MISH'S
Global Economic
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Friday, April 29, 2005 12:31 AM


1st Q GDP shows an alarming rise in inventories


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Inventories 2000-2005 (click for sharper view)


Annotated raw data 1995-2005 (click for sharper view)


Is this just a "soft spot" or is this telling a different story?
Some might note that inventories are not as out of hand today as they were in spots between 1998 and 2000. Then again, we did not have a Y2K scare to look forward to, panic buying of fiber, PC replacement cycles every 4 months and "just in time" delivery of goods was not as prevalent as it is now.

GDP 2000-2005 (click for sharper view)


No matter how you slice it, today's GDP numbers were horrid. Economists had been expecting the GDP to increase 3.6% in the first quarter. Instead GDP came in at a shocking 3.1% even though domestic purchases increased 4.4%.

First-quarter inventories grew by a staggering $80.2 billion, adding 1.2 percentage points to GDP and marking the largest inventory contribution to growth in three years. In other words, over 1/3 of the GDP was inventory buildup three plus years into a "recovery" and with the FED merrily hiking away.

If there is pent-up demand for anything someone please tell me for what. Has Greenspan finally managed to convince everyone to increase their orders and that this recovery "is real" just as the curtains are about to fall on it?

In other news it was reported that real disposable incomes fell 0.3% in the first quarter and in a separate report the Labor Department said initial jobless claims increased by 21,000 to 320,000 last week. Neither of those looks like they will sustain consumption at this insane pace.

This "recovery" is all but over. A recession is coming up. It will be brutal. Greenspan's proclaimed victory over deflation will soon be put to the test.

Mish

Thursday, April 28, 2005 1:16 PM


Walking The Planks


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Walking The Planks - Click on image for Enhanced View

Notice the progressive failures....
Failure at the 50MA
Failure at the 200MA
Failure at the 400MA
Each drop is about 50 points more or less

The idea behind this chart came from Greg Collins at Minyanville.
There is a lot of great analysis and discussion at Minyanville and some of you may wish to check it out.

Now, when will this chart produce a "Swan Dive"?
It sure looks like it wants to.

Mike Shedlock/Mish
http://globaleconomicanalysis.blogspot.com/

Wednesday, April 27, 2005 12:11 AM


Impressive New Home Sales?


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U.S. FEB. NEW HOME SALES REVISED TO 1.27M V. 1.23M
10:00am 04/26/05 U.S. MARCH NEW HOME INVENTORY 3.6-MONTH SUPPLY
10:00am 04/26/05 U.S. MARCH NEW HOME INVENTORY DOWN 0.9% TO 433,000
10:00am 04/26/05 U.S. MARCH NEW HOME SALES BEAT 1.19M EXPECTED
10:00am 04/26/05 U.S. MARCH NEW HOME SALES UP 12% TO RECORD 1.43 MILLION

Record New Home Sales....
Were you impressed?

I was not (more on this in an upcoming blog) but for now let's take a look at the market's reaction.


Click on image for enhanced view.


Click on image for enhanced view.

If the Market was not impressed, should anyone else be?
Looks to me as if it was all priced in if not more.


Mike Shedlock / Mish
http://globaleconomicanalysis.blogspot.com/

Monday, April 25, 2005 12:57 AM


Deflation is in the Cards


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Yes Readers, that is correct. The answer to the "Great Flation Question" is DEFLATION. I am not going to wimp out and say "stagflation", and rest assured it is not "inflation" which means that the "hyper-inflation" that many see coming is totally laughable.

Before we build the deflation case, I think it's time for a new feature. We will call this feature the "Laugh of the Week". I will be loose with this. There might be three a week or none a week depending on how I feel. The first must see laugh of the week is The Reverse Revolution! by Mark Fiore.

The Case for Deflation: Background History

To understand the case for deflation we must turn back the hands of time.
The year is 1914. WWI was breaking out in Europe and the US stayed out of it for three years. As a result of being a "safe haven" gold poured into the United States and US gold reserves rose 64% as Europe exchanged its gold for American goods. By the time the US entered the war much of Europe was ravaged. The US escaped unharmed. After the war ended the US trade surplus remained high and allies began repaying their war debts.

The US experienced rapid credit expansion as a result of the surge in gold reserves. Between 1914 and 1920 the US doubled its expansion of credit. During those war years, investment in machinery and equipment rose by 205% and the value of durable goods output increased in excess of 250% This surge in capacity led to general oversupply of goods by 1926. During the second half of the "roaring 20's" credit expanded at moderate rate but the damage had already been done. The economy was no longer able to profitably invest in equipment so increasing amounts of money poured into the stock markets. The bubble finally burst in 1929 when profit growth (earnings) could not keep pace with rising stock market valuations. Share prices plunged, credit contracted, and bankruptcies proliferated.

Fast forward to 1980. Following the collapse of the Bretton Woods agreement in 1971 with Nixon closing the "gold convertibility window" coupled with huge output expansion in Japan, Japanese currency reserves increased 260% between 1985 an 1988. Those dollars triggered a lending boom in Japan as well as incredible property bubbles and stock market bubbles. In 1989 the Nikkei index peaked above 38,000. Just as in the US in the late 1920's, earnings could not keep pace with market valuations and share prices started plunging. Japan repeatedly tried to stabilize the markets with injections of liquidity but Japanese property values plunged for 18 consecutive years and are still falling at the time of this writing. Japan peaked in 1989 and may just now finally be coming out of it.

Meanwhile back in the states, this was the 1990's outlook:
In 1990 there was no property bubble, no global wage arbitrage, no China factor, no fiber revolution, no PC revolution, and most importantly no internet. However, there was plenty of credit to fuel the boom of a lifetime in all of those in the aftermath of the collapse of Bretton Woods.

Greenspan declared irrational exuberance in 1996 then took it back and proclaimed a "productivity miracle" in 1999 and pundits proclaimed the "end of the business cycle" and other such silliness. That was the beginning of the end.

Outlook 2000.
Here are some highlights of the May 2000 FOMC minutes:
The members saw substantial risks of rising pressures on labor and other resources and of higher inflation, and they agreed that the tightening action would help bring the growth of aggregate demand into better alignment with the sustainable expansion of aggregate supply. They also noted that even with this additional firming the risks were still weighted mainly in the direction of rising inflation pressures and that more tightening might be needed.

Looking ahead, further rapid growth was expected in spending for business equipment and software. ... Even after today's tightening action the members believed the risks would remain tilted toward rising inflation.

Here is the full text for anyone wanting to look at the details.
How could they have possibly been more wrong? Over the next 18 months CPI dropped from 3.1% to 1.1%, the US went into a recession and capex spending fell off the proverbial cliff.

Outlook 2002
Talk about going from one extreme to another. In 2002 FED Governor ($Ben) Bernanke openly discusses defeating deflation via the Helicopter Drop. "... the U.S. Government has a technology, called a printing press ... A money-financed tax cut is essentially equivalent to Milton Friedman’s famous 'helicopter drop' of money." Actually the Greenspan and the FED were total wimps. They would not even use the "D-word". Instead of saying deflation they called it "an unwelcome drop in inflation" aka "Liquidity Trap".

Here is an article on how the US can escape "The Liquidity Trap".

For the record, you may wish to check out
Deflation: Making Sure "It" Doesn't Happen Here, the complete text of "Helicopter Drop" Bernanke's infamous speech in 2002.

Fast Forward 2004-2005
The FED that was worried about inflation and spiraling wages right in front of the biggest stock market crash and declining real wages since the great depression, a scant two years later started worrying about deflation although there were huge tax cuts (approved by Greenspan himself), a war stimulus, business tax credits, and GSEs that were expanding credit like mad. At that time, with that record stimulus deflation was not YET an issue. Fueling the seeds of deflation, the FED cut interest rates to 1% and in 2004 Greenspan declared "victory over deflation". Apparently he now believes the business cycle has been defeated.

Present Situation
"Wrong-Way Greenspan" (how I believe history will refer to the worst FED manager in history is once again worried about inflation. We are now in period of what might be called "pseudo-inflation" since it is an unsustainable mirage. Inflation is there alright. How can one deny the expansion of credit, absurd home prices, a re-inflated stock market bubble, and irrational exuberance in properties exhibited by "flipping houses"? Greenspan and the FED fueled this boom by attempting to defeat the deflationary business cycle. All this did was fuel an enormous expanse of credit that went into property values just as happened in the late 1980's in Japan.

The hopes of this FED was that 1% interest rates would fuel a jobs boom. It did, but NOT where the FED wanted it. There was a jobs boom but it was in China not the US. We discussed this sad state of affairs in Searching for Jobs and in Outsourcing the Soul of the US. Unfortunately for the FED, they can only provide liquidity. They can NOT determine where it goes. In this case it accelerated the transfer of jobs to China and went into an unsustainable consumption binge fueled by ever-rising property values in the US (and worldwide too). Now the FED is worried about the property boom, but it is too late. They have blown their last bubble and there is NO hope of slowly deflating it. We discussed some of this in Signs of Economic Stress and in It's a Totally New Paradigm.

The Mish top ten reasons why deflation is inevitable:
1) Enormous consumer debt
2) Falling wages
3) Global wage arbitrage
4) Credit expansion that can not be maintained
5) Mal-investments
6) Over capacity
7) A world-wide housing bubble
8) A re-inflated stock market bubble
9) The normal business cycle
10) Past history

Consumers are going deeper and deeper in debt and real wages are falling due to the outsourcing of jobs and global wage arbitrage. Meanwhile spending has been maintained because of a seemingly (for now) endless supply of credit based on rising home prices. 1% interest rates and easy credit re-inflated the stock market and created a housing bubble. Prices of imported goods are falling (electronics, TVs, PCs, etc) because of 18-1 to 30-1 wage differentials in China and India vs. the US.

Stock market prices rose because earnings increased in this environment. People are now getting rich "flipping houses" just as they flipped stocks in 2000. Everywhere you look (outside of imported goods from China), prices are going up. Oil is rising, home prices have skyrocketed, insurance is going up as are medical expenses. Money supply is expanding and inflationists are alarmed and hyper-inflationists are gloating "I told you so".

OK Mish how the heck do you get DEFLATION out of that mess?

Simple: Just as the FED could not have possibly been more wrong in 2000, hyper-inflationists could not possibly be more wrong today! What can not be maintained will not be maintained by definition. We noted some problems in Signs of Economic Stress. Here are additional signals to consider.

Refis no longer support continued consumption


Cosumers keep spending money they do not have


Bankruptcies Rise with rising interest rates


This is the scenario I envision:
Wages continue to fall due to outsourcing, mergers, and global wage arbitrage
Home prices level off then fall sharply
Home equity loans stagnate as result of stagnating home prices
Home building stalls because affordability finally starts to matter
Trade jobs fall with falling home starts
Expansion of Walmarts, Home Depots, ect. stops with the slowdown of new home subdivisions
Retail expansion peaks and stalls
Consumer sales slow with the slowing economy
Bankruptcies increase
Consumer lending based on rising home prices falls flat
Credit growth declines
The US goes into a recession
Layoffs in the financial sector increase
Layoffs in the real estate sector increase
Credit is destroyed in more bankruptcies
Deflation is finally recognized in hindsight
Hyper-inflationists throw in the towel

OK Mish what are the inflationist counter-arguments to this?
That is a good question. Let's discuss them.

1) Since we left the gold standard money supply has never gone down.
Mish answer: That is like saying because GM has not gone bankrupt yet it will never go bankrupt. Obviously this argument is feeble at best.

2) The FED will increase the money supply to "defeat deflation".
Mish answer: This is what Greenspan and Bernanke foolishly believe. In fact Both think that the failure of Japan to defeat deflation was caused by Japan's reluctance to "inflate" soon enough in response. Having learned from "Japan's Mistake", the FED slashed interest rates to 1% fueled a housing bubble, re-inflated the stock market bubble and this is key "Greenspan declared Victory Over Deflation".

NO! This is where my long historical introduction finally comes in handy. There was no "Victory Over Deflation". All the FED did was increase the mal-investments and debt that needs to be DEFLATED away. Flashback 1929......... One can NOT defeat deflation by the very thing that caused it! What caused the Great Depression was an un-abated supply of credit that finally imploded. More credit would not have solved a thing! Where would money supply have gone in 1929? What credit worthy customer would have wanted to borrow? Who would have wanted to lend? For what purpose in a world of over capacity?

Fast forward one more time to 2005.
Most inflationists expect home prices to fall. The thinking ones also realize that falling home prices will slow home demand and cause layoffs in plumbing, carpeting, appliances, grass seed, windows, roofing, lumber, and in trucking all of the above.

Unemployment will rise and so will bankruptcies. Bankruptcies are the essence of deflation.

Once housing prices collapse who will want to lend?
We are already at 100% or even 125% funding of mortgages. What lender will go to 150% to a person without a job? None will IMO. Business lending? Forget about it! We have a capacity glut. What credit worthy customers will want to borrow? Do we need more cars, houses, TVs, computers, anything? This is THE NUT that inflationists and hyper-inflationist can not defeat. Credit and money supply will fall flat if not out and out plunge. Debts will be wiped clean and monetary creation will go negative. The government is trying to avoid this situation with an absurd bankruptcy bill but I believe it will backfire. For a discussion of this absurd bill please see The Deflation Guarantee Act of 2005.

Falling home prices, and the resultant slowdown in trade jobs coupled with rising unemployment are the Achilles’ heel of inflationists. They can not explain how this scenario leads to further inflation. Nor can inflationists tell me how home prices can keep rising as long as we have global wage arbitrage, falling wages, and loss of jobs. Home prices can NOT rise above wage growth over the long haul!

There it is in a nutshell. From where we are, continued inflation, or wimpy forecasts of stagflation are simply not possible. Show me rising wages and I will accept that inflation might be a possibility. I see no reason to believe rising wages are about to happen and although Housing may (for some time) continue to support consumption, WHEN not IF housing turns the result can NOT be anything other than DEFLATIONARY.

I will gladly debate anyone on this issue. I have a great deal of respect for Jim Puplava and we both agree about gold over the long haul. However, the next move is not towards hyper-inflation it is towards DEFLATION.

That said, I believe gold will rise as the FED attempts to fight deflation just as they attempted to fight it by slashing rates to 1%. This FED has learned NOTHING from history. The root cause of the great depression was an over-expansion of credit. One can NOT defeat the business cycle by throwing more money at it. All hyperbolic credit expansions end the same way. It will NOT be different this time.

Deflation is in the cards.
The FED's attempt to fight it will ultimately be good for gold.
Book it.

Mike Shedlock / Mish
http://globaleconomicanalysis.blogspot.com/

Sunday, April 24, 2005 12:04 AM


Steel Prices to Plunge


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On Friday, ThyssenKrupp, Europe's 4th largest steel maker said that it would cut steel production by 10% to "maintain prices" at current levels, as imports and inventories of the metal increased since the beginning of the year.

Mish says "Fat Chance".
Let's take a look:

India:
India fires up steel production. India's iron and steel industry seems poised to double its production in five years in response to an anticipated sharp rise in domestic demand. "Essar Steel is India's largest exporter for flat products and has been so for the last five year," says Essar boss Prashant Ruia. "We continue to maintain 30% to 40% export of all our products. Basically we are going from 3 million tonnes to 3.5 million tonnes over the next two years. Because of the vast reserves of iron ore and coal, many believe India has the potential to become one of the leading steel producers in the world", he says.

China:
China is now a major player in steel production. China has now become a major player in the global steel industry by contributing nearly 70 per cent of the world's increased output of 205.9 million tonnes in the last four years. It has contributed 140 million tonnes to the world's steel output increase since 2001.

"China's economy has entered a new growth period mainly powered by its heavy industry. During the past four years, the country's steel output growth has accounted for 70 per cent of the world's increased output of 205.9 million tonnes," said Wu Xichun, Chairman, China Iron and Steel Association (CISA).

Due to lack of specialization China rely heavily on imports for almost all steel products with high quality. This is because special and quality steel output accounts only for eight to 10 per cent of the country's total output.

Here is a nice boast:
"India can make steel much cheaper than China".

The pieces are all in place.
The world economy is slowing. China and India will soon be in a position of EXPORTING (not importing) high end steel products, and the global wage arbitrage is clear on this subject. China and India can produce steel far cheaper than can Germany or the US.

Yes China and India both will need mammoth supplies of steel to build their own infrastructure but both can maintain vital exports by maintaining sufficiently high export production levels to provide capital for domestic improvements.

Cutting production to "maintain prices" seldom works, especially when output is increasing elsewhere. This is just another part of the deflationary forces at play in the world economy of 2005 and beyond.

Mish

Thursday, April 21, 2005 10:33 PM


Energy Bill Lowlights


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Today the US House of Representatives passed a comprehensive energy bill.
I would like to report the highlights but there weren't any.
Following are the lowlights:

1) The bill will allow drilling in Alaska's Arctic National Wildlife Refuge (ANWR). Oil-extraction activities will disturb the refuge's most critical and sensitive areas, including calving grounds for the Porcupine caribou herd and denning areas for one of the United States' two polar bear populations. If oil development is allowed, it will most likely displace the caribou cows from the calving area, said Tara Wertz, a biologist who specializes in caribou for the Artic National Wildlife Refuge.

2) The legislation contains roughly $8.1 billion in tax incentives for industry, $1.3 billion more than the White House has budgeted for the bill. House Minority Leader Nancy Pelosi, D-Calif., said $7.5 billion, or 93%, of the incentives in the bill would go to traditional energy sources. If there ever was an industry that did not need handouts it is the traditional oil companies. This Congress continues its pattern of reckless spending by approving even more graft and in more inappropriate places than the President asked for.

3) The bill shields manufacturers of the fuel additive methyl tertiary butyl ether, MTBE, from products effects and groundwater contamination. Companies are free to pollute the environment and US taxpayers will pick up the tab.

4) The bill mandates the production of 5 billion gallons of ethanol by 2010. It does not matter if ethanol is cost effective or not, the bill simply mandates its use. No doubt corn and sugar beet growers are pleased with this provision.

5) An amendment that would have required the administration to reduce oil demand in the U.S. by 1 million barrels a day was defeated on a vote of 166-262.

6) The House rejected an amendment that would have raised fuel economy standards from today's average of 25 miles per gallon to 33 miles per gallon by 2015 on a vote of 177-254. 2015! This administration is worried about social security 50 years down the road but is staring at an energy cricis right here and now and refuses to address it. The apparent solution is to deplete all of our reserves first and worry about it later.

7) An amendment that would have raised fines for companies found to have manipulated electricity and natural gas markets to between $1 million and $5 million from $5,000 was defeated on a vote of 188-243. Enron was guilty of manipulation energy prices in California and that cost the state billions of dollars. This Congress could not even see fit to raise fines to a paltry $1 million but could pass out $7.5 billion in handouts to companies that do not need any handouts at all.

8) The bill does nothing to improve the fuel economy of automobiles, which use 70 percent of the country's oil.

House Democratic leader Nancy Pelosi of California accused Bush of trying to exploit people's anxiety over high gas prices to gain support for a bill that she said "was written by energy lobbyists for the benefit of the energy industry."

According to the US Government Department of Energy US petroleum demand is projected to average 20.9 million barrels per day in 2005, up 1.7 percent from 2004. Jet fuel demand is up by 4.5 percent from 2004; motor gasoline use, accounting for almost half of total petroleum demand, is expected to increase by 1.6 percent this year. In 2006, U.S. petroleum demand is projected to increase by an additional 1.5 percent, as use of motor gasoline and other transportation fuels continues to increase.

Here is the bottom line: This bill does nothing to reduce demand, nothing to encourage conservation, gives handouts where they are not needed, is an affront to environmental common sense, and is totally a disgusting non-energy policy.

Let's compare China's energy policy with ours. China is forging ties with Russia, South America, Iran, Nigeria, Sudan, Australia, and Canada. China is attempting to negotiate pipeline building with multiple countries, mandating higher gasoline mileages on cars, investing heavily in coal gasification, building liquid natural gas terminals, and attempting to secure supplies from oil tar sands in Alberta Canada.

Meanwhile this administration is waging war in Iraq, threatening Iran, threatening Venezuela, doing nothing to encourage conservation, doing next to nothing to encourage development of our oil shale deposits, doing next to nothing about building liquid natural gas terminals, relaxing environmental standards, and giving the biggest handouts to the least deserving companies. What a disaster.

Mike Shedlock / Mish
http://globaleconomicanalysis.blogspot.com/

Wednesday, April 20, 2005 9:55 PM


Signs of Economic Stress


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There are unmistakable signs of economic stress everywhere.

We already talked about threats of trade wars in The Nonsense on "Free Trade" Continues. We also talked about the implications of the bankruptcy reform act in The Deflation Guarantee Act of 2005.

Let's take a look at some new ones...

Just today the State of Utah told the Bush administration to take a hike On unfunded federal mandates. In a stinging rebuke of President Bush's signature education law, the Republican-dominated Utah Legislature on Tuesday passed a bill that orders state officials to ignore provisions of the federal law that conflict with Utah's education goals or that require state financing. The bill is the most explicit legislative challenge to the federal law by a state, and its passage marked the collapse of a 15-month lobbying effort against it by the Bush administration.

Federal officials fear Utah's action could embolden other states to resist what many states consider intrusive or unfunded provisions of the federal law, known as No Child Left Behind. The attorney general of Connecticut has announced that he will sue the Department of Education over the law's finances, Texas is in open defiance of a federal ruling on testing disabled children and many state legislatures have protested various provisions of the federal law, which has required a sweeping expansion of standardized testing.

Utah is interesting because it has a republican state congress as well as a republican governor who said he will sign the bill. The problem is that US congress is passing national bills, without funding them, forcing states to pay for services they do not want with money they do not have. If times were better one would not see republican states being openly defiant of President Bush. This is clearly a sign that this "recovery" is clearly under duress.

More signs of stress....
Today the Labor Department said average real weekly earnings fell 0.3% in March and 0.5% in the past 12 months. Increases in average hourly pay for 80% of U.S. workers have not matched the increase in prices. In March, energy prices jumped 4%, the highest increase since October. Gasoline prices rose 7.9%. Bear in mind those are AVERAGE wages, and that includes fat raises paid to CEOs to outsource work to India and China in the name of corporate profits. Let's see.... wages keep going down, prices keep going up, and consumers going further into debt. Does anyone think that is not causing stress?

Still more signs of stress...
Today GM announced that it is considering screwing its employees as much as possible before it ultimately goes bankrupt by withdrawing $6 billion from the retiree health care fund. Once it takes money out of the fund, it is not required to replace it. And the money could be used for general business expenses, GM Chief Financial Officer John Devine said. "It is a source of liquidity if we need it," he said. "We can extract it pretty aggressively, if we have to." That's nice. Attempt to hold stock prices up by screwing your employees. The sad thing is it will not work. Meanwhile GM insists it will keep paying billions in dividends with money it does not have.

Too bad GM did not choose to fund their retirement plan with leap PUTs rather than GM stock which has now fallen in half since they did that. What were GM's pension plan estimates again? 9% or so. Anyone think they will make those targets?

Here's still another one....
Shares of bond insurer Ambac Financial Group Inc. (NYSE:ABK) fell more than 14 percent after the company said it will no longer provide earnings estimates because markets are too unpredictable. That is just too much. I was rolling on the floor laughing.

Still more signs of stress...
Credit spreads are widening, bond offerings have been delayed or canceled, and financial and tech stocks are taking a beating. These are signs that this "grand reflation scheme" is falling apart at the seams.

Following is a chart of the XLF Financial Services Sector.Notice the breakdown on extremely high volume. This is a strong economic warning signal.


Following is a chart of the QQQQ Nasdaq 100 Index. Once again notice the high volume selloff. Is the flight from tech a sign of liquidity stress? I think so. Perhaps it is just a sign that earnings have peaked for this recovery. Most likely both of the above.


Let's recap some of the signs of stress we are seeing.
1) Trade War Threats
2) States ignoring federal laws over monetary concerns
3) Real wages falling
4) Job growth stalling
5) GM funding problems
6) Earnings estimates postponed because "the markets are too unpredictable"
7) Credit spreads are widening
8) Bond offerings have been shelved
9) High volume breakdown in the financial sector stocks
10) High volume breakdown in liquidity driven momo stocks

I did not see it but I am told that the CEO from Annaly Mortgage Mangement Inc (NLY) was on CNBC today. This is what he said: "We are witnessing a slow motion car wreck in credit....GM was just the first to go through the windshield."

Is there any reason to be long this market other than perhaps energy or gold? I think not. Get out now if you haven't already.

http://globaleconomicanalysis.blogspot.com/
Mish

1:14 AM


Transaction Value of New and Existing Home Sales


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The minute I laid eyes on that chart it looked very familiar.
Hmmmm. Let's see. Could this be it?


Check out the index numbers in addition to the chart graphics. Even the index numbers seem uncannily alike to me. A housing drop of even half the amount the SPX dropped percentage wise would cause a world of hurt to leveraged homebuyers grazing away.

Tales of the Absurd

I happened to speak with David Donhoff at No Bull Mortgage today and we started discussing the book "Flipping Properties: Generate Instant Cash Profits in Real Estate". He had some interesting tales. Here is one of them:

I'm getting 3-10 contacts a day from people seeking "hard money" loans for their flipping deals. They ask for "hard money" because they have ravaged credit, and zero cash. I have a difficult time explaining to these would be flippers that nobody in their right mind would pay the appraisal price they are shoving at me. Seriously, the only use for some of the absurd appraisals I am seeing is for use as emergency toilet paper if someone runs out of it. The fact is that some of the properties people want to buy with zero% down at full "appraised value" have been sitting for sale without success for 6 months. This does not ring a bell in the heads of these would be flippers.

Meanwhile, the Florida condo craze hit a new absurd height as Jorge Perez, a condo developer now has over 40 projects going on at once. "We are in territory we have never seen before with Jorge," said Ezra Katz, chairman and chief executive of Coconut Grove-based real estate investment firm Aztec Group. "There is no precedent anywhere in the 34 years I have been in real estate. I have never seen anything of this magnitude or production."

"He is very careful with his money," said Matthew B. Gorson, a Greenberg Traurig lawyer who is Perez's attorney. "He watches things, that is why he has done so well. Jorge is extremely disciplined."

Perez said he has socked away loads of cash and carefully selected properties that are either near the water or in a city center. Such sites, he contends, will not dramatically lose value in a downturn. And if need be, he said, he can rent rather than sell units until prices rise to new heights.

He has 40 "carefully selected" condo projects going on at the height of this boom that will "not lose value" in a downturn? In addition we are supposed to believe he is "very careful" with his money? Yeah right.

Then again Jorge quips "If you find me under a bridge, you'll know I made the wrong call."

Mish
Note: I did two posts this evening scroll down for A Conundrum About Conundrums.
http://globaleconomicanalysis.blogspot.com/

Tuesday, April 19, 2005 9:51 PM


A Conundrum About Conundrums


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Mish is in a Conundrum About Conundrums.
This article is partially to blame: Fed's Yellen upbeat on inflation.

Janet Yellen proclaimed today that she was upbeat on inflation. "My view is inflation remains basically well contained, and I think things look good going forward".

"Long-term inflation expectations remain very well contained," wage and salary growth and compensation overall is well contained, and productivity growth "remains extremely solid" she said.

Mish replies: Indeed not only is wage and salary growth "contained" but so is job growth as we discussed in Searching For Jobs and also in Where the hell are the jobs?. In fact, I am not sure that "contained" adequately describes the situation. Real wages have declined over the last four years and private sector employment is actually negative under the Bush administration. At any rate, let's just accept as fact that wage growth is "contained" since I can not think of a better word either.

Yellen is wondering if this just another "Soft-Patch?" The Mish question of the day is this: How many "softs" does one get before it is just plain "soft" as opposed to "patchy"?

Housing starts were down by a mere 17.6% in March. It was the biggest drop since January 1991. Now how many jobs will be lost going forward if this is the start of a trend as opposed to a one time outlier? Bear in mind that it takes 150,000 jobs a month just to break even with immigration and population growth and we are not even hitting that every month.

Yellen said she shared Fed chairman Alan Greenspan's puzzlement that long-term bond rates haven't risen more in this tightening cycle: "Perhaps it is partially unraveled but I think there remains a bit of a conundrum there," Yellen said.

There you have it folks, at least two members of the FED are in a conundrum.

Here is how I see it:
1) Jobs are stagnant
2) Real wages are negative
3) Housing is slowing
4) Inflation is contained
5) Productivity growth is solid
6) Long term yields have been relatively steady (barring a couple of panic spikes that dissipated)

Am I mistaken or would it be PERFECTLY NORMAL for long term treasury yields to be steady or even drop when the economy is slowing, wages are negative, inflation is contained, and productivity is rising?

Perhaps one thinks that Yellen and the FED are telling blatant lies about inflation but would those be lies as opposed to conundrums? Quite frankly, given the statements presented above, how can anyone be in a conundrum about long term rates?

Mish
http://globaleconomicanalysis.blogspot.com/

Sunday, April 17, 2005 10:46 AM


Would Floating the Renminbi Solve Anything?


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Political pressure on "forcing" China to float the RMB rose to new highs last week as the US the appears to have stepped aside from its "talk softly approach" under pressure from lawmakers on Capitol Hill who are demanding immediate action and threatening trade sanctions.

Here is an accusation by Debbie Stabenow (D-MI) and 66 other senators who want to send a strong message to China telling them to "Stop Manipulating Their Currency". This article by Business Week says that the Bush administration is blaming China's undervalued currency for contributing to America's record $162 billion trade deficit with China last year and the loss of 3 million U.S. manufacturing jobs since 2000. See The Nonsense on "Free Trade" Continues for more discussion on trade issues.

China does not like public political pressure however and failed to send their top leaders Friday's G7 meeting in retaliation.

Let's take a step back from all the political posturing and take a look at what problems we are attempting to solve: US job losses and the current account deficit. What is interesting is that we have an administration that is bragging about an unemployment rate of 5.2% and "job expansion" while bitching about huge losses of jobs to China because of the RMB peg. OK which is it?

Political and economic pundits also argue that the US current account deficit is a "sign of strength" that foreign countries are "investing" in the US because of our marvelous "growth engine" at the same time the same people are calling this a problem. Once again, which is it?

Here is the latest chart of the trade deficit:


Anyone that believes that chart of the US current account deficit is a sign of strength is a complete fool. The notion is simply preposterous. We were once the worlds biggest creditor. With month after month after month of current account deficits we are now the world's biggest debtor nation. How can that be a sign of strength? Were we not once bragging about being the biggest creditor nation? Were we right then, or now?

Here is the bottom line: The US is living well beyond its means.
We are flooding the world with US$ and in order for other countries to keep their exports flowing to US consumers, countries such as Japan and China have kept massive US reserves and investments not because they wanted to but because they HAD to keep their export business booming because of lack of internal demand.

As we discussed in Searching For Jobs, the unemployment rate of 5.2% is a total an complete distortion of reality. Unless you believe in "contradictory doublespeak" we are not an engine of growth and jobs are a real problem.

Now that the doublespeak contradictions have been eliminated we are left with two real problems to discuss: jobs and the current account deficit.

Last year, Japan's current account surplus was $159 billion and the euro zone's was $72 billion. China's current account surplus was a mere $39 billion. Is China really the problem here?

Bert Keidel, an economist at the Carnegie Endowment for International Peace, a Washington-based think-tank, and former US Treasury official, said: "China has a bilateral trade surplus with the US but deficits with much of the rest of the world. It makes no sense to concentrate on the US's bilateral trade deficit with China. China is often only the last stop for a complicated Asian supply chain, in which China imports intermediate goods and puts together the final products. The right way to look at this is who has the big trade surpluses in the world, and it is Europe and Japan."

According to theory, a sinking US$ would cure the trade deficit but as you can see in the chart above it has not. Since that theory failed to produce any results, the mindless pundits have modified that theory slightly. The latest misguided theory goes something like this: "The Euro has born the brunt of the falling US$ and that what we REALLY need is for the RMB to float and for Japan to 'stop interfering' with a de-facto peg as well". While it is true that the EURO has born the brunt of the falling US$, will floating the RMB cure anything? First let's consider jobs:

At 20-1 or 30-1 wage differentials between China and the US, floating the RMB most assuredly is NOT going to do a damn thing about solving the loss of jobs unless one believes that the US$ would fall far enough to allow all of the factories moved to China to relocate back to the US. With manufacturing wages in China at $1 per hour or less it is absurd to believe we can bring those jobs back. Sorry folks, it's not going to happen.

Please note that we essentially used China to help cure a huge debt problem looming over US corporations like the Sword of Damocles. Outsourcing of jobs to India and China along with an easy supply of credit to any consumer that could breathe helped restore the balance sheets of many US corporations. US corporate profits soared and at 1% Fed Fund rates, there was plenty of demand for capital. We flooded the world with US dollars but the only jobs created were housing related or in China or India. We forestalled a severe economic recession, effectively going on a massive and blatant "weak dollar" policy all the while Treasury Secretary Snow was talking lies about our "strong dollar" policy.

Our implicit weak dollar campaign added fuel to the fire and accelerated jobs leaving the US. Notice I said "accelerated" not "caused". We are losing jobs because of global wage arbitrage in conjunction with a worldwide glut of cheap labor. The weak dollar policy of the FED merely accelerated that primary trend, it did not cause it. Nothing can stop that trend other than exhaustion. It will continue until it has played out. The primary trend can be accelerated or temporarily slowed; it can not be stopped or reversed.

Let's move on to the problem of the current account deficit. The problem is simple: The US is living beyond its means, consuming too much of the world's savings at a rate that is simply unsustainable. The savings rate in the US now is less that 1%. Since some of the wealthy are indeed saving large amounts of money, the average Joe is really going to town loading up on debt.

Currently it takes $2 billion dollars a day of foreign capital (loans) to support our appetite for "stuff" manufactured in other countries. In return for temporarily bailing out US corporations with our implicit "weak dollar policy" we paid an enormous price. We are now in the midst of a mind boggling US housing bubble as well as a horrendous consumer debt bubble. Effectively we traded one problem for an even bigger one now looming over our heads.

Since there has been no job growth and no wage growth, this consumption binge was only possible because of rising home prices. Consumers have literally been treating their houses as ATM's with cash out refis to support consumption. The administration is finally starting to get more than a little worried about the sustainability of this "grand reflation experiment" now that current account balance that just hit a new high of $61 billion in spite of "the falling dollar" that was "supposed" to be the cure. Our experiment has now gone amiss and the "China Boom" which helped restore corporate balance sheets is now being used as the scapegoat for our loss of jobs and our current account deficit. The real problem all along is that the US government and the US public are both spending beyond their means.

We have laid the case that those problems can not be cured by currency corrections. Unfortunately that is not stopping the "Blame Game", since there is no fewer that eight bills in Congress "demanding action" from China. Senator Evan Bayh (D-Ind.) is threatening to hold up the confirmation of the Bush administration's nominee for trade representative, Rep. Rob Portman (R-Ohio), unless the Senate considers his bill aimed at stemming China trade. Another bill would slap 27.5% tariffs unless Beijing stops pegging its currency, the renmimbi, to the dollar. Given the fact that the bulk of our deficit with China comes from US corporations shipping back goods to the U.S. goods made in China by U.S. companies, these bills are pure insanity.

Let's approach this subject from another point of view. Exactly what is it that we make in the US that anyone wants? Cars (take a look at GM and laugh), trucks (take a look at Ford and laugh), SUVs, television sets, clothing, computers, oil, anything? OK we are the world’s biggest manufacturer of weapons but then again we refuse to sell to China. No doubt Europe will get that trade. We do make Moss Tents in the US and they are damn good tents too! I have one and recommend them but I hardly expect that the nation of Japan is going to take up camping and start requesting Moss Tents. Grains can be just as easily grown in Brazil as the US and I expect that agricultural products, one of our previous bright spots is about to "take a hit".

If we don't make much of anything here that anyone wants, exactly what is it we expect Europe and Japan to import from the US?


Can Tariffs solve the problem? NO! Tariffs can never solve a problem. For starters we already discussed the 20-1 wage differential that will be impossible to overcome and secondly, it is highly unlikely that would bring back any factories anyway. Imagine goods from China going up 27.5% across the board. Do you thing the average Walmart shopper will be pleased? Will anyone be pleased? Can you say instant recession?

In an article entitled Tough Love Stephen Roach, one of my favorite economists, accurately describes the problem: "In macro terms, trade and current-account deficits are emblematic of an economy that is living beyond its means...... Which takes us to the heart of the problem — America’s consumption binge. Imports don’t come out of thin air. They are a very much a by-product of growth in domestic demand, especially private consumption. And if there is anyone in the US guilty of living beyond his or her means, the American consumer certainly gets the prize. Since 1996, average growth in real consumption (3.9%) has exceeded gains in real disposable personal income (3.4%) by 0.5% per year. Over that period, the income-short consumer has been converted into an asset-dependent spending machine — first drawing sustenance from the equity bubble and more recently from the property bubble. As a result, the income-based personal saving rate has plunged toward zero and households have taken on record debt loads as they extract newfound purchasing power from increasingly over-valued homes."

Unfortunately Roach goes off the deep end as to the solution: "A further decline in the dollar is needed, as is a meaningful increase in real US interest rates. The longer we wait, the more treacherous the endgame."

For starters we have already had a MEANINGFUL rise in interest rates. A rise from 1% to 3.00% (assuming one more hike) is a very meaningful rise. By my math we will have a 200% rise in interest rates. It's not necessarily "how high" as opposed to how high in relation to where we were that adds stress. For that same reason most economists are wrong about gasoline prices. Yes, in real terms gas prices have not risen as much as during earlier oil shocks. However, try explaing that to cash strapped US consumers where every marginal rise in prices matters greatly.

There are huge signs of stress right now in the stock markets, in consumer confidence numbers, in housing (in some areas), in cities like Detroit, and in other places as well. It takes time for rate hikes and oil shocks to work their way through the system and the indications are there right now that these hikes are starting to take their toll. Roach and other economists ignore the affect that rising rates will have on the job market!

I am not purposely trying to be overly critical but it is important to discuss the issues. I also note that he is calling for both a decline in the US$ as well as rising rates. Hmmm. Wouldn't rising rates help stabilize the US dollar? I think so and I think that is why the US$ stopped falling recently. Perhaps I am mistaken but didn't the falling US$ help accelerate the loss of US jobs to China and India? Don't get me wrong. China does need to float the RMB and they will eventually do so. In the meantime blaming the RMB which might be about 5-10% of our problem for the whole shebang is simply nuts. If we focused on the 90% problem I believe China would be happy to tackle the other 10%.

Now that interest rates are back to neutral (yes I really believe that, in fact I think we overshot as a 200% rise is pretty steep medicine) the only other thing we can do would be to rein in government spending and perhaps pass a revenue neutral consumption tax or so. Unfortunately the problem has gone on for so long and the consumer debt bubbles and mal-investment in real estate are so huge the only way out is the tried and true: a massive consumer-led recession.

As a result of cutting rates to 1% we accelerated the outsourcing of jobs to China, we created an overcapacity in nearly everything imaginable, we took the single strongest point of our economy (housing) and put growth that might have taken place over 10 years and accelerated it into two or three years of bubble mania producing the biggest global housing bubble since the bursting of Japan's bubble about 20 years ago. That attempt by the FED to forestall and shorten the normal economic cycle did nothing but sow the seeds for the greatest worldwide economic decline since the great depression.

Where we really need "Tough Love" is from Congress. They are partially to blame for this mess, as is Bush's nonsensical war in Iraq and as is the FED. Instead we have silly threats (bluffs) of 27.5% tariffs against China when the problem is right here staring us in the face.

At this point there is simply no good solution. We really NEED a recession to wipe out the mal-investments in production capacity and to cut US consumer spending. Why is everyone so afraid of saying that it will take a recession to cure these imbalances? We will not need to see mammoth rate hikes from here to bring it on. It has already taken more hikes than I have expected but now the stock market is finally hinting at signs of increasingly severe stress as is the increasingly protectionist rhetoric coming from Congress.

In the meantime, the call to float the RMB is just scapegoat noise.
1) It will not happen until China is damn good and ready
2) It would not solve anything (not now at least)
3) Why does EVERONE (and I mean everyone) assume that the RMB would rocket up and stay up vs. the US$. Can you name one person that believes the RMB would sink vs. the US$ if it was floated? Is this that rare moment when all economists are correct? Has such a moment ever happened before?

As for me, I am skeptical that the RMB would stage a strong rally and stay there. I believe China understands that and that is why they will not float the RMB anytime soon. The Chinese banking system is too fragile right now and their internal market procedures are not yet in place for them to float the RMB. What is it about that assertion that the world outside of China fails to understand? If and when they do float the RMB, it will be because China is ready. When they finally do float the RMB I suggest we will not like the result one bit.

The China "Scapegoat Blame Game" does serve one political purpose. It throws attention outward instead of forcing Congress to focus on the real problems. Is that the intent or are we really that stupid?

Here is the bottom line: Even IF China gives in now (which I seriously doubt) it will not solve a single thing. I suggest Congress and the President level with the American people about what the REAL problems are: US citizens and the US government are living beyond their means. Since that is extremely unlikely to say the least, the problems will contine to get worse until the next recession forces the issue.

Mish
http://globaleconomicanalysis.blogspot.com/

Friday, April 15, 2005 12:12 AM


The Deflation Guarantee Act of 2005


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Today Congress passed the "The Deflation Guarantee Act of 2005" currently known as the "Bankruptcy Abuse Prevention and Consumer Protection Act of 2005". Twenty years from now economists are going to be studying legislation from this Congress and signed by this administration and be wondering: "What the * were they thinking?".

Consumer Protection Act? LMAO
Anytime this administration passes a law with the "protection" in it, assume it will do just the opposite. Credit card companies have made record profits lending money at obscene rates, jacking interest rates and fees up at the drop of a hat, lending money to anyone that can breathe, charging interest rates that are down right usurious, and now that the economy is on the verge of collapsing wants guarantees from Congress and the Administration that they will be "paid back". Never mind that at 30% interest rates they have already been paid back time and time again, they want to keep earning 30% from now until eternity. This was a bill written by loan sharks, and bought via payoffs (otherwise known as campaign contributions) to those voting for this bill. It has NOTHING to do with "Consumer Protection".

I believe this will backfire in many ways, and not all of them are fully understood yet. First let's look at some highlights:

1) Before anyone can file bankruptcy under the Bankruptcy Reform Act, they must receive a certificate from an approved non-profit credit counseling agency that states that they have received a briefing on opportunities for available credit counseling and have been assisted in performing an individual budget analysis. The legislation mandates that the agencies offering the counseling be nonprofit in nature, such as the Consumer Credit Counseling Service of America (CCCS). But according to Jeffrey Morris, resident scholar at the American Bankruptcy Institute, the amount of time necessary to complete the counseling may take debtors away from work, which would put the struggling debtor even farther behind.

2) A small but vitally important part of the 500-page bill is the six-page section dealing with a "means test." The "means test" is the system by which the IRS determines who can legitimately file for bankruptcy and who cannot. The test is a rigorous process involving examination of the debtor's income and expenses, calculations as to whether or not their expenses meet the standards of their area, and judgments relating to whether or not they genuinely qualify for a Chapter 7 filing. If the combined gross income of your family is greater than the median family income in your state, you may be required to file a Chapter 13 repayment plan where you repay a percentage of your debts over a 36-60 month period, and not allowed to file a traditional Chapter 7 bankruptcy where your debts are eliminated. The "means test" is an inflexible standard designed to leave no leeway for debtors to abuse the system, but in the process it is bound to penalize a great many people who have fallen into bad circumstances through no fault of their own.

3) If required to file a Chapter 13 under the means test, your monthly expenses will be compared to the IRS National and Local Standard Expense guidelines. The Bankruptcy Reform Act strictly limits the amounts you can claim as expenses.

4) Another provision of the bill places the burden of proof for bankruptcy on the debtor's lawyer, requiring the attorney's signature on the petition and verification that they have investigated the claim sufficiently and found it to be solid. Many lawyers will demand their fees up front, or they will decide the case isn't worth their time.

Here is a discussion on some of the bill's ramifications.

OK Mish what the heck does this have to do with deflation and why is this legislation a bad idea? Those are good questions and we must first start with a definition of deflation: Deflation is a reduction in money supply, a monetary phenomenon often associated with falling prices and lessoned demand for goods and services.

How will this bill help bring on deflation?
1) Anyone currently on the edge will be best advised to file for bankruptcy BEFORE this bill takes affect in October. There is an incentive now, if at all in doubt to file now and get it over with. I expect a dramatic increase in bankruptcies before this bill kicks in. Bankruptcies are inherently deflationary since the result is a write off (destruction) of money.

OK Mish what happens after the bill passes?
2) After this bill passes, greedy credit card companies will start losing repeat balance carrying customers. (That is actually a good thing but it sure is not the "purpose" of the legislation). Perhaps they get paid off but probably not. How can people that fall under chapter 13 then lose their job or get ill ever pay back? They can't and they won't. I speculate many will never use credit cards again. Speaking of which, it is quiet possible that as part of that credit counseling, people are asked to or even required to destroy their credit cards as part of the bankruptcy judicial hearing. It will now be up to a judge to decide is it 13 or is it 7 and what the requirements will be.

3) It is highly likely that many of the filings after this bill passes will be forced kicking and screaming chapter 13's. What will happen is this: Consumers will be required to pay off their credit cards (perhaps at 0% or some amount set by the judge) perhaps with wages garnished if the consumer refuses. Consumers underwater on houses, cards, and deep in hock will absolutely be FORCED to cut back on consumer spending. They will be forced to start living within their means. This process will have a very, very sobering affect on the economy. Card companies will get paid back, but they will have lost a balance carrier for life.

4) Anyone forced to file for chapter 13, will be in debt slavery. Debt Slavery is the cornerstone of this administrations's "Ownership Society". Debt slavery might guarantee repayment, but it will have a potentially great cost and social upheaval. Also anyone going thru debt slavery will take great pains to avoid it in the future. Monetary growth will likely fall off the cliff. That is in and of itself the essence of deflation.

5) I am sure there are unforeseen consequences to this act that no one can figure out at this time, but they are coming and likely to be brutal. I confidently predict that years from now economists will be discussing this piece of legislation and the role it played in accelerating the upcoming global recession.

Note 1: Before anyone gets all bent out of shape, I admit there are abuses of the current system. As a % however they are quite small. Because that % is small, credit card companies have made record profits. Part of their risk in lending at obscene usurious rates is that some people default. Card companies want to be free to prey on consumers at no risk. That is the flaw in this bill, and also why it can not possibly work. This bill does not reduce interest rates on cards, fees, or anything else. It is the most one sided anti-consumer bill EVER passed by Congress.

Note 2: I am predicting deflation regardless of what the affects of this bill are. The headline title of this blog is therefore a bit misleading but I will lay the case that multiple bills passed by this Congress will enhance the deflationary housing crash/credit crunch that is about to happen just as "Smoot-Hawley" enhanced but did not specifically cause the Great Depression.

Enquiring Mish readers might be wondering what other bills I am referring to that are deflationary. Here goes:

The "Job Destruction Act of 2004" is right up there on the list. We discussed that bill in Searching For Jobs. The cornerstone of "The Job Destruction Act of 2004" currently know as "The Job Creation Act of 2004" was legislation allowing companies to repatriate funds sitting overseas at a tremendously reduced tax rate if it was used in activities deemed to create jobs (most of which did nothing of the kind) but one approved activity was mergers which I believe I proved is guaranteed to destroy jobs.

Is there anything else? Of course there is:
The "Medicaid Handout Bill of 2004" practically guaranteed consumers will pay the highest rates possible for prescription drugs.

Finally we must consider pending legislation on Smoot-Hawley type tariffs. We discussed this at length earlier in Free Trade? What Free Trade? and also in The Nonsense on "Free Trade" Continues.

In a friendly but spirited debate with The Nattering Naybob we discussed whether or not this Congress was stupid enough to pass another Smoot-Hawley Tariff act. Mr. Naybob writes:

I have read two excellent missives on Protectionism at Mish's GET Analysis Blog. Mish makes a valid comparison of the current legislation to Smoot-Hawley enacted in 1930:
Mish asks: "Are we bound and determined to replay the great depression, complete with a more modern version of Smoot-Hawley?"

I feel I should weigh in at this point. Fear and fret not, a semblance of propriety must be maintained, but above all, control. Perception is not reality, money is. All the Smoot-Hawley type protectionism talk is nothing more than saber rattling, misdirection and sleight of hand for the public’s consumption. The legislation in question is a ruse and sheer theater.

I want to believe the "Nattering One", but when I look at the track record of legislation passed by this Congress has passed I am in serious doubt. Even If one assumes Naybob is initially correct and this starts out as a bluff, what happens if the public catches the spirit (not realizing it was supposed to be a bluff) and demands action? What then? Personally I think it is only a bluff at the margin. In other words SOME are bluffing to be politically correct; others are quite likely just plain stupid enough to pass something like this.

Just today Bush Pressures China on Currency, Taiwan. Not only is Bush applying public pressure to a country that will not give in to such nonsense, he ups the ante by dragging Taiwan into the picture. "President Bush ratcheted up pressure on China on Thursday to float its currency to permit fairer trade and said he expects Beijing to keep the peace with Taiwan." If that was not enough he went on to say "I'm constantly reminding China that a great society is one that welcomes and honors human rights, for example, welcomes the Catholic Church in its midst, doesn't fear religious movements". What the heck is that all about? Can anyone tell me what Bush is attempting to accomplish by dragging Taiwan and religion into this?

Also today As rhetoric sharpens, China skips talks.

On a March 29 flight to Seattle, the U.S. Treasury secretary, John Snow, dictated a letter to Hu Xiaolian, China's new top foreign-exchange regulator, expressing the hope they could work together. Around the same time, China sent its own message to the Treasury: Jin Renqing, the finance minister, and Zhou Xiaochuan, the governor of the central bank, would not attend meetings this week in Washington of the International Monetary Fund and World Bank, and so would be unavailable for the gathering of policy makers of the Group of 7 industrial nations that begins Friday.

"China is manipulating its currency and taking a sledgehammer to manufacturers in the U.S. and Europe," Senator Lindsey Graham, a South Carolina Republican who is co-sponsoring the tariff legislation, said in an interview. "So far, our response has been tepid. China's currency is undervalued and needs to be adjusted."

Now let's take a look at something different. Is natural gas different enough? I thought so!

Check out more of today's insanity: Bill targets natural gas speculation Legislation designed to limit natural gas speculation was introduced Thursday by U.S. Rep. Sam Graves, R-Mo, and U.S. Rep. John Barrow, D-Ga.

The Graves/Barrow bill would set up daily 8% limits on how much natural gas futures contracts can fluctuate in price. It would also require the CFTC to draw up rules for large position reporting and cash settlements of natural gas contracts. The bill will probably be sent to the Agriculture Committee. Graves and Barrow are members of that committee.

Is this unbelievable or what? Are there any Republicans left in Congress? Are we going to bring back wage and price controls? Is this wage and price controls and WIN (Whip Inflation Now Part II?) We have bills sponsored by Republicans to protect tackle box manufactures (discussed in one of my earlier free trade pieces), we have a FED that sets interest rates rather than the market, and now we have attempt to control the daily price swings of natural gas, sponsored by both republicans and democrats.

Are we reverting to China's Command and Control economy as them move closer to ours? Is anyone still confident that tariffs are saber rattling bluffs as opposed to blatant stupidity? Is any of this legislation going to serve the stated purpose? If someone thinks so, please tell me how.

These bills may not guarantee deflation, but they are guaranteed to make the upcoming deflation and credit crunch worse.

Mish
http://globaleconomicanalysis.blogspot.com/

Wednesday, April 13, 2005 11:30 PM


Searching For Jobs


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I'm still searching for jobs. Wages Too. Where are they?
Enquiring Mish readers probably want graphical displays so here goes:

Real Inflation Adjusted Wages:


Private sector jobs created during this "recovery"


In Where the Hell are the Jobs we showed how the unemployment numbers are a blatant fabrication and tonight we are going to look ahead and see just what might be coming down the road. Clearly we can see this recovery produced less than ZERO private sector jobs. No one can deny it. Well I take that back (Bush apologists can and do deny it but that is another story for a political blog).

Not only have we lost private sector jobs over the last four years (in spite of a mammoth housing boom and retail sector expansion), but real wages have declined as well. What is amazing is that figure holds true in spite of mammoth earnings growth at corporations, bonuses, and blatantly disgusting CEO salaries.

Consumers have gotten away with lifestyles by literally and figuratively consuming their houses with cash out refis, home equity loans, etc etc etc. One might think that foreclosures would be up in this situation. Well they are. Then again they are not. Foreclosures are down in California and some of the bubble areas, but in areas where job losses are severe (Ohio Michigan Indiana) foreclosures are rocketing. For a good analysis of the home foreclosure situation see: Housing Bubble: Foreclosures up 57%, Mostly Non-Bubble States

Rest assured Mish readers that home foreclosures are about to skyrocket everywhere. See A Tsunami Wave of Foreclosures for further discussion.

Bottom line #1: Home prices can not keep rising above real wages regardless of what anyone thinks about
1) The scarcity of land
2) Demographics
3) The Long Haul
4) Anything Else

Japan proved it and we will prove it too. The reason foreclosures are down in California is that people (for now) still have a huge profit on their purchases. Recent buyers are probably underwater or will be soon and that is all it will take to start one incredible deflationary downslide.

Bottom line #2: Wages are falling, jobs are stangant, and the FED (for now) is hiking. That is a lethal mix.

Meanwhile let's take a look at some recent happenings starting with something you probably never even thought about "Outsourcing the Drive Thru Window". Yes Mish readers, McDonalds is test piloting a program to outsource drive-up windows. When I first saw reports of this I thought it was a spoof. It is not. "That friendly voice at the drive thru of the Hermiston McDonald's is no longer your neighbor, or even someone from your own town. Instead, you are now patched through to someone working in Grand Forks, North Dakota.North Dakota's minimum wage is $5.15 and Oregon's is $7.25, so it makes sense for them to want to hire someone who can do the same job, for a lot less money."

Is there another side of this story? Isn't there always?
Here it is: The orders are actually being taken in a call center run by a company called CCS-SEI. The calls are not being taken by minimum wage McDonalds employees at a store in another state, but by professional phone support staff in a calling center. The idea of this order taking alternative is not to save money so much as to make sure that the people taking the orders get them right - apparently complaints and replacing incorrect orders uses up a lot of staff time and materials. What savings there are to this system are in increased efficiency, not lower wages.

Enquiring minds might be wondering if there is a Mish side to this story. Of course there is: McDonalds would not be doing this at a wage loss to save a potential screw-up on a "supersize" vs. a regular fry. This is a test pilot under "ideal" situations to see if it will fly. If it will fly here, why won't it fly in ... India or Ireland or wherever? I do not know if it will fly here, but I think it will. If it does, then it's only a matter of time before someone in India is asking "Do you want to ‘supersize’ that ma'am?" How many jobs will this cost? I can't even begin to think about it. If you have a number, and a number for self-checkouts at grocery stores as well. Send me a buzz. Somehow I think it will EVENTUALLY be staggering.

Enquiring Mish readers might be wondering about the "American Job Creation Act of 2004". This 650 page bill is essentially corporate welfare that over the long haul can not possibly create any jobs but let's kick off with some of its lesser known monstrosities:

The bill is a veritable treasure trove of tax handouts for companies ranging from General Electric to Plano Molding Co., a maker of tackle boxes in Republican House Speaker Dennis Hastert's Illinois district. Let's take a look:

Current law imposes a 10 percent excise tax on imported fishing equipment. It seems some anglers are stowing their lines and lures in sewing kits, which are not subject to the tax. So Plano's representatives backed a measure to cut the tax on tackle boxes (but not other fishing gear) to 3 percent.

Among other minutiae, bows such as those used for hunting are subject to an 11 percent excise tax if they have a peak draw weight of 10 pounds. The bill increases the peak draw weight to 30 pounds before a tax applies. It also repeals the tax on all fish-finding sonar devices.

In a stroke of bad timing, the bill imposes a 75-cents-per-dose tax on flu vaccines, to be paid by the recipient. The tax is equal to that imposed on other childhood vaccines and will go into a vaccine injury compensation fund.

Sen. John McCain, R-Ariz. called it the "worst example of the influence of the special interests I have ever seen."

OK let's take a look at the REAL problem:
The nation's corporate tax rules provide strong incentives for American companies to shift their profits from the United States to low-tax havens such as Ireland and the Bahamas.
Outside the country, in tax havens, profits are allowed to grow untaxed by the United States until they are repatriated. On the silly notion that repatriating this money back into the US will "create jobs" Congress passed and the president signed the "Job Creation Act of 2004".

Congress's ostensible purpose for allowing the holiday is to unleash a flood of money for "job creation" by repatriating money sitting abroad. Instead of taxing corporations at 35% rate it lowered the tax burden to a measly 5.5%.

Here are approved uses that "supposedly" will create jobs:

1) Worker hiring and training
2) Infrastructure
3) Research and development
4) Capital improvements
5) Financial stabilization
6) Debt pay down
7) Corporate acquisitions
8) Advertising
9) Legal Liabilities

Of those approved uses only "hiring" will create jobs. However, any company planning in hiring would probably just shift funds around, use repatriated money to "hire" and earmark funds for "hiring" to do something like increase dividends or bonuses. Rest assured, not a single job will be created from this monstrosity.

For instance: Merck, which is sitting on some $15 billion in untaxed foreign profits and faces an estimated $18 billion in potential claims arising from the Vioxx debacle may use it pay claims. Will that create any jobs?

The drug giant Schering-Plough announced a $9.4 billion repatriation, and Eli Lilly announced one for $8 billion. Pfizer is considering whether to repatriate $29 billion in untaxed foreign profits; Hewlett-Packard has $14.5 billion eligible for repatriation; Intel has $6 billion. By the end of 2005, an estimated $100 billion to $500 billion will have found its way home. All in all, Congress's Joint Committee on Taxation projects that the holiday will allow companies to avoid $3.3 billion in taxes.

Where does Mish think this repatriated money will go? That's easy: Mergers and acquisitions. We will get to this topic a bit later but rest assured mergers and acquisitions will not create any jobs.

The big problem with this bill is that it establishes a horrible precedent by encouraging companies to leave profits abroad in anticipation of future "tax repatriation holidays" and it makes fools of companies that regularly pay the full corporate tax rate, while providing incentives for mergers that will actually cost the US jobs.

I have been tracking mass layoffs for quite some time. I am positive I have missed more than a few. Here are the ones I know about, announced since Dec 2004. Note: only totals greater than 700 are in this list or it would go on forever.

December 2004

4400....Colgate
Colgate Plans to Cut About 4,400 Jobs
Colgate-Palmolive Co., which makes consumer products including Ajax detergent and Irish Spring soap, plans to cut its work force by about 4,400 jobs as part of a restructuring plan aimed at boosting its sales and profits around the world.

750.... Time Warner's America Online
Job cuts hit AOL's Dulles operations
Time Warner's America Online division began handing out pink slips Tuesday, firing 750 employees division wide, with more than half of those cuts in Northern Virginia.

825.... United
United Airlines to cut another 825 positions

8500....Delphi
Delphi Announces Plans to Cut 8,500 Jobs
Delphi Announces Plans to Cut 8,500 Jobs Next Year, Revises Its 4Q Sales Forecast
The Troy-based company had set the same goal for 2004 and exceeded it.

4200.... Cardinal Health
Drug wholesaler Cardinal Health Inc. said on Monday it would cut 4,200 jobs, or 7 percent of its work force, and close 25 facilities around the world as part of a plan to reduce costs.

5100....Merck
Merck to Cut About 5,100 Jobs by Year's End
Merck to Slash About 5,100 Jobs by Year's End, Will Cut Millions of Dollars in Spending

1200....Westinghouse
Westinghouse Savannah River Co. Announces Up to 1,200 Job Cuts by Oct. 1 2005
Westinghouse President Bob Pedde told employees in an e-mail the company that operates the Savannah River Site near Aiken had formally requested the layoffs, which needs Department of Energy approval.
Up to 800 additional workers could be laid off by Oct. 1, 2006, Callicott said, as site projects come to a close at the former nuclear weapons complex.

2000....American Express
American Express Co. said it will cut 2,000 jobs, or 2.5 percent of its work force, in a restructuring designed to save more than $75 million a year before taxes.

1000.... Lockheed Martin
Lockheed to shed 1,000 local positions

January 2005

2000 wet seal
Wet Seal to cut 2,000 jobs, close 150 stores
Wet Seal said it will record the restructuring costs in the fourth quarter ending Jan. 29. It also said it will announce its closing cost estimate in January.

2500.... Northrop Grumman
Northrop Grumman job cuts target Gulfport, New Orleans shipyards
Cutbacks in the U.S. Navy's budget likely will cut 2,500 jobs at Northrop Grumman Corp.'s Ingalls shipyard in Gulfport and Avondale shipyard in New Orleans in the next three years, the company's senior shipbuilding executive says.

GM.... 7% of workforce
GM to Continue Shrink Work Force in 2005
the automaker said it would offer buyout packages early this year to some of its 38,000 salaried workers in the United States.
GM Chief Executive Officer Rick Wagoner at the Monday briefing denied a local press report that the automaker would cut up to 7 percent of its U.S. workforce this year.
"Seven wasn't my number," Wagoner said, but he declined to give a target for job reductions.

2465....West Point Stevens
The Upstate’s textile industry could face further layoffs as it struggles against foreign competition, industry representatives said the day after WestPoint Stevens announced it would close three plants in Clemson. The company, which has filed for bankruptcy, said lower-cost textile imports are the reason the company is cutting a total of 2,465 jobs at plants in the Carolinas, Virginia and Indiana.

1900....JP Morgan
J.P Morgan Chase has told 1,900 employees of its Tampa call center that they will be out of a job by the end of 2005. The cuts follow the merger between J.P. Morgan and Chase Manhatten a year ago.

3000-6000....Peoplesoft
Oracle to PeopleSoft: The pink slip's in the mail
Oracle appears to be adding insult to injury in its merger with PeopleSoft--taking the unusual step of notifying workers of their termination by sending pinks slips via express mail to their homes. As earlier reported, shipments to thousands of PeopleSoft employees across the country are expected over the weekend, according to sources close to the company. Those spared pink slips will get packages too--containing new Oracle employment contracts. "The view of most of the employees out there is that it's a really callous way to do it," said Joe Davis, chief executive of Coremetrics and a former group vice president at PeopleSoft, who stays in touch with his former co-workers. An Oracle representative did not return repeated calls for comment.

907....Glass plants shutting
Local Glass Plant Workers Given Layoff Notice
2 Other Glass Companies Close Their Doors
MONACA, Pa. -- A layoff is not the news anyone wants to hear from their boss. But, 250 workers at a Beaver County glass plant were told they will soon be out of a job.
The Anchor Hocking Company in Monaca blames the job cuts on a restructuring plan that will consolidate some operations.

4000....Wachovia
The No. 4 U.S. bank, on Wednesday said quarterly profit rose 32 percent, reflecting its acquisition of SouthTrust Corp. and helped by growth in loans, deposits and fees, and said it will cut up to 4,000 jobs. Wachovia said the reduction of 3,500 to 4,000 jobs, or roughly 4 percent of its work force, is part of a move to save up to $1 billion a year and will be accomplished by 2007. The cuts are on top a reduction of 4,300 jobs related to the Nov. 1 acquisition of SouthTrust, which made Wachovia one of the biggest banks in several southeastern and eastern U.S. states.

1000....MBNA
MBNA Net Rises 9.3%; 1,000 Job Cuts, Buyback Planned
U.S. Jan. 20 MBNA Corp., the world's largest independent charge-card company, said earnings rose 9.3 percent as credit quality improved. The company also said it will incur as much as $350 million in costs to shed about 1,000 jobs.

2000.... US Airways Group Inc.

7000.... SBC Communications Inc.
Jan. 27--SBC Communications Inc. said Wednesday that it expects to eliminate 7,000 jobs this year, making 2005 the fifth straight year in which the communications giant has shrunk its workforce. A crew member uses a machine to push fiber-optic cable into an underground conduit. San Antonio-based SBC included the updated job information as it reported that its fourth-quarter earnings were down 16.7 percent from a year earlier. Its results were pulled down by severance costs for 2004 job cuts, changes to its pension plan and its share of Cingular Wireless' expenses

5600....Proctor and Gamble on merger with Gilette
P&G Strikes $57B Deal For Gillette
In the headlines this morning, Procter & Gamble is buying Gillette for $57 billion in stock, creating the world's largest consumer-products company.
It plans to cut up to $16 billion in costs and lay off 4% of the combined workforce of 140,000.

5500....Celestica
Celestica's latest job cuts reflect industrywide overcapacity, analysts say
Celestica's latest restructuring, which will cut 5,500 more employees worldwide and trim over $;1 billion US from its bottom line in 2004 and 2005, has some analysts wondering if it will ever achieve acceptable profitability.

SBC to Cut 13,000 Jobs After Buying AT&T
SBC Communications Inc. said Tuesday it expects to eliminate about 13,000 jobs after its $16 billion acquisition of AT&T Corp. closes. The projection came during an occasionally heated meeting with investors a day after SBC announced plans to acquire AT&T, its former corporate parent, a deal that would create one of the world's biggest telecommunications companies on numerous fronts. The cuts would come in addition to existing plans at the two companies to eliminate at least 12,000 jobs before the merger is finalized at least a year from now. [Am I reading this correctly? Is that 25,000 jobs to be eliminated? Mish] San Antonio-based SBC had recently indicated it would cut about 7,000 positions from its work force of 163,000 during 2005, primarily through attrition, which executives said typically total about 1,000 a month. [Amazing. Working conditions are such that 12,000 people a year leave that place. Mish] AT&T, based in Bedminster, N.J., had already planned to eliminate at least 5,000 of its 47,000 jobs this year, though those cuts likely will involve layoffs in the customer call centers which the company plans to close as it retreats from the traditional consumer phone business.

1723....Illinois companies
Suburban employees still facing job losses
Despite recent job gains in Illinois, the state said about a dozen companies are planning to eliminate 1,723 jobs, including more than 800 workers at five suburban companies. The companies filed the layoff notices by Jan. 31 and the list was released this week by the state. Many of the layoffs either started with the notice or will continue through March, the documents said.

February 2005

1800.... State of Wisconsin
MADISON — Cutting 1,800 state jobs, letting more senior citizens stay in their own homes and raising hunting fees are included in Gov. Jim Doyle’s budget plan for the next biennium. The governor released tidbits of the budget, which he will submit to the Republican-controlled Legislature on Tuesday, in interviews with various media outlets around the state. He will recommend cutting about 1,800 more state jobs over the next two years as part of his long-range goal of cutting 10,000 jobs, spokeswoman Ethnie Groves confirmed Sunday.

11,400.... or 30% Pfizer
Pfizer rises on layoff speculation
Pfizer stock traded higher midday Tuesday, as analysts speculated the drug giant soon would announce massive cuts in its sales and marketing force in a cost-reduction effort. In a note, Lehman Brothers analysts said they confirmed rumors that the pharmaceutical firm planned to slash its sales and marketing force of 38,000 by as much as 30 percent, or 11,400 employees.
Lehman said it believed Pfizer senior management would meet to discuss the move later Tuesday.

1000....Citigroup
Citigroup announced it was making "limited staff reductions" in its corporate and investment banking division. An estimated 1,000 jobs are expected to be cut worldwide, according to people familiar with the decision. The division currently has about 48,000 workers. Citigroup employs some 285,000 people worldwide.

7000.... Verizon-MCI
Verizon Communications Inc. is acquiring MCI Corp. for $6.75 billion, a swift response to the acquisition of AT&T Corp. by SBC Communications Inc. and the third big telephone industry merger in two months. The agreement announced Monday, scuttling a competing bid for MCI by Qwest Communications International Inc., will result in about 7,000 job cuts from the combined Verizon-MCI work force of about 250,000 employees.

973....Circuit City
Circuit City plans store closures, job cuts; reviews $3.25 bn takeover offer

1100....Acuity Brands
Acuity Brands Inc. said it would slash 1,1000 jobs worldwide, or about 15 percent of its salaried work force, and take a $17 million pretax charge in its fiscal second quarter ending Feb. 28. The Atlanta-based maker of lighting and specialty chemicals said it expects the job cuts will reduce operating costs by at least $13 million in the second half of fiscal 2005 and about $50 million annually by the end of calendar year 2005.

700....Erie County
Lawmakers Unveil List of Job Cuts
(Buffalo, NY, February 23, 2005) - - It is the largest wave of layoffs for Erie County workers so far. Tuesday night, county lawmakers unveiled a massive list of job cuts. News 4's Barbara Pinson reports from Erie County Hall with the detailed list.
Department leaders have agreed to nearly 700 job cuts.

5500....Cadbury
Chief Executive Todd Stitzer is shedding 10 percent of Cadbury's workforce and shuttering 20 percent of Cadbury's factories, a plan that saved 75 million pounds last year and is expected to save about 100 million pounds this year. Cadbury plans to spend that money on marketing as well as research and development. The company promoted Bubblicious Lightening Lemonade gum during this year's Super Bowl.

3600...Sun Micro
Sun expands software staff cuts
The firm has increased planned layoffs to include 3,600 staff, but insists it is still committed to software. Sun has laid off employees in its software group, part of a gradually expanding job-cut programme by a company that has yet to return to consistent revenue growth.

40000....Mittal Steel or 8000 a year
Mittal Steel plans to slash jobs worldwide
Mittal Steel Co., set to become the world's largest steelmaker next month, may shed as many as 8,000 jobs a year through 2010 to cut costs after the purchase of International Steel Group, the company's owner said.

2500....more- Marsh & McLennan
Marsh & McLennan Has Loss, Cuts Dividend
Insurance broker Marsh & McLennan Cos. posted a quarterly loss related to charges from a settlement of a bid-rigging scandal, and cut its dividend by half while warning of more job cuts. The world's biggest insurance broker, whose fourth-quarter results were also hurt by restructuring charges, said the restructuring could result in the loss of another 2,500 jobs, pushing recently announced layoffs to 5,500.

1400....Citigroup
Citigroup Inc. the world's largest financial services company, on Monday said it will cut about 1,400 jobs in its corporate and investment bank in early 2005, and take a related $275 million pretax charge in the first quarter.

March 2005

1400...more- Erie County
Another Round of Massive Layoffs for County Workers
Buffalo, NY, March 1, 2005. 1400 employees will be getting their pink slips Tuesday morning.

1400....UPS
UPS to Close Hub in 2006, Laying Off 1,400
DAYTON, Ohio - UPS Inc. will close its recently-acquired freight sorting hub in Dayton in 2006, eliminating 1,400 jobs, the world's largest shipping carrier announced Thursday.

5000.... GM
General Motors Corp. to lay off several thousand workers in Lansing
DETROIT - General Motors Corp. said Tuesday it will lay off nearly 3,000 hourly workers at its Lansing Car Assembly plant later this spring. The company already has announced it is closing a 69-year-old plant in Baltimore and a second plant in Linden, N.J. Those moves will affect about 2,000 workers.

800...LG Philips displays
Electronics Group LG Philips Displays is to close its cathode ray tube factory in Durham, trade union Amicus is claiming. The closure in July will result in the loss of 800 jobs - production is moving to China, Amicus says.

1100....Weston
Weston puts closing sign on 2 plants
North America's third-largest bakery, George Weston Ltd., is closing two plants and cutting 1,100 jobs as consumer tastes shift away from sweets and white bread and more toward healthier whole-grain products.

700....Springs Industries
Springs Industries said Wednesday it would cut 700 more jobs this year, leaving little more than 4,000 workers in South Carolina clustered around its Fort Mill headquarters and bringing its total layoffs in the state close to 10,000 in the past 13 years.

745....Citicorp
Citicorp Credit Services Inc. will lay off 745 local employees in phases as the company goes through the process of shutting down a large west Houston service center.

1000-2000....GM
Automaker to trim up to 2,000 workers
DETROIT -- General Motors Corp. expects to reduce its white-collar work force in North America by 1,000 to 2,000 employees this year and reduce the head count in some departments by more than 10 percent.

2000....Alcoa
PITTSBURGH -- Alcoa Inc. will cut 2,000 jobs over the next 12 months as the aluminum company streamlines its operations as part of its new global business structure, the company announced Tuesday.

2000....Pioneer Corp.
Pioneer to Cut Workforce by 5.1 Percent, Ito Says
Pioneer Corp., which forecasts its first annual loss in nine years, said it will try to recover profitability by cutting jobs and closing factories.
The company will eliminate 2,000 jobs, reducing its workforce by 5.1 percent to 37,000,

1600-2000...Delta
Delta Air Lines outlined plans to reduce its technical operations staff by from 1,600 to 2,000 employees on Tuesday. In a Form 8-K filing with the Securities and Exchange Commission, the Atlanta-based airline also said it plans to partner with Avborne and Air Canada Services in a move aimed at reducing maintenance expenses.

1400....Bank of America
Bank of America Corp. has cut about 1,400 employees in Massachusetts in its merger with FleetBoston Financial Corp., about half of its total job loss in New England, the bank has told elected officials. The Massachusetts layoffs are double the number the bank had previously disclosed

April 2005

825-875....BMC Software
BMC Guides Down, Sets Layoffs
BMC Software previewed a fourth-quarter earnings and revenue shortfall Monday and set plans to cut about 12% of its global workforce.

800.... Chicago City Schools
City schools brace for cuts
800 teaching jobs, programs targeted

There you have it. Take a good look at the bolded job losses due to mergers above. I defy anyone to tell me how the "American Job Creation Act of 2004" is going to create any jobs. In fact, if someone can figure out exactly how many it will cost I would appreciate an estimate.

Bear in mind that many of those layoffs above have not been felt yet, especially in telecom and banking. Meanwhile the FED is hiking away and assumes that corporate spending will pick up the slack if consumer spending slows.

I do not know what the FED is smoking but whatever it is please send me some. Consumer spending is now 70% or more of GDP. WHEN (not IF) that falls off the cliff corporate demand will NOT pick up the slack. Whatever spending corporations do will be to improve productivity (as McDonalds is doing) and that will COST jobs. Mergers will cost jobs. A slowdown in housing will cost jobs. More outsourcing will cost jobs.

This "recovery" is on its last legs and the FED and most economists are clueless. Without jobs and rising real wages, housing (the only thing holding the economy together) will collapse.

I am searching for jobs. Do you see any coming? I don’t.

http://globaleconomicanalysis.blogspot.com/
Mish

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