput data, stock falls Tuesday, August 31, 2004 7:26:23 AM TOKYO (AFX) - Japanese government bond prices closed firmer for a fourth straight day, with weaker-than-anticipated production data as well as the bearish tone of equities market attracting investors to fixed-income instruments, dealers said. "(The lower-than-expected July) industrial output data and a decline in stock prices helped provide a lift to bonds today," said Seiji Shiraishi, chief market economist at Daiwa Securities SMBC Co. The yield on the bellwether 1.9 pct 10-year bond ended at 1.540 pct, down from 1.570 pct late yesterday. The lead 20-year bond yield finished at 2.145 pct, down from 2.170 pct from yesterday's close, with the yield of the benchmark five-year note closing at 0.660 pct, down from 0.700 pct Bond prices move inversely to yields. The 10-year bond futures contract for September delivery ended at 137.65, up from 137.28 at the previous day's close On the Tokyo Stock Exchange, the blue-chip Nikkei 225 Stock Average Index closed down 102.74 points or 0.9 pct at 11,081.79. The broader TOPIX index of all First Section shares dropped 8.47 points or 0.7 pct to 1,129.55 Ten minutes before trading began, the Japanese government released closely-watched data on industrial output for July, which came in unchanged from the previous month on a seasonally-adjusted basis, below expectations This was the second consecutive month that output failed to rise. But the Ministry of Economy, Trade and Industry (METI) forecast that production would increase over the next two months Production in July at the nation's factories and mines was expected to rise 1.1 pct, according to the average forecast of 23 research houses polled by the Nihon Keizai Shimbun. All 23 expected output to increase, with the forecast increases ranging from 0.5 pct to 2.4 pct METI itself expected last month that output would rise 1.6 pct in July Year-on-year, output added 5.9 pct In June, output declined 1.3 pct month-on-month, but was up 8.9 pct from a year earlier. Nonetheless, few market analysts expect bond investors and traders to build aggressive long positions, or overbought positions, ahead of key event and economic indicators due out later this week. "Caution ahead of Thursday's auction (of 10-year government debt) and Friday's US jobs data for August could cap further gains in bond prices" over the short term, BNP Paribas Securities Co chief strategist Koji Shimamoto said. The Ministry of Finance will conduct an auction of 10-year debt worth some 1.9 trln yen on Thursday. Daiwa Securities SMBC Co's Shiraishi said that Japan's economic data released recently, including industrial productions, pointed to a slowdown in its economic growth, which helped set a bullish tone of bond market. "However, (JGBs investors) need more clues from China and US (which should signal economic slowdowns in their economies) to snap up bonds," according to Shiraishi, who added Friday's US jobs report should be one of major leads for bond investors to forecast the future course. fxstreet.com

To: zonder who wrote (11181)	8/31/2004 10:31:28 AM
From: mishedlo	Respond to of 116555

U.S. Aug. Chicago PMI falls to 57.3 percent Tuesday, August 31, 2004 2:20:38 PM CHICAGO (AFX) -- Business conditions improved at a slower pace in the Chicago region in August, according to the Chicago purchasing managers index released Tuesday. The Chicago PMI sank to 57.3 percent in August from 64.7 percent in July. Readings over 50 percent indicate expansion. Economists were expecting the index to fall to 60.8 percent. It was the 16th straight month of expansion in the region. The prices paid index surged to 86.6 percent, a 16-year high, from 77.6 percent in July. The employment index rose to 51.1 percent from 45.6 percent. The new orders index fell to 58.0 percent from 68.7 percent. ======================================================================= I am really getting tired of this busiiness conditions improving BS. Hopefully next month will fall below 50 and they will shut up. Mish

To: zonder who wrote (11181)	8/31/2004 10:33:06 AM
From: mishedlo	Read Replies (1) \| Respond to of 116555

U.S. Aug. consumer confidence falls sharply Tuesday, August 31, 2004 2:15:58 PM WASHINGTON (AFX) -- U.S. consumer confidence fell sharply in August, the Conference Board said Tuesday. The consumer confidence index declined to 98.2 in August from a revised 105.7 in July. This is the largest drop in the index since February. The level of confidence is the lowest since May. The decline in the index was below expectations. Economists expected the index to fall slightly to 103.6. The July confidence index was revised down from the initial estimate of 106.1. The present situation index fell to 100.7 from 106.4, while the expectations index dropped to 96.6 from 105.3. Lynn Franco, the director of the Conference Board's Consumer Research Center said the slowdown in job growth in the past two months has curbed confidence