Wherein the mask doesn't just slip, it falls onto the floor with a loud, reverberating clatter

. - by New Deal democrat

I love posting highly polarizing diaries at times like this.

...there have been times (many, many times) in my career where I've been paid hefty hourly fees, (even alongside a few folks that are working for the administration, now) for creating the very sh*t to which this crowd reacts, as if it was factual (LOL!), and as if it should be accepted at face value (which is the intended purpose of it, of course; but it has NOTHING whatsoever to do with the reality)

The Pied Piper of Doom, October 2, 2013

There is a doctrine called "false in one, false in all." It means that once a person has been found to or has admitted to a deliberate deception about one thing, everything they say should be treated as unworthy of belief. I find nothing so loathesome as deliberate deceit, and not far behind are those who enable or approve of deliberate deceit to advance their objectives. That is why I have continued, and will continue, to call this out.

Unfortunately the proprietor of the biggest "left" community blog and several senior persons past and present have regularly shielded the Pied Piper from equal enforcement of their site's rules, even to the point of allowing the posting of virtually an entire copyrighted LA Times article, something that supposedly gives rise to immediate banning.

In this case, finally, all pretense has been dropped. If Truth appears in anything written by the Pied Piper, it is strictly as a passerby, a happenstance. If it helps to achieve some other end, fine, and if it doesn't, then Truth must be denigrated, attacked, and insulted. Revealing the truth isn't the objective; rather, making those who object to his deliberate deceits feel unwelcome enough to leave, is. That isn't me saying so. It is the Pied Piper himself saying so.

Read More

No Commodity Based Inflation in the Works

Above is a weekly chart of the overall commodity index for the last three years.  While heavily weighted towards oil, other commodities are represented in the numbers.  What's important on the above chart is the incredibly weak price pressure the economy is receiving from the commodities complex overall.  This ETF has printed successively lower highs over the last two years.  Momentum is weak and there is little meaningful volume inflow driving prices higher.

In short, there is nothing on the chart to indicate commodity inflation is in the cards for the foreseeable future.

Read More

Republican Minority Decides To Send US Into Recession

The federal government has shut down, largely as a result of a minority of Republicans bullying the Speaker of the House into a no compromise position.  While Boehner does have the votes in the House to pass a continuing resolution to fund the government, he would have to do so with a majority of Democratic votes.  Should he do this, the consensus among political analysts is he would lose the speakership (which is probably a correct assessment).

However, what has been completely lost among the Republican rump is that government spending is essential to the economy.  In addition, it has been essential for an incredibly long time and the low level of federal spending over the last few quarters has been a primary reason for slow economic growth in those quarters. 

Let's start with the simple GDP equation: GDP=C+I+X+G.  Yes, the "G" stands for government spending.  Using basic math analysis (lost on the rump), if you remove one element from one side of the equation involving addition, you lower the value on the other side. 

Now, let's look at historical data from the CBO. Below is a chart that shows the percentage of government spending relative to GDP:

Federal government spending -- under both Democratic and Republican administrations -- has in general comprised about 20% of GDP.  And yes, the total did go up as a result of the worst recession in the last 70 years, but the percentage is in fact going down.

Here I would insert a chart from the BEA to show the federal government spending was the primary result of show economic growth over the last three quarters.  However, the website is down because of the shutdown, so I'll link to this piece I wrote on August 6th that shows the sequester is in fact a primary reason for weak economic growth over the last three quarters.  Here's the chart from that piece that shows federal government spending has in fact substracted from growth over the last three quarters:

No economy can afford to have this much of an economic hit.  More importantly, an economy recovering from a financial crisis -- which will inherently lead to slow growth -- can afford a shut down even less.

There is only one conclusion: the Republican rump wants to cause a recession.

Read More

Oil Is Still At Elevated Levels

For the last several months, oil has been trading between the 102/104 and 108 level.  Over the last few trading sessions prices have moved below the 102 level, trending to just above 101.  However, prices rebounded strongly yesterday on solid volume.

Interestingly enough, this has not translated into higher prices at the pump:

Read More

An important announcement from Bonddad and New Deal democrat

Although I'm not a fan of the Grateful Dead, I have to admit the phrase, "what a long strange trip it's been" has been running through my head as I ponder recent developments.

I started blogging at the end of 2004 on Daily Kos under the name Bonddad.  Before I was a lawyer, I was a bond broker where I bought and sold bonds to money managers, insurance companies and banks.  This is where my internet name comes from -- a "bond dad" is (or maybe was) a Wall Street term for a very successful bond broker (completely as an aside; I went to law school with another guy who was a broker.  We were on law review together.  When we first met as a group, we exchanged emails and after finding out that I was bonddad@.... he said, "so you're the one who took that name!").  Within what I guess was a year or so, I was making it to the Rec list, where my internet prominence grew (although I was hardly a household name).   I wrote pretty exclusively about the economy on that website for 6-7 years.  I left that blog largely because the level of discourse -- especially in the area of economics -- had devolved to the point of lunacy.  While I wrote for the Huffington Post for a few years, I stopped writing there for the same reason. 

I started this blog on December 6, 2006.  Here's a link to the very first post, where I wrote:

Last week there was a deluge of data hitting the street. This week we have far fewer items. Productivity, factory orders and non-ISM numbers are on Tuesday. Weekly jobless claims come on Thursday. Last week we say a big increase in construction related losses. We'll have to see if that trend continues this week. Most people will probably be waiting for Friday's employment report to see where the economy stands. 

What a deep statement that was....

Oddly enough, my mother died within a few months of starting this blog and frankly, the daily discipline of writing about the economy really helped to get me through that time.

NDD and I "met" on Daily Kos sometime over the last 6-7 years.  We wrote a series of posts together.  I think our first really big collaboration was a series of 4 articles on the Great Depression that were also posted on the Huffington Post.  I frankly forget when NDD started writing here but it's been at least a few years and he's been a welcome addition to the blog.

If I was going to describe the difference between our basic approaches, I'd say that he is more of a true economist while I am still a trader at heart.  NDD looks at the fundamental trends in the economy without analyzing how that effects potential trades while I'm looking for actionable information to make money.  And because of that basic difference, I think we provide some of the best overall "real" economic data on the net.  It certainly isn't for everyone; in fact, our overall readership has remained between 800-1000/day for the duration of the blog's life.  But when I look back at our level of success -- that is, our overall correct calls for the economy and the markets -- we've been right more than wrong.
 
About a year ago, I received a communication from the website XE.com who wanted to add economic commentary to their website.  We exchanged a few emails about the possibility, but the negotiations slowed at the beginning of the year.  Over the last few months they picked up again culminating in our signing contracts with them to provide content.  And the best part is we're finally getting paid!  On top of that, they have over 14 million hits per month on their website, so our visibility will increase. And we'll eventually be doing podcasts.  I'll be doing one/week that focuses on international developments while NDD and I will be doing a bi-weekly podcast on the US economy.

So, what's going to change from my end?  My international postings will go to XE for obvious reasons -- they're a currency website, after all.  I'll also be posting shorter pieces mostly on important economic data releases.   My US stuff will probably stay here.  I'm also going to be posting more charts here, focusing on general market trends.

For those of you who have been with us since whenever, I want to encourage you to make the jump with us over to the new site.  None of the content will change; it will just be posted in a different place.  And from our perspective, we'll be making money (finally!) from the deal along with gaining a wider audience -- and an audience who would find our analysis useful.

----

New Deal democrat here: I would like all of our readers to take to heart two things. First of all, I hope you'll be happy for us. For my part, what this means is that I'm going to get paid for doing something that I love to do anyway, and I've been doing for free for eight years. Secondly, it's not going to change the type of material I post, let alone its content, by one iota. In fact, the site explicitly wants us to continue to post the same nerdy analysis we've both been doing here. And, after serious consideration, I've decided that I'm keeping the nom de blog "New Deal democrat." If some commenter over there doesn't like it, too bad for them (although the site is internationally focused, so I expect a lower proportion of RW nutjobs than on, e.g., Business Insider). So if you are a reader that started with us way back in the Daily Kos days, i very much would like you to follow us over and feel free to comment - and don't freak out that it is a Canadian-based currency trading site, Eh?

One of our concerns was that you, our established readers, wouldn't be shut out of reading our material. And you won't. You won't even need to register to read our posts. If you want to comment, you'll need to register, that's all. There's good news there as well. The comment system at XE.com is much more thread-friendly than Blogger's.

And just to be sure you're aware of what we post, I'm going to be posting links here so that you can click right over from the Bonddad Blog to the post on XE.

Further, every couple of weeks you'll be able to hear the dulcet tones of my midwestern voice, because we are doing podcasts as well. If you thought I was sarcastic in print, you ain't heard nothin' yet!

Plus, we aren't obligated to post all of our material at XE. So we'll continue to post here as well, although obviously the volume will go down.

It's been quite a journey. We both now join a pretty select group of bloggers, who have been able to leverage their talent into paying gigs - mind you, not that either of us can retire on this! But can my dream of becoming the new Mark Haines (the colorful, take no BS part, not the congestive heart failure part) of economic videojournalism be in reach? MSNBC, CNBC, and Bloomberg, call me maybe! ;-)

Read More

Consumer prices likely up 0.1% in September, YoY up only 1.1%

- by New Deal democrat

For the last few months I have been using the change in the price of a gallon of gas to forecast that month's CPI in advance. My point has been, that all you really need to know about inflation is the price of gasoline. So far each prediction has turned out to be within 0.1% of the actual number.

Yesterday the E.I.A. reported for the final week of September, so we can estimate the inflation rate now. My method is to take the change in the price of a gallon of gas and divide by ten, then add 0.1% to 0.2% to account for core inflation, or else divide by 16 to be more conservative, to arrive at the non-seasonally adjusted inflation rate.

In August the average price of a gallon of gas was $3.57.4 This month it was $3.53.2. That is a -1.2% decline. Dividing by 10 gives us -0.12%, and adding 0.1% to 0.2% gives us -0.02% to +0.08%. Dividing by 16 gives us a -0.08% decline, and adding 0.1% to 0.2% gives us +0.02 to +0.12%.

The seasonal adjustment for September last year was +0.07%. This gives us a final seasonally adjusted inflation rate that rounds to +0.1% +/-0.1%.

That will replace last September's +0.5% inflation rate, so that the YoY inflation rate will be +1.1%, 0.1% above the lowest YoY inflation rate for the last 50 years outside of the great recession. This inflation rate is also subdued enough to suggest that real YoY wages have probably increased again in September, and may be closing in on their all-time high set in 2010.

Read More

Abe's Policies Are Starting to Have a Positive Impact

It was about this time last year when Abe's policies began to have an impact on investor's expectations for the Japanese economy.  As such, it makes sense to look at some of Japan's macro data to get a feel for  the programs success or failure.  Let's start with a look at GDP:

This is where we see the strongest and most positive impact.  In 1Q13 annual GDP printed at a 3.8% rate and in 2Q13 GDP printed at a 2.6% rate.  Private consumption rose .5% in both of those quarters -- which is an incredibly important development for the following reason: deflation is at the root of Japan's problems.  In a deflationary environment, consumers delay purchases as they think that prices tomorrow will be cheaper than prices today.  This obviously slows overall growth, especially in a first world economy where consumer spending accounts for over 70% of the economy. Part of Abe's plan is for the Bank of Japan to double the monetary base in a short period of time, creating inflationary expectations.  The central purpose of this is to get consumers to change their inflationary expectations from deflationary to inflationary.  This means that consumers think prices will increase tomorrow, so they make more purchases today at what they think will be cheaper prices.  The above results indicate that Abe's policies are having the desired impact at the consumer level.

In addition, Abe wanted to devalue the yen on increase exports.  Here's a chart of the yen for the during of the post Great Recession price performance:

Despite having a very weak economy, the yen rose post recession because investors viewed the currency as a safe haven.  At the same time, this increase in the yen's overall value hurt Japanese exports.  At the end of last year, we see a large decrease in the yen's overall value along with a price consolidation over the last two quarters.  This decrease in value has had a positive impact on Japanese exports:

In the first and second quarter we see an increase in real exports of 1.5% and 3.6%.  While the 3 quarter number does show a decrease, it's only one month of data.

Read More