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

To: zcream who wrote (44779)	1/19/2006 7:27:39 AM
From: valueminded	Respond to of 116555

I say right on and common sense. It is clear that inflation is a managed number. Anyone who has an objective mind and has analyzed what they have had to pay for items over the last several years knows that to be true. It is also clear that when you significantly understate inflation that the rest of the numbers look positive: ie gdp growth overstated, productivity overstated etc. 7% is about the right number for this past year and agrees with what I have seen. If I take food, energy, housing, medical, college tuition, as the majority of my monthly outflows it is clear that that is the case. ie Which of the above has decreased over the last year ?

To: zcream who wrote (44779)	1/19/2006 11:19:09 AM
From: mishedlo	Read Replies (2) \| Respond to of 116555

The CPI has indeed been manipulated. So is the GDP (a really gross distortion of reality there due to hedonics) So is unemployment numbers. In fact I am not sure there is a number one can trust. That said, I do not think it is as distorted as most people think and I do think quality improvements need to be factored into the CPI but NOT the GDP. To say the median price of a house has gone to the moon does not take into the size of the house or the number of rooms or the fact there is a slate floor and a marble bath. Furthermore someone sitting in a house forever (My dad only had one house), did not feel the effects. Only new buyers were impacted. Renters did not seem to be impacted much either these past few years. I continue to think food is a veritable bargain if one knows how to shop. The simple concept of only buying meat and goods when they are on sale can reduce one's food bill 30% or more. Finally the CPI is very underweight energy but then again is oil rising because of inflation or is oil rising from peak oil? It is a critical mistake to pass off oil which is subject to supply constarints (Katrina), geopolitics, a War in Iraq, and peak oil. There are reasons other than inflation that prices of goods rise and fall, and the government should essentially just get the F out of the picture. In that regard, there should be no management of the FF rate to the CPI. Instead rampant growth of money supply needs to be reined in. It will be (perhaps forceably) by a credit market that revolts. It may start in a junk bond revolt or a housing bust, or someplace we just do not see. I have talked about both of these ideas before. 1) Targeting money supply not the CPI 2) Grossly distorted government numbers Grossly Distorted Procedures globaleconomicanalysis.blogspot.com Is the Inflation Monster Tamed? mises.org I believe both articles are on extremely solid ground In regards to inflation, I am looking forward to a deflationary credit bust, not past distortions that have understated government numbers of all kinds. One must look ahead to what is coming..... A huge freaking credit bust and huge numbers of bankruptcies. Mish

To: zcream who wrote (44779)	1/19/2006 12:00:30 PM
From: mishedlo	Read Replies (1) \| Respond to of 116555

WASHINGTON, Jan 19 (Reuters) - New U.S. jobless claims fell to a six-year low last week, pointing to a strong labor market, and December housing starts slowed as a record-breaking rally in real estate cooled, government data on Thursday showed. The Labor Department said the number of U.S. workers making new claims for unemployment benefits fell unexpectedly last week to 271,000, down 36,000 from a revised 307,000 the prior week. That was the largest one-week drop since late September, and took initial claims to their lowest level since April 2000, when they were 257,000. Separately, the Commerce Department said U.S. housing starts fell 8.9 percent in December as single-family house construction tumbled. U.S. Treasury debt prices slipped on the jobs report, which covered the week in which the Labor Department gathers data for its monthly payrolls report, with the benchmark 10-year Treasury note <US10YT=RR> yield rising to about 4.363 percent. "Jobless claims are exceptionally strong," said Pierre Ellis, senior economist at Decision Economics in New York. "There was a big decline in new claims and a very large drop in the number of continuing claims. ... This is a volatile series so there is the potential that claims could rise next week. But the bottom line is the labor market is not weakening and is probably strengthening." Analysts said the housing data signaled a slowdown was clearly underway. Many economists have been looking for a slow, steady moderation in the market to bring price gains and investment back to levels seen as more sustainable. "As long as mortgage rates don't spike, we might expect a slow moderation in the market," said Joel Naroff, chief economist at Naroff Economic Advisors. "But if rates do pop, watch out." ROBUST LABOR MARKET Wall Street economists had forecast initial jobless claims to rise to 315,000 from the prior week's initially reported 309,000. A Labor Department analyst said there were no special factors behind last week's drop, but noted there is typically extra volatility in the data around the holidays. The four-week moving average of initial claims, which smooths weekly volatility for a more reliable indication of underlying employment trends, fell 12,000 to 299,000, the lowest since October 2000. The report also showed the number of people still on the jobless rolls after an initial week of aid dropped by 158,000 to 2.53 million in the week ended Jan. 7, the latest for which these data are available. Economists expected continued claims to rise to 2.68 million in the Jan. 7 week. Federal Reserve officials believe strong U.S. growth has lifted the economy close to full employment -- a theoretical concept indicating the lowest level of unemployment the United States can sustain without triggering wage inflation. The unemployment rate dropped to 4.9 percent in December despite lackluster job growth of just 108,000 last month. HOUSING STARTS December housing starts slowed to a 1.933 million unit annual rate from November's 2.121 million unit pace. That was below the 2.050 million unit pace anticipated on Wall Street. Still, economists had expected starts to decline from November's originally reported 2.123 million rate due to slower home buying and seasonal weather factors. "The weaker-than-expected housing number still leaves housing at a fairly high level of activity but will raise some eyebrows as markets worry about the (Federal Reserve) overshooting (with rate hikes)," said Lara Rhame, foreign exchange strategist at Credit Suisse in New York. For the year as a whole, starts rose 5.6 percent to 2.065 million units -- the second-highest level on record. The highest came in 1972, when starts hit 2.357 million units. Permits also logged their second-highest level since 1972. Historically low mortgage rates fueled a multiyear rally in housing, but the sector began to show signs of flagging when borrowing costs started to rise in September. While long-term rates dipped in December, economists and analysts expect rates on the benchmark 30-year fixed-rate loan to climb in 2006. In December, starts plummeted throughout most of the United States. A 21.7 percent drop in the West marked the biggest percentage decline for that region since February 1999, when starts dropped 24.7 percent. Total single-family starts dropped 12.3 percent in December to a 1.577 million unit pace while groundbreaking on multifamily units jumped 10.2 percent to a 356,000 unit pace. Permits for future groundbreaking, an indicator of builder confidence, also came in below forecasts, falling 4.4 percent to a 2.068 million unit pace. Economists had expected permits to fall to a 2.100 million unit pace from 2.163 million unit clip in November. today.reuters.com.