Updated:  Friday January 30, 2004              "News with a twist of money..."

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Fed Defenses of the Dollar: 

Are They Dreaming?

Once again, the government has issued numbers about the gross domestic product.  Once again, pardon us, but the numbers don't bode well.  Join me for a trip through the official press release and I'll share with you my own case of the blues...

       GROSS DOMESTIC PRODUCT:  FOURTH QUARTER 2003 (ADVANCE)

    Real gross domestic product -- the output of goods and services produced by labor and property
located in the United States -- increased at an annual rate of 4.0 percent in the fourth quarter of 2003,
according to advance estimates released by the Bureau of Economic Analysis.  In the third quarter, real
GDP increased 8.2 percent.

Hmmm...so the rate of increase has fallen in half...this is almost a sign of honesty.  Not completely, but it's a sign that enough people like you and me have been reading the news releases that the feds are finally admitting that the GDP may not be soaring the way they were hoping it would.

    The Bureau emphasized that the fourth-quarter "advance" estimates are based on source data that
are incomplete or subject to further revision by the source agency (see the box on page 3).  The fourth-
quarter "preliminary" estimates, based on more comprehensive data, will be released on February 27,
2004.
 

We already expect those revisions will be up or down depending on the political situation more than the reality of the large (and increasing) number of unemployed in the country.  To put it nicely, it seems to us that the GDP figures mirror Bush popularity.  When popularity falls, GDP increases at amazing rates - and micraculously - without hiring more workers. Is this an amazing economy, or what?

    The major contributors to the increase in real GDP in the fourth quarter were personal consumption
expenditures (PCE), exports, equipment and software, inventory investment, and residential fixed
investment.  Imports, which are a subtraction in the calculation of GDP, increased.
 

Oh this is easy: PCE is up because of refi's (and this bumps up residential fixed investment, too...) The frightening thing, that the report doesn't draw enough attention to is that imports increased.  Why?  BECAUSE MORE OF WHAT SHOULD BE U.S. JOBS HAVE BEEN STOLEN AND MOVED OFFSHORE BY GREEDY CORPORATISTS, of course...

    The deceleration in real GDP growth in the fourth quarter primarily reflected a deceleration in
PCE, an acceleration in imports, and decelerations in equipment and software and in residential fixed
investment that were partly offset by an acceleration in exports and an upturn in inventory investment.

Again, ask yourself, "What would make the rate of spending decrease (relatively)  and imports increase?  If you answer "jobjacking" you too can become an economist!

    Final sales of computers contributed 0.25 percentage point to the fourth-quarter change in real
GDP after contributing 0.65 percentage point to the third-quarter change.

Let me see, if the annual rate is 4% in the fourth quarter, and we back out the grossly overstated computer hype, this would mean what?  A 3.75% annual growth rate.  OK, stay with me.  If the Fed is increasing the money supply at something north of 6%, that means U.S. workers will net the difference between GDP growth and money supply growth...in other words, look for a net loss of 2.25% in how your well being works out for the fourth quarter (at an annualized rate).

    The price index for gross domestic purchases, which measures prices paid by U.S. residents,
increased 1.0 percent in the fourth quarter, compared with an increase of 1.8 percent in the third.
Excluding food and energy prices, the price index for gross domestic purchases increased 1.1 percent in
the fourth quarter, compared with an increase of 1.3 percent in the third.

FOOTNOTE.--Quarterly estimates are expressed at seasonally adjusted annual rates, unless otherwise
specified.  Quarter-to-quarter dollar changes are differences between these published estimates.  Percent
changes are calculated from unrounded data and annualized. "Real" estimates are in chained (2000)
dollars.  Price indexes are chain-type measures.

           This news release is available on BEA's Web site at <www.bea.gov/bea/rels.htm>.

    Real personal consumption expenditures increased 2.6 percent in the fourth quarter, compared with
an increase of 6.9 percent in the third.  Durable goods purchases increased 0.9 percent,

(which doesn't keep up with the monetary inflation rate) compared with an
increase of 28.0 percent  (which was a hosed up number, and we all knew it). 

PCE purchases of motor vehicles decreased in the fourth quarter after
increasing in the third.  The fourth-quarter downturn was partly offset by an upturn in motor vehicle
inventory investment. (In other words, unsold new cars & light trucks piling up in rented football fields up north)

PCE nondurable goods increased 4.4 percent, compared with an increase of 7.3
percent.  Services expenditures increased 2.1 percent, compared with an increase of 2.8 percent.

    Real nonresidential fixed investment increased 6.9 percent in the fourth quarter

(which is about flat compared with inflation of the money supply) , compared with an
increase of 12.8 percent in the third.  Nonresidential structures decreased 3.0 percent, compared with a
decrease of 1.8 percent.  Equipment and software increased 10.0 percent, compared with an increase of
17.6 percent.  Real residential fixed investment increased 10.6 percent, compared with an increase of
21.9 percent. Refi's chilling)

    Real exports of goods and services increased 19.1 percent in the fourth quarter, compared with an
increase of 9.9 percent in the third.  Real imports of goods and services increased 11.3 percent,
compared with an increase of 0.8 percent. If there weren't so many US jobs being stolen this would actually qualify as good news, but a good sized chunk of the exports doesn't go to foreign consumers, it goes to support job theft.  You know, like selling equipment to a company in India in order to have it available to the customer service teams there that are quickly replacing US-based workers. 

    Real federal government consumption expenditures and gross investment increased 0.7 percent in
the fourth quarter, compared with an increase of 1.2 percent in the third.  National defense increased 1.8
percent, in contrast to a decrease of 1.3 percent.  Nondefense decreased 1.6 percent, in contrast to an
increase of 6.5 percent.  Say, here's a key point: The Bush administration is delivering less nondefense spending.  How about that?

Real state and local government consumption expenditures and gross
investment increased 0.9 percent, compared with an increase of 2.1 percent.

    The real change in private inventories added 0.61 percentage point to the fourth-quarter change in
real GDP, after subtracting 0.13 percentage point from the third-quarter change.  Oh oh...what's this? Down here buried in the new release we find another "fiddle" number, .61% that needs to come out because it's inventory build up?  OK, from the top then:

4% annual rate, less the final sales of computers means 3.75% annual rate.  Now, let's back out this inventory build up which means we have a 3.14% annual rate

Private businesses increased inventories $6.1 billion in the fourth quarter, following decreases of $9.1 billion in the third
quarter and $4.5 billion in the second.  From which we would infer that all the refi money earlier in 2003 ended up being spent on things that had already been built and were in someone's inventory.  Wonderful...and now inventories are building up again... get the picture?

    Real final sales of domestic product -- GDP less change in private inventories -- increased 3.4
percent in the fourth quarter, compared with an increase of 8.3 percent in the third.  Which sounds fine, but they don't back out the computer dream as we did.


Gross domestic purchases

    Real gross domestic purchases -- purchases by U.S. residents of goods and services wherever
produced -- increased 3.7 percent in the fourth quarter, compared with an increase of 7.0 percent in the
third. Less income usually means less spending, huh?


Disposition of personal income

    Current-dollar personal income increased $70.1 billion (3.1 percent) in the fourth quarter,
compared with an increase of $96.6 billion (4.3 percent) in the third.  Personal current taxes increased
$68.3 billion, in contrast to a decrease of $64.2 billion.  The upturn in taxes primarily reflected the drop-
off in advance payments of the child tax credit sent to taxpayers in the third quarter as part of the Jobs
and Growth Tax Relief Reconciliation Act of 2003.

What's buried in the data if you look the addendum to Table 10 is the admission that disposable personal income actually declined a bit, from $7.8723 to $7.8621 billion. in the quarter, that's in chained 2000 dollars.  So if you felt you worked harder in the fourth quarter and didn't make any headway, you're absolutely right.  You actually lost ground (about 1/10th of 1%).  Doesn't it make those late nights at the office worthwhile?

    Disposable personal income increased $1.7 billion in the fourth quarter, compared with an increase
of $160.8 billion in the third.  Real disposable personal income decreased 0.5 percent, in contrast to an
increase of 6.3 percent.

    Personal outlays increased $62.7 billion (3.1 percent) in the fourth quarter, compared with an
increase of $161.8 billion (8.4 percent) in the third.  Personal saving -- disposable personal income less
personal outlays -- was $127.2 billion in the fourth quarter, compared with $188.1 billion in the third.
The personal saving rate -- saving as a percentage of disposable personal income --decreased from 2.3
percent in the third quarter to 1.5 percent in the fourth.

Again, buried in the number was the personal savings rate (last item ahead of the addendum in table 10) which collapsed from $188 billion to $127 billion for the quarter.  That's about $434 for each person in the country...so if you had a family of four, you should have saved or plowed into the market, about $1,300 during the fourth quarter of last year.  Now, I'm no spendthrift, but that's a number cruncher's wet dream.  All you need to do is estimate U.S. population at about 292-million or the workforce at 146-million and divide the personal income numbers and you'll see how the fix is in.

Take the lead number in Table 10.  It says that A bit more than $5-trillion was received by workers, right?  So let's assume a workforce of 146-million and see what's up.  Ready?  $42,795 is what each worker ought to make at an annual rate - between compensation $35,127 annual rate plus supplements to wages and salaries - about $7,668.

Current-dollar GDP

    Current-dollar GDP -- the market value of the nation's output of goods and services -- increased 5.1
percent, or $139.3 billion, in the fourth quarter to a level of $11,246.3 billion.  In the third quarter,
current-dollar GDP increased 10.0 percent, or $260.3 billion.


2003 GDP

    Real GDP increased 3.1 percent in 2003 (that is, from the 2002 annual level to the 2003 annual
level), compared with an increase of 2.2 percent in 2002. Meanwhile, the money supply galloped ahead at 6+% so the average worker fell 3% behind after discounting the effects of watering down our money - which is why we can't trust government with a printing press to make up money when they feel like it - or do so to please their non-governmental central bank masters...

    The major contributors to the increase in real GDP in 2003 were personal consumption
expenditures (PCE), federal government spending, equipment and software, and residential fixed
investment.  Imports, which are a subtraction in the calculation of GDP, increased in 2003.

    The acceleration in real GDP in 2003 primarily reflected an upturn in equipment and software, a
smaller decrease in nonresidential structures, and an upturn in exports that were partly offset by a
downturn in private inventory investment.

    The price index for gross domestic purchases increased 1.9 percent in 2003, compared with an
increase of 1.4 percent in 2002.

    Current-dollar GDP increased 4.8 percent, or $503.1 billion, in 2003.  Current-dollar GDP
increased 3.8 percent, or $380.0 billion, in 2002.

    During 2003 (that is, measured from the fourth quarter of 2002 to the fourth quarter of 2003), real
GDP increased 4.3 percent.  Real GDP increased 2.8 percent during 2002.  The price index for gross
domestic purchases increased 1.6 percent during 2003, compared with an increase of 1.7 percent during
2002.


BOX
    Information on the assumptions used for unavailable source data is provided in a technical note
that is posted with the news release on BEA's Web site.  Within a few days after the release, a detailed
"Key Source Data and Assumptions" file is posted on the Web site.  In the middle of each month, an
analysis of the current quarterly estimates of GDP and related series is made available on the Web site;
click on Survey of Current Business, "Business Situation."



    BEA's major national, international, regional, and industry estimates; the Survey of Current
Business; and BEA news releases are available without charge on BEA's Web site:

                             <'www.bea.gov>


    Summary BEA estimates are available on recorded messages at the time of public release at the
following telephone numbers:

               (202) 606-5306     Gross domestic product
               (202) 606-5303     Personal income and outlays
               (202) 606-5362     U.S. international transactions

    Most of BEA's estimates and analyses are published in the Survey of Current Business, BEA's
monthly journal.  Subscriptions and single copies of the printed Survey are for sale by the
Superintendent of Documents, U.S. Government Printing Office.  Internet:  <bookstore.gpo.gov>;
phone: 202-512-1800; fax: 202-512-2250; mail: Stop SSOP, Washington, DC 20402-0001.
                        *          *          *
                Next release -- February 27, 2004, at 8:30 A.M. EST for:
                Gross Domestic Product:  Fourth Quarter 2003 (Preliminary)

Gee, I can hardly wait...
 

Thursday

Wrong Move

Now that we've had a good night's sleep to think about it, and we've got an hour or two of trading to look at, it appears that the Fed's weak defense of their sleight of hand in trying to look like they actually did something will be falling on deaf ears among the markets.  Here's why. 

To begin with, the Wednesday move amounts to nothing more than jawboning.  Remember, the Fed didn't do anything but they simply did what the Fed does best - talk (or not talk) about the long term rate future.  As we pointed out to Inside Report subscribers previously, when you read what Greenspan and company are saying, it many times amounts to a weak "we don't know" although somehow when couched in weasel terms, such as "the outcome of such a policy is not certain" it somehow passes muster.  We continue to be amazed as how FedSpeak has become a language without review.  Say something in FedSpeak and it's taken as financial Gospel. Good grief!

The outcome of the Fed change of language has been predictable.  In the short term, the price of gold FELL because the tea leaf readers think the Fed will actually defend the dollar.  In fact, the signified coming end of low rates should be a hell of a BOOST for gold because it means  that INFLATION is returning.  That's always good for the precious metals group.  If you play follow-me in the market, the "safe" thing to do is get whipsawed back into the long side of the market.  We genuinely expect by the end of the week that the recent bounced - which lasted several months - is really over, and that the dreaded second leg down of the major bear market is beginning - and that we will see three such down legs overall, with the last and most devastating coming in the 2005-2007 timeframe. 

Look at your headlines.  Take the Federal guaranteed mortgage backers - Freddie and Fannie - and see what has happened today: Reserve requirements are being increased for Freddie: http://biz.yahoo.com/rb/040129/financial_freddiemac_2.html.  You think they can raise capital by some method other than higher rates and fees?

Exxon Mobil profits are up on what?  Sure as hell not lower energy prices.  http://biz.yahoo.com/rb/040129/energy_exxon_earns_3.html Who is going to pay the bill?  You and me, natch.

Jobless claims fell slightly last week: http://biz.yahoo.com/rb/040129/economy_3.html  Next week, my own personal claim will be entered.  I know literally hundreds of readers who have been screwed out of being counted by a corporate sleight of hand that goes like this.  If you're a high paid executive (like I was), the company will offer you a "consulting" gig.  Then you "consult" for a month or two.  When the consulting runs out, your unemployment is abbreviated.  You drop off the rolls and you know what?  You weren't really "working" as a consultant, unless you paid in to state unemployment funds...and what lone consultant does that, for crying out loud?

U.S. business hiring that usually accompanies Christmas was all but gone this year... http://biz.yahoo.com/rf/040129/economy_helpwanted_1.html   People we know will take all comers who want to bet against the US economy losing 2-3 million more jobs before election day.  http://ap.tbo.com/ap/breaking/MGADN6FY0QD.html Why do you think Bonesman alternate Kerry is being pushed up so hard right now?  The powers behind the presidency know they have blown it.  Even the Value Line forecast for year end is 1,400 points below where we are now, and my personal take is that's a low number. 

You think the Feds have stopped playing in the 30-year bond market for no reason?  Who's gonna buy the ridiculous rates that they wanted based on maniacal spending habits of a "we know how to cook free lunches" Congress? The $44-trillion budget hole is just the start.  Congress has been robbing Peter to pay Paul for years and even our Social Security Trust fund is nothing more than a stack of IOU's written by politicos more interested in re-election than doing the right things for the country. 

Well, enough of a rant.  If the market is significantly higher - or even the same - at year end as it is now, it will be by the Grace of God and not by the wisdom of the Fed.  We're all running on borrowed time on pieces of paper that don't mean squat.  I've always been a hard asset guy - and now that we've in a 100% debt free situation, I'm loathe to take on debt because that's making a deal with the devil. 

Now let me take an aspirin before I stroke out...but I think the markets will savvy up this week, too.  Fed's a non-power in a freefall for the Walbuck and that's that.

Worse Worm

A more vicious form of the mydoom worm is spreading and targeting Microsoft products http://news.bbc.co.uk/1/hi/technology/3439959.stm.  Time to update your anti-virus software?

Texas Bureaucrats

I don't usually go into long rants about bureaucracy, because it's a fact of life, and we can't do much about it.  But let me tell you the adventure we went through yesterday. 

I went to the Department of Public Safety and plopped down my Florida license.  "Sorry sir, but I need to see your Social Security card and your vehicle registration."

You're kidding, right?  "No sir..."  But it's against the law to require a Social Security Card for anything for an employer or to file a claim, right?  "No sir, not in Texas." "You'll need your vehicle licensed, too."

Wonderful.  OK, so we go to get the Social Security Card.  That takes two weeks, but the print out shows that, as Popeye says, "I ams who I ams." 

Then we're off to the courthouse for the license.  "Sorry sir, you have to go to an inspection station."  Where's the closest one?  "I think there's one at Wal-Mart..."

Not for three frigging months, there hasn't been.  A quickie lube a mile away did have the inspection paperwork.

Then it's back to the courthouse.  "That's be $179.40, sir".  Adding insult to injury, I get a Space Shuttle license plate.  A piece of Columbia (a seat) landed on my neighbors property...

Then with a whole 30-minutes to spare, we were off to the DPS.  This time, I was able to get my license.  But could Elaine?  No sir.  Being inherently honest, she said, well, yes, I do have a vehicle that we will be registering in Texas that's in my name.

"Sorry mam, you cain't get a Texus license until that veekull is licensed." 

Today, instead of six stops to get a license, we figure we should be able to get it down to three stops.  I'll let you know tomorrow.  If we ever get back from town. 

Lesson:  The people of Texas are a unique breed.  However,  bureaucrats are bureaucrats the world over.

Wednesday

Fed In a Box:  Higher Rates Coming

Special Update:  The Federal Reserve today acted as we expected - leaving rates unchanged, but signaling that the low rates would not last forever.  Key point: The Fed will have to raise rates this year to prevent a collapse of the dollar - and they're hoping to keep things rolling till election time.    Here's the word from their press release:

The Federal Open Market Committee decided today to keep its target for the federal funds rate at 1 percent.

The Committee continues to believe that an accommodative stance of monetary policy, coupled with robust underlying growth in productivity, is providing important ongoing support to economic activity. The evidence accumulated over the intermeeting period confirms that output is expanding briskly. Although new hiring remains subdued, other indicators suggest an improvement in the labor market. Increases in core consumer prices are muted and expected to remain low.

The Committee perceives that the upside and downside risks to the attainment of sustainable growth for the next few quarters are roughly equal. The probability of an unwelcome fall in inflation has diminished in recent months and now appears almost equal to that of a rise in inflation. With inflation quite low and resource use slack, the Committee believes that it can be patient in removing its policy accommodation.

Voting for the FOMC monetary policy action were: Alan Greenspan, Chairman; Timothy F. Geithner, Vice Chairman; Ben S. Bernanke; Susan S. Bies; Roger W. Ferguson, Jr.; Edward M. Gramlich; Thomas M. Hoenig; Donald L. Kohn; Cathy E. Minehan; Mark W. Olson; Sandra Pianalto; and William Poole.

2004 Monetary policy

We look for gold to give up its $4.90 gain posted ahead of the Fed - and a pullback to $400 would not surprise us.  But that'll be short term.  The Fed's in a box and world markets know it.  Without core manufacturing jobs, the US economy is a slow motion disaster...

Kerry: Bonesman's Alternate Wins NH

Yeah - no surprise here:  John Kerry - the so-called "challenger" to fellow Bonesman George Bush - has won New Hampshire.  Tell me you're not surprised by the outcome...  Details at http://apnews.myway.com/article/20040128/D80BIR980.html make it almost sound like there's a difference between Bush and Kerry, but to us, it's the same "in crowd" with different labels. 

Speaking of Kerry, you know that he was a big pusher of the BCCI investigation back in 1990-1991?  Well today - a mere 12 years later, the BCCI scandal is still making headlines in England:  http://english.aljazeera.net/NR/exeres/422C960F-2457-411F-B23D-1C78EE367C80.htm. As we duly reported for subscribers recently, Kerry was a senator pushing more aggressive action against the perps at the Bank of Commerce & Credit International, but didn't make much headway.  We find it curious how Kerry's rise to the fore of US politics seems inversely related to the BCCI prosecutions.  No Bones about it.  'Course Bush is still Bone choice #1...but if that doesn't work out...

Cool and Cold

We touched 22 degrees here north of Palestine Texas last night, but that's nothing compared to the Northeast where more snow is due this coming weekend. http://apnews.myway.com/article/20040128/D80BIE280.html. 

Israeli Kills 8

More Palestinians were killed in the latest Israeli incursion into Gaza - 8 this time: http://english.aljazeera.net/NR/exeres/77B6D038-EF01-4C0F-97DB-541D87BD62BE.htm.  We're still scratching our heads at the so-called "security wall" the Israelis have built.  Talk about drawing the line in the sand, this is the ultimate f-y to the Palestinians.  Surprised why they're angry?

Speaking of Homeland Security

You noticed that the 9-11 investigators are asking for more time to complete the probe of the 9/11 event?  Details of how the politicos want this done and buried before elections at http://www.nytimes.com/2004/01/28/national/28TERR.html?ei=5062&en=6f6d24ae738db297&ex=1075870800&partner=GOOGLE&pagewanted=print&position=.

What's the real story?  The Bush administration did all it could, in a subtle way, to block progress of the panel by not turning over the  requested papers and emails and such to the investigators.  By delaying the turnover of material, the administration appears to have deliberately botched the probe.  Now, with investigators asking time to sort it all out, the administration is taking a "hell no" attitude.  What's driving that?  We could speculate, but there are already far too many conspiracy theories floating around the 'net.  I for one am willing to wait a bit longer to get closer to the truth behind what happened.  We presently hold the view that it was an oil patch gang war between the Middle East interests and the Texas oil barons as some level...with fundamentalist Islam versus Western Corporate Consumerism at another and we're never really going to know precisely why and by whom the killers were turned loose.

France Bans Headscarves

Say what you will about France, this is a ballsy move: The French Cabinet has decided to ban headscarves in public schools.  http://ap.tbo.com/ap/breaking/MGAZUOBCZPD.html. 

Fund Fee Rip Offs...

One of our pet peeves has been the seemingly excessive fees charged by Mutual Funds.  Now, we find in the NY Post today, a great article about what  is being called by one senator, the world's largest "skimming" operation: http://www.nypost.com/business/16767.htm.  We haven't heard from Don Christensen, author of the classic "The Coming Mutual Fund Crisis" lately, but when we do, we'll ask for an update on his new book on the subject we understand is in the works.

More Retirement Issues

The Senate and House are still working on how to bail out many pension funds.  The problem is that since the Feds essentially exited the 30-year bond market, the contributions required by major corporations have gone through the roof.  And explanation of all this - and it impacts businesses like airlines can be clicked at http://ap.tbo.com/ap/breaking/MGABVPCFZPD.html.  Meantime, this weekend for subscribers, we'll get into the ramifications of the Fed's ending 30-year instruments.  Free Preview: We think when the feds stopped dealing 30's, it meant they saw the end of the present financial system in the country within 30-years.  Now we'll be asking the question, how long before the feds exit the 10-year instruments?  Subscription info at http://urbansurvival.com/subscribe.htm.

Value Line: Market 1,200 Overpriced

Amazing: Someone is actually forecasting a lower market!  Hallelujah!  http://biz.yahoo.com/cbsm/040128/a79bad2f576e4302a48b361386151852_1.html

Above, Parr

The guy who made the phrase "I kid you not..." has passed away at age 85.  Jack Parr, the man who literally built the Tonight Show and spawned the genre of late night television has passed on: http://ap.tbo.com/ap/breaking/MGA7ULT7ZPD.html. 

We think it's interesting that one of the battles Parr fought is still being waged today - specifically, the issue of what is indecent and who makes that call.  During his reign, according to the article, Parr was busted by network censors, for wanting to do a bit about confusion between Wayside Chapel and Water Closet...  Parr walked out, but within a month was brought back and opened his first returning monolog apologizing for that brief interruption.

As we scanned the headlines this morning, one of the stories that jumped out at us concerned how Clear Channel Communications was facing a $755,000 fine for airing alleged obscenity.  http://apnews.myway.com/article/20040127/D80BCQB00.html Seems that wherever there are Powers That Be, someone will try to decide for us what is obscene and what is not.

I may be a bit too much of a Constitutional  cowboy on this, but as best I can tell, there should never have been the FCC's seven bad words you weren't supposed to say on the radio.  To limit the expression of free speech is expressly forbidden by the Constitution.  More important, in the world of broadcasting, people always have the opportunity to vote by pushing another channel.

Like the Sunday Bible banger who preaches fire, brimstone, and damnation on Sunday, yet stops at a topless bar three nights a week on the way home from work, I find double standards offensive.  What Parr gently poked at in his day is still with us.  I've got to wonder what kind of a world we would have if there were no regulation of morality, save non-interference with our fellow humans.    Think what it would be like with no speed limits, but strict accountability for accidents, no "forbidden words" and no legislation against any kind of drugs.  Seems to me that would be freedom...real and near total freedom.  Wrong country, huh? 

Still, there isn't better, even if a Bonesman will be the next prez...but if you ever hear of such a place, please let me know.

Tuesday

Fed Surprise?

No, it's not likely, but there is tremendous pressure on the Fed today - from both directions.  On the side of increasing the interest rates, the Fed is being pressured by the falling US dollar.  As of this morning it look less than 80% of a Euro to buy an American Walbuck - which just a few years ago would have cost something like 1.2 Euros.  In the currency markets this is one hell of a swing.  Some general background from Forbes at http://www.forbes.com/home_europe/newswire/2004/01/27/rtr1228340.html is worth reading.

But now let me show you the reason we could actually get a shocking slight decrease in rates.  Remember how quickly the money supply was being inflated by the Fed?  We looked at the rates this morning and noted that on the last Fed report, the M-1 figure was up about 3% from November to December and 6.3% year-on-year.  http://www.federalreserve.gov/releases/h6/Current/ That would seem to suggest that the Fed could raise rates, maybe a tad, without the economy blowing over.

That's no longer the case.  Here's why.  With the rates now stable and no increases in home refinancings, the fraction reserve artists have no way of "borrowing money into existence".  The signs are clear and the mortgage banking business nationally is reportedly ready to axe 65-thousand jobs this year, which we pencil out to a small piece of the 2-3 million who will lose their jobs between now and election day.  If the Fed lowers rates, that might forestall a precipitous collapse of the housing market, but at the same time, the US Walbuck would tank in the forex (foreign exchange) markets.  What's a Fed to do?

We hope the answer is read.  We picked up a piece this morning out of South Korea that ought to send a shiver down the spine of any partially human bankster:  The South Korean money supply (rate of growth) shrank for the latest reporting period. It's the first time in three years that has occurred http://times.hankooki.com/lpage/biz/200401/kt2004012717153311900.htm. Their rates had been increasing  at 9.1% in 2001.

We look at South Korea as a bit of a canary in the mine.  A drop in their money supply could be viewed as a critical warning to the entire globe that deflation - which accompanies the longwave Kondratieff Winter - is still a very real possibility.

The Fed this month or next will run out of "wiggle room"  because if they raise rates they save the Walbuck and crash the domestic housing market.  If they lower rates, they crash the buck, but save the domestic economy.  However, lowering rates would also pump up the Dow which is already peaking too early for an election year rally.

So it's with a certain sense of fear that we watch the Fed today, mindful that they are likely to "stay the course" but this economy is the Titanic with the rocks of deflation on one side and the hyper-inflationary iceberg (Debtberg) on the other.  Lotsa luck.  Even if they postpone a decision now, there's nothing we can see on the horizon which will save the economy because the Bush administration has failed to recognize that at its core, the US economy is based on corporations, and corporations without regard to humans, are outsourcing what should have been recovery-driving jobs to China and other least cost producing nations.

To Do Item: Not that there's much you can do about Fed decisions, but there is one item.  John Crudele, shining economics writer at thge NY Post says it's time to gang up on your bank again and talk to them about adjusting your rates lower: http://www.nypost.com/business/16650.htm.

Bird Flew?

I don't know of any other way to describe the discovery of notorious bird flu in China now other than to speculate that meandering birds brought it there.  Still, it's a biggie to watch: http://ap.tbo.com/ap/breaking/MGAMQ82WXPD.html

The Criminator?

Arnold S. may have to pay back $4.5 million of campaign loans out of his personal wealth says a California body: http://ap.tbo.com/ap/breaking/MGADVTBXXPD.html.

Penthouse Dresses Up

After taking a turn toward the Hustler kind of audience, we note with interest that Penthouse is headed back for more artistic direction in its content and less blatant content.  http://www.nypost.com/business/16649.htm  As my late father said, when it comes to women, it's not what a man sees, it's what his imagination calls forth.  Penthouse I guess has learned the hard way that there's tasteful and then there's medical book stuff...

Cold Barn

Although it's not really a barn, Elaine & I are still living in our big shop area in the outbuilding, where a couple of hard-working heaters manage a 20-30 degree temperature differential with outside.  With 27 this morning, that means we work up to a brisk 55 this morning.  A lot of readers are sending us articles about how the cold snap is unseasonable and how there really may be a new ice age forming.  A bunch of reading at http://apnews.myway.com/article/20040127/D80B46LO0.html  Climate change snips include:

"Central O'ahu residents see twister take form

Maj. Joe Mecadon, a 47-year-old Air Force officer, witnessed it from start to finish. Mecadon said he saw the tornado begin to take shape as a funnel cloud at about 1:35 p.m., approximately one mile northwest of Royal Kunia.

"It wasn't like a powerful Texas twister, but it touched down in some pineapple fields near Kunia Road," said Mecadon, a former Texas resident who grabbed his camera the moment the tornado started to form.

Mecadon said the tornado connected to the ground from its cloud base for about four minutes. He estimated the tornado was between 1,000 feet and 1,400 feet in length. "

and

"Addendum to the Woods Hole link sent earlier. Implications for commodities anyone?

"The ocean level appears to be rising, causing problems of coastal flooding, aquifer intrusion, and disappearance of presently inhabited islands. Sea level rise is caused by:

Depletion of aquifers. Ground water, which may have been stored since ancient times, is pumped out for irrigation, drinking, household, and industrial uses (for example, power plant cooling). Used water finds its way to the sea via run off, or by precipitation of evaporated and transpired water. Expansion of ocean water, whose temperature appears to be increasing. Melting of land-supported ice, and calving of icebergs from glaciers. Production of continental snow and ice is not keeping pace with the melting and calving.

At the present time, the Gulf Stream is feeding too much warm tropical water into the North Atlantic Current for delivery to the Norwegian Sea and other seas bordering the Arctic Ocean. This incoming warm surface water is cooled by the floating ice and sinks to the bottom. Most of this cold bottom water exits the Arctic Ocean and surrounding seas via three paths [Ref. 4]: "

And it's only warming up to the 50's today...ugh!  The good news is that the insurance company has already paid off on the property so we now own the whole spread free and clear - after all the paperwork settles - and all we need to do is rebuild the house...  Not exactly what we had in mind but from a net worth perspective it didn't hurt.

A reminder that weekend's we do a bigger version of the daily reports.  If you'd like subscription information click over to http://urbansurvival.com/subscribe.htm and thanks to the dozens who have subscribed this month.  Every little bit is appreciated.

Bill Mail

A final note for this morning.  Regardless of your thoughts about ex-prez Clinton,  one thing I've inferred is that he was no techno-whiz.  Story at http://au.news.yahoo.com/040126/11/ng1n.html will be used by both sides, I expect.  Demos will say "What a great administrator!" while the Repubs will say "Proof he was an idiot...."   I'll sit back and say Bush and Clinton were both Yale men of the same ilk - so it's Tweedle Dee and Tweedle Flightsuit...

Monday

Stealing Our Government (jobs)!

You have no doubt heard about the latest high jinks on the jobjacking front: the idea that some U.S. government jobs would be exported to least-cost-labor countries, like India.  Well, in the highest insult I've heard yet on the topic, India is getting pissy about us saying "No!" to the export of U.S. (and state) government jobs that might otherwise go to the 21-million unemployed here in the USA.  Check out: http://news.ft.com/servlet/ContentServer?pagename=FT.com/StoryFT/FullStory&c=StoryFT&cid=1073281284712&p=1012571727088

Of course the lazy Congress, sucking at the corporate faucet, hasn't done anything to stem the flow of U.S. jobs overseas either.  In fact, there's a report out from a consulting outfit in Connecticut that says:

“Most companies begin outsourcing of business processes in areas that are not core competencies and are easily separated from other processes,” says Saugatuck Senior Program Director Michael Isaac, who is directing the ongoing survey project. “Payroll, accounts payable, and customer call centers are examples of such processes. But interest in outsourcing more complex processes such as procurement and logistics is rising. We’re seeing many companies taking a “nothing is sacred” approach to evaluation of outsourcing alternatives as they explore all options to increase their competitiveness,” says Isaac.

In fact, while the need to cut costs and to focus on core activities remain key drivers for the outsourcing of non-core business processes, BPO as a means of creating competitive advantage is on the rise. More and more, users seek to leverage the service provider’s process expertise to improve key business metrics such as customer service levels, quality levels, and cycle times. "
http://www.prweb.com/releases/2004/1/prwebxml100191.php

Don't expect the pressure on U.S. jobs to lessen any time soon.  In fact, if you read the Edith Lederer piece for the A.P. at http://ap.tbo.com/ap/breaking/MGAR3KBKWPD.html you just might get the idea that other countries are literally licking their chops at a chance to take on more and more U.S. business.

Not to sound like a broken record, BUT: When the Framers of the Constitution built the inspired document to protect us from tyranny, they had no clue that corporations would become so all pervasive.  As a result, despite debacles like John Law and the 1720's South Sea Bubble, the mindset was that corporations wouldn't ultimately replace the agriculture power - the mass of people.  Since the rise of corporatists globally, we've seen nothing but bottom line profit concerns with people considered only as grist for the machine.  A

All of which wouldn't matter, but when corporations control our media (save the glimmers of alternative thought on the Freenet, which we expect will ultimately be taxed to keep rabble under control) the people lose peaceful recourse.  Historically, when methods to address grievances are blocked, pressures build and revolutions are born...

$14-Billion Mess

The misadventures of Parmalat continue to grow almost daily.  http://news.bbc.co.uk/1/hi/business/3430155.stm Latest piece of mind on the subject coms from William Donaldson, chairman of the U.S. Securities and Exchange Commission.  His suggestion:  Go after the banks involved because clearly they didn't get the "big picture" of the fraud developing: http://ap.tbo.com/ap/breaking/MGAOWLDLWPD.html.

1% Rates: Safe Bet

With the Fed set to meet and keep interest rates steady, there's a wonderful article in Fortune today asking the question "Anybody heard from Greenspan Lately?"  http://www.fortune.com/fortune/investing/articles/0,15114,582218,00.html  As we mentioned to subscribers this weekend, the Deity Himself is in trouble if the European banks raise rates and we figure that's only a matter of time.  What concerns us most is that Greenspan is not a young man any more - and any health issues for him could result in a calamity.  Pray he stays well lest he become his own exogenous shock to the markets.  Who's being groomed?  Bernanke?

Al Qaida's New Targets   

The attack last summer on a Marriot hotel in Indonesia signified to us a change in targets by al Qaida.  We have mentioned previously that they are likely to attack U.S. corporate interests worldwide.  Now, some evidence of that being a correct insight comes from the follow-on trial in Jakarta: http://news.bbc.co.uk/1/hi/world/asia-pacific/3429497.stm.

'Bones" versus Dean

You are not alone if you thought the media made far too much of a "big deal" when Howard Dean give an impassioned speech following Iowa.  Apparently voters are not so much bothered as he's now to within 3-points of John Kerry, who as we noted for subscribers this weekend, learned who had what skeletons in their closet when he pushed the BCCI scandal probe in the early 1990's.  The latest poll is at: http://news.myway.com/top/article/id/43159|top|01-26-2http://news.myway.com/top/article/id/381234|top|01-25-2004::20:08|reuters.html07:12|reuters.html.   Kerry winning the White House would be like Bush being re-elected.  Same kinda mindset, we're afraid.  When Kerry calls for the Bush administration to be held accountable for the WMD claims of Iraq, http://news.myway.com/top/article/id/381234|top|01-25-2004::20:08|reuters.html, we see it as grandstanding to make it appear that there's a difference between 'em.  Just as a personal note, I've pledged never to vote for another Yale grad or Skull & Bones member.

Bird Flu Troops?

Yup.  Calling out the military in Thailand to kill chickens: http://news.ft.com/servlet/ContentServer?pagename=FT.com/StoryFT/FullStory&c=StoryFT&cid=1073281281191&p=1012571727085

Meantime, back at the Urban Survival Ranch

We are still living out of boxes, although our outbuilding here at the ranch now sports a queen-sized bed (that smells horribly of smoke) and what had been the dining area off the kitchen in our home has another bed it in, as we recover from the fire.  Visqueen sheeting keeps the smells out of the kitchen and the lone functional bathroom.

Although the home is properly a total loss according to the adjuster, we're resigned to camping out here for a few more weeks before we do much else, other than keeping on with cleaning soot out of cabinets and so forth.  We'll likely dig into savings and build a completely new wing to the place once the insurance squares up. 

This past week, my brother in law replaced about 100 feet of CPVC water piping while I tackled the 2", 3" and 4" waste pipes.  Knock on wood, the plumbing is holding together nicely.  We have hot water and a microwave, and we've run cable from the satellite dish on the house over to the outbuilding. The washer and dryer are operable, but not well.

Thanks to a neighbor renting us a small cabin ($150/month) which also has hot water, a bed, microwave, and such, we should be able to sort out our lives a bit this week.  Because we've been working from about 9 AM till 9 PM (what else do we have to do?), these daily reports have been a little tardy.  If I run across the alarm clock we'll get these posted before the market opens.

Because of all the effort going into getting our house rebuilt from the fire (during our move to Texas) we will for an interim period limit our weekend updates to subscribers only. If you would like information about subscribing, please click here. It's just $30/year.

Today, our projects include cleaning out more soot, more exploratory floor removal checking for damage, as well as bill paying. 

I have to say we're all in remarkably good spirits about this - it's like a dry run for "if the world ended, what would it be like scraping by afterwards?"  Well, this is about as close as you can get and not be in a third world country.

When we rebuild, there may be enough of the former house left over (now that we have the hot water going) to keep a corner of it as a guest house. We'll see how much sweat equity gets invested as we go, but I figure we've got about $10,000 worth of labor and materials so far out of our own pocket and the place is about 15% useable.   Still looking for the cable so I can upload some pictures from the camera.

Thanks for dropping by...

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Write when you get rich - or sooner if you feel like it.

George Ure

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