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

To: CalculatedRisk who wrote (52174)	6/7/2006 3:38:24 PM
From: mishedlo	Respond to of 116555

[This is interesting CR . Home equity loans tapped out so back to the card one final time? Perhaps this is a last "GFY" to the lenders right before bankruptcies soar - Mish] Credit spending, auto loans up in April By MARTIN CRUTSINGER, AP Economics Writer news.yahoo.com WASHINGTON - Americans increased their borrowing in April at the fastest pace in 10 months as credit card spending and auto loans both picked up. The Federal Reserve reported Wednesday that consumer borrowing rose at an annual rate of 5.9 percent in April, a significant increase from a tiny 0.8 percent gain in March. It was unclear, however, how long the rebound in borrowing would last given a decline in consumer confidence during May that was attributed to worries about soaring prices for gasoline and other energy products. The 5.9 percent rate of increase for overall borrowing was the biggest gain since borrowing rose at a 6.8 percent rate in June of last year. The increase in dollar terms was $10.6 billion, which pushed total consumer credit to a record $2.17 trillion. The Fed's measurement of consumer credit does not include mortgages and other loans secured by real estate. The small 0.8 percent rise in March was revised down from an original estimate a month ago that borrowing had risen at a 1.4 percent rate during the month. For April, consumer borrowing on credit cards and other types of revolving loans rose at an annual rate of 4.5 percent after having fallen by 2.3 percent in March. Consumer borrowing for auto loans and other types of non-revolving credit rose at a rate of 6.7 percent in April after having fallen by 2.6 percent in March. Economists are predicting that consumer spending, which accounts for two-thirds of total economic activity, will slow in coming months as gasoline costing around $3 per gallon leaves consumers less to spend in other areas.

To: CalculatedRisk who wrote (52174)	6/7/2006 3:41:43 PM
From: mishedlo	Read Replies (1) \| Respond to of 116555

Immigration Raid Roils Kentucky Community npr.org Listen to this story... by Jennifer Ludden Morning Edition, June 7, 2006 · The Department of Homeland Security is stepping up immigration enforcement in the workplace. Officials say the past practice of assessing small, civil fines simply has not worked. So instead, they're bringing criminal charges against businesses that knowingly employ workers who are in the country illegally. Last month, federal agents raided one of the largest home-construction companies in Northern Kentucky. The raid and resulting arrests sent shockwaves through the community

To: CalculatedRisk who wrote (52174)	6/7/2006 3:54:06 PM
From: mishedlo	Read Replies (1) \| Respond to of 116555

Between a Rock and a Hard Place -- Steve Plant 6/7/2006 fxa.com 5:00 AM New York time. I try not to be a chimer-in. If everybody is talking on a topic, I just figure the last thing my readers need is yet another opinion. I’m going to make an exception this time and stick my two cents in on this whole Fed/Ben Bernanke thing. Ben Bernanke does not have an easy job. And he’s new at it. But he is making his own situation more difficult with each utterance. His latest is to make sure the markets have confidence in him as an inflation fighter. That’s great Ben. Try to squeeze out that last tenth in core PCE even if it means throwing the economy into a tailspin (right or wrong… the growing perception). Before that he had the markets thinking the Fed would pause in June. Like a trader out of synch with the markets, he just needs to clear the sheet, step back for a little while, and say nothing. It would do him well to simply be an observer for a little while. He would notice that the stock market continues to act abysmally. Hmmm… More than a few savvy trader/investors have pointed to the 1987 analog. Jobs, homes, and investment markets, in that order, help generate our nation’s sense of aggregate financial well being. Lets see… two out of three are headed lower, the third is becoming questionable. Then there is the behavior of the yield curve. What is that saying Mr. Bernanke? The long end closed at its highest since mid-May yesterday. More in detail on that later. The Fed now looks guaranteed to hike again in June… as of today. That view is subject to change. Such is the nature of data dependent decision-making. I say it will not matter either way to all but traders of the extreme short end. In the final analysis, Mr. Bernanke is doing more psychological damage to the equity capital markets, and ultimately, helping to drive long rates down farther than if he had never hinted at all. Mr. Bernanke is missing the forest for the trees. He seems overly concerned with managing market expectations and building his own credibility. But in forcing both issues, he is actually losing them. The Fed has already hiked 16 times. Those pressures continue to work through the pipeline. What’s the hurry? Let them work. We may be at, or near the peak of yet another business cycle. The Fed already has the rate-hike trade on. They have the luxury of sitting on the sidelines for a bit to see how the trade develops. And there is evidence that it is working. They should be able to relax. They should be painting a picture of a Chairman with his feet up on the desk, confident in his position. They can put more on down the road if needed, or wait and take some off in six months. Either way, the majority of the work toward taking the edge off the economy and whatever inflation they can actually control, has already been done. Instead… the Fed, through Mr. Bernanke, is acting like a frantic trader with a bad position. They seem to be agonizing over (and torturing the markets along with it) the Fed’s next move, which, most would argue will have marginal impact anyway. Chill fellas! As far as bonds go. Today’s action speaks volumes to the underinvestment and bad positioning in that market. While currencies reversed the balance of their gains from Payrolls (and continue to do so this morning), bond prices have continued to crawl higher. The short dollar trade is already well participated. Nobody or their uncle owns bonds. If I had to guess, more than half of the previously-dollar-bullish commercial and investment banks have swung their opinions since April. But not a single one of them, from what I continue to hear in the financial media, have yet to come out and get bullish bonds. They are caught between the mathematical reality and an environment which increasing fits the criteria for a bull market in bonds. Within the news-stimulus-price-reaction outcome for any market, are clues to how participants are positioned. The bond market is speaking loud and clear. I took a chance and bought back some gold yesterday down about $17. I’m sure (as usual) I’ll be early. It is down another $7 as I write this. I have none of my usual indicators to point to an exhaustion bottom. But as I have repeatedly said, gold has been one of those markets where if you don’t buy it when the sh** is hitting the fan, you can easily miss 10 –20 dollars of opportunity right from the start. I’m hoping today’s action will simply be a retest of the lows from Friday, and it will all be over with a minor poke through followed by a rally back. $610 looks like a real good spot from a technical standpoint. That’s roughly where gold’s quasi-parabolic acceleration started from. We’ll see. I haven’t said much about the dollar lately. I don’t think there’s much to say. This entire Payroll/Bernanke whipsaw is nothing more than that. All of that action easily fits within the confines of what I see as a continuing sideways consolidation. Indeed… it is a consolidation that has taken back very little of the dollar weakness we experienced between mid-April and mid-May. That again speaks to the level of commitment that larger, longer-term participants have to this trade. And it again points up the silliness of this Fed debate, when there are so much larger issues at stake. Steve Plant FXA

To: CalculatedRisk who wrote (52174)	6/7/2006 4:02:15 PM
From: mishedlo	Respond to of 116555

more inflation talk from the Fed - This time Guynn DJ Fed Guynn: Fed Will Not Get Behind The Curve On Inflation -2- In his remarks to reporters, Guynn said "I don't think we are behind the curve" when it comes to targeting inflation with monetary policy. But he noted that now was a more uncertain time for making rate decisions, which are now being done with a "meeting to meeting judgment." Guynn added: "I am comfortable with the path we've been on" with monetary policy. He also reprised a sentiment from his speech and said "we are at a point in the cycle where we have gotten policy close to where it needs to be." The Federal Open Market Committee next meets at the end of the month in a gathering where markets are uncertain what rate action central bankers will take. Many economists are confident the Fed will maintain its overnight rate target at 5%, but many in markets, fueled by Fed officials' recent round of hawkish inflation remarks, reckon the policy makers will bump the target rate up to 5.25%. Guynn told reporters that a tight labor market - the current unemployment rate is a historically low 4.6% - is not sending signals suggesting the hiring environment is driving up unit labor costs, a key contributor to inflation. Guynn also said, in response to a question about the equity market's recent woes, that the day-to-day action there will not be an important part of his thinking at the upcoming FOMC gathering on June 28/29. In response to audience questions, Guynn said that much of the main driving force in U.S. inflation is not related to the goods producing sector. He said "much of the recent pressure is coming from services" and "it is in fact rent, it's airline fares, it's medical expenses" that are creating the upswing. He said that trends in the housing market suggest rental rates should rise over time. Guynn also said in response to an audience question that China has shown "some willingness" to adjust the flexibility of the yuan, and "I would like to think that would continue."