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To: TideGlider who wrote (693117)	7/21/2005 8:41:19 AM
From: Hope Praytochange	Respond to of 769670

Message 21525287

To: TideGlider who wrote (693117)	7/21/2005 8:42:53 AM
From: Hope Praytochange	Respond to of 769670

smra.com --Stone & McCarthy (Princeton)-- We are at the high end of the Claims range this week (week ended July 16) at 350K, median estimate is 325K. This represents an increase from a seemingly elevated reading of 336,000 in the July 9 week. I don't think that the hurricanes will have much impact, if any at all. But the auto retooling may be a key swing factor. Typically claims spike in the first full week of July due to auto shutdowns and retreat in the 2nd full week. But the timing varies considerably based on the specific dates. Historically, if the 2nd week ended on July 15, claims actual rise slightly from the prior week, same is true of July 16 (this week is a July 16), but if the week ends on July 17 or later, claims decline, and the later the week ended the bigger the decline. The seasonal looks for a small decline, so if the historical pattern prevails, we should get a rise in the seasonally adjusted level of claims. This is the basis of our estimate for a rise to 350K. How confident are we of this estimate? Not especially confident. But we have done our homework, and think an increase is probably more likely than a retreat.

To: TideGlider who wrote (693117)	7/21/2005 8:45:30 AM
From: Hope Praytochange	Read Replies (1) \| Respond to of 769670

Chart of the Day: Inflation Expectations Tipping Lower by Dana Saporta, CFA In mid April, when we last compared yields on Treasury Inflation-Indexed Securities (TIIS or TIPS) and those on conventional Treasury issues, spreads between the two were shrinking from a peak reached earlier in the month. In the intervening three months, the differences between nominal and inflation-adjusted yields of similar maturities have gotten smaller still. The yield differences we graph in today's "Chart of the Day" are measures of the inflation rate over the given horizon that would make the two investments equally profitable: higher inflation than this "breakeven rate", and TIPS outperform conventionals, and vice versa. For this reason, these differences are commonly considered reasonable measures of expected inflation. Specifically, we focus in this update on the behavior of the TIPS breakeven inflation rate for three-year, five-year and 20-year maturities: At the three-year maturity, the short-term breakeven inflation rate rose from a low of 2.146% on September 21, 2004, to a high 3.085% on April 1, 2005, or +0.939 percentage point. Since April Fool's Day, however, that rate has fallen by some 0.737 point to 2.348%. The long-term breakeven rate has been less volatile than its short-term counterpart since September, but that is common. Long-term inflation expecations generally do not vary has much as those for the near future. The 25-year breakeven rate ranged from a recent low of 2.644% on September 23, 2004, to a high of 2.987% on March 21, an increase of only 0.343 percentage point. Since then it has fallen by 0.534 point to 2.453%. There are two themes here. One is that inflation expectations have fallen off since the spring, do in part to confidence the Federal Reserve will have continued success in stifling those factors that would otherwise put upward pressure on the price level. Indeed, Fed Chairman Greenspan's semiannual testimony on monetary policy before the House Financial Services Committee yesterday provided a strong indication that the central bank intends to keep removing policy accommodation at a "measured" pace. The second theme regards the relative behavior of the long-term and short-term breakeven inflation rates. Note that the long-term breakeven inflation rate, which had been running below that of the elevated three-year rate from late February through late May, is now back above the short-term rate. In fact, the spread between the two hit a five-month peak of 0.145 point on July 18. But inflation expectations across all time horizons have come down significantly since the spring. So, the increase in the long-term breakeven rate relative to the short-term rate indicates that if investors have built the energy-related price run-up we saw earlier this year into their long-term inflation expectations, they have not done so very aggressively smra.com