How Bad Does It Get?
I hate to tell you this, but if you thought this past week was bad, you
better get ready for a whole lot more downside action...and when I say a lot
- I mean a whole friggin' huge gob more, and starting rather soon, although
I wouldn't panic just yet, as I explained to subscribers at mid week that
I'm waiting for one last bounce up to the 13,500-13,700, next week.
I'll be selling into that one, with a few commodity precious metals calls
that should be delightfully green.
The specific reason that the headline "Stocks
End Volatile Week with Huge Drop" is likely only the foretaste of a
horror to come (that may whack more than half the Dow average off) is
that Elaine and I had a long conversation with a genuine Wall St. insider
friend last night, a fellow that knows exactly (or more precisely, within
mathematical bounds of mark to index models) where things are headed.
"It's going to be a whole lot
worse than LTCM, for example, much worse" he told us.
How much worse? I've got six pages of notes to go over with
Peoplenomics on Sunday. But if you think in terms of 20% of
subprime homes being foreclosed on or more, and a Dow under 6,000, you'd
have some idea of future being priced by the inside markets right now.
How will it be saved? Inflation will be tried, and you know what the
implications of that are for things like the metals, the cost of living, and
None of this is to be taken as financial advice - I'm just thinking out
loud, reflecting on our chat and about my personal account, and outlining
where I think things are headed. Besides my 'insider' friend there's
also this chart that I've been watching...
Linguistically, come next year (or even late this) we are expecting
'restrictions on travel' and 'encounters with scarcity' - and the leading
edge of that wave seems to be showing up in language use today,
although the results from the Google search of news stories may be
attributable to more sites being searched, or a change in caching. Still,
the chart is what it is:
How big a hole will 20% of subprimes (or more) being foreclosed on make?
I don't know for sure, but 2-3% of the US population going homeless isn't a
You'll see that
in Ohio, the state is going after predatory lenders already - and more of
this kind of action can be expected.
Some of the hot spots - once the darlings of the house-flipping crowd - are
blowing up now. An official of an Arizona mortgage company tells me
its much worse than reported, and
you know that's got to be pretty damn bad because the public number
is foreclosures in the valley are up 566% in 2008 compared with 2006.
Worse to come, he tells me.
Other fall out: Fannie Mae
losses have about doubled.
And as if this isn't enough, the new FSAB rules requiring more disclosure of
tier-three fair values, largely swept under the rug by big companies, will
be required disclosure
when FASB 157
goes active next Thursday. As those new disclosures work
their way through the system, you can expect more fist (and other body part)
clenching. It says in part:
"This Statement emphasizes that fair value is a market-based
measurement, not an entity-specific measurement."
So, how will this impact tranches marked to an index like the ABX?
Stand by for fireworks to come.
It's not all bad though, as my source is optimistic that the only way out of
the still coagulating mess will be inflation: "There's no other way out from
a policy standpoint," he offered.
But while we're waiting for the other shoes to drop in the financial
markets, readers are sending in first-hand experiences from all over the
country saying inflation is already here big time - here's just one example:
"From Manti,Utah. The last time we went to Wal-Mart in Ephraim,UT about
two weeks ago.(Seven miles from Manti) Black Plumbs were $.50 lb,
yesterday (11-8-07) they were $2.24 lb up 348%. Cantaloupe was $.97
each, now $2.50 each up 158%,Cabbage was $.40 lb now $.58 lb up 45%,
Sour Dough Bread 24 oz was $2.12, now $3.07 up 45%. Bananas were still
$.54 lb. And I will get 2.13% raise on my Social Security, Oh and Gas
went up $.24 to $3.05 in the last two weeks. The Gov. inflation numbers
look OK to me. Right? Sarcasm Off. You can use this if you want to.
Thanks for all the good information you give us each day.
I can hardly wait for the CPI figures, which the central bankers look to for
the core rate (inflation less energy less food), having concluded
(wrong-headedly, I think) that food and energy don't matter. Maybe if
you're in league with space aliens, or something, but the rest of us have
those two real earthy problems to cope with. Gotta eat and gotta heat.
Earlier this week (or was it last? Times flying right now...) I told
you that once the Tuesday elections were past, we would see gasoline prices
do a moon shot. No sooner had polls closed than were were reading
about $5 gas in some parts of the L.A. area and headlines are softening us
up for a lot more to come:
prices toi get higher, forecasters say." Well, gee, duh, how about
Obviously, there's more - a lot more from those 6-pages of notes taken last
night, while I watched a perfectly good T-bone I had pulled off the BBQ go
cold, so as not to be munching during my chat with my source. Covered
in Saran Wrap, it survived last night intact. After hearing what my
friend had to say, I didn't feel much like eating.
Today, braced with two cups of coffee and able to pass on a glimpse of the
storm still developing along with the suggestion that you consider getting a
year or two of house payments together while you can, the appetite is back.
But maybe not for long. If I had to throw two darts for 'thousand
point down days' they would land right next to each other: Thursday November
29 and Friday 30, with a 600 point bounce the following Monday. Just
darts, mind you, but if anywhere near right, the appetite will go missing
How's this sound: "Global War in Two Years"? I've written many times in past
columns about how as the world comes to the end of its resource 'string' we
will see the outbreak of fighting over what little scraps of oil, arable
land, untainted food, and such that remain. What I haven't tried to do is
put down a specific sequencing of events that could lead to such an outcome
within a very short period of time - like a couple of years - tops. Just
like a doctor running tests to find out how a disease will progress, this
week's report will give a short summary of where current trends take up, and
we'll seek the key inflection points which put us on the road to the most
deadly of outcomes.
More for Subscribers
Pass It On
UrbanSurvival depends on having lots of people read this site. If
you have friends, tell them about the daily reports and if you own a web
site, a link to this site is always appreciated. If you have
click here to send an email to someone you know telling them what a
strange site you've found.
Can you trust Politicians?
To get your "No Incumbents in 2008" click here. They're just $5.
And no, that would not keep Ron Paul from running for the White House - he is
not an incumbent for that office - having never held that job before, you see.
Guide to Living Cheaply
Order our handy ebook "How to Live on $10,000 a year or less - and learn
to live like a Third World person now. It's coming anyway, with big job
layoffs this summer - and by ordering now, you can beat the rush...You may have
more time to read this fall if the economy falls apart as I expect...
report is here.
Friday November 9, 2007
Cliff's Edge, and Other
It's time we had us a serious think-about on the topic of a Chinese trade
embargo of the USA. While it's true that in the past, during the heady
'getting started' days of globalism, China really needed the USA as a
consumer of her goods, that picture is swiftly changing today with (last
time I heard) China's exports to the USA were only about 20% of her total
exports and the growth of the domestic Chinese economy has been tremendous.
An email from a reader makes an interesting (and not yet reported)
"The web bot is right, we are standing on the edge of a cliff with sharp
rocks below economically. My son is an engineer and manages the rolls at
[regional US steel company] in [somewhere], a division of [parent steel
company] He told me this evening that he has just learned today that
Chinese steel has quit coming into the country, along with a number of
other products. Good for them and U S steel, but bad for the unaware U S
populace and the U S $."
My linguistic pals always warn me "Don't ask "Why?" so much - just observe
the data and move on. In the case of China, however, the "Why?" of
such a move - if true - would be incredibly obvious: We have not
exactly be the kind of "handshake you can take to the bank" trading partners
we might wish to image ourselves to be, and the landscape is changing
China has several reasons to be less than happy with the USA right now.
For one, we have dumped a lot of paper assets on them denominated in dollars
to buy goods and services. As the US dollar declines (the long term
trend, although we may see a bounce for a few days) the picture is
definitely one of us taking the Chinese profits away by dropping the
purchasing power of the dollar; all that's been made necessary because of
the current tendency to bail out bankers (not foreclosed homeowners) to
preserve, best I can tell, Long Island real estate prices.
While I don't foresee an actual trade war breaking out any time soon,
what I do look for is steadily increasing dollar denominated prices of goods
coming from China - bound to show up at X-Mart and other big box stores
where much of the inventory is imported. And that will in turn
be reflected in higher prices, which then in turn, may or may not, be
reflected in the Consumer Price Index.
It's all a matter of timing.
The Fed is eyeing another rate cut and there's a log of investor
cheer-leading behind the idea. On the other hand, if China begins
to throttle back USA exports, that ought to drive up prices, which in turn
should show up as inflation 3-4 months out.
The only conclusion I can reach is that while the Fed rate may indeed come
down another quarter, the likelihood of it being a long-term rate at low
levels seems pretty low. There's too much global currency jockeying
going on for it to be otherwise.
Just as a 'fer instance' take
Australia where the Central Bank(sters) have just pushed rates up to an
11-year high. That, in turn
will put the screws to homeowners both in Australia and Tasmania.
(Dropping into my best Japanese martial arts voice track mode) "Hai!
And, so you see Gozo, the pen is mightier than the sword, but the money is
more powerful than the pen, and the greed more powerful than the money..."
Fade to black.
But seriously, or as best I can manage on Friday: How long would you
sell things to a country that paid you with money that was dropping in value
Balance of Trade
The U.S. Census Bureau and the U.S. Bureau
of Economic Analysis, through the Department of Commerce, announced
today that total September exports of $140.1 billion and imports of
$196.6 billion resulted in a goods and services deficit of $56.5
billion, compared with $56.8 billion in August, revised. September
exports were $1.5 billion more than August exports of $138.6 billion.
September imports were $1.2 billion more than August imports of $195.4
In September, the goods deficit decreased
$0.3 billion from August to $65.7 billion, and the services surplus was
virtually unchanged at $9.3 billion. Exports of goods increased $1.2
billion to $100.2 billion, and imports of goods increased $0.9 billion
to $166.0 billion. Exports of services increased $0.3 billion to $39.9
billion, and imports of services increased $0.2 billion to $30.6
In September, the goods and services deficit
was down $7.7 billion from September 2006. Exports were up $16.8
billion, or 13.6 percent, and imports were up $9.1 billion, or 4.9
In a nutshell, it is being summarized as 'gonna get worse, then
better'...but here's the whole text because Ben Bernanke presents good
testimony, and its really important to get the whole sense of it.
Economically, this is important enough to go right to the source and ignore
the spin. (click here to skip Ben's speech and get
to the Ron Paul cross examination)
"Chairman Ben S. Bernanke
Before the Joint Economic Committee,
November 8, 2007
Chairman Schumer, Vice
Chairman Maloney, Representative Saxton, and other
members of the Committee, thank you for inviting me
here this morning to present an update on the
economic situation and outlook.
Since I last appeared before this Committee in
March, the U.S. economy has performed reasonably
well. On preliminary estimates, real gross domestic
product (GDP) grew at an average pace of nearly 4
percent over the second and third quarters despite
the ongoing correction in the housing market. Core
inflation has improved modestly, although recent
increases in energy prices will likely lead overall
inflation to rise for a time.
However, the economic
outlook has been importantly affected by recent
developments in financial markets, which have come
under significant pressure in the past few months.
The financial turmoil was triggered by investor
concerns about the credit quality of mortgages,
especially subprime mortgages with adjustable
interest rates. The continuing increase in the rate
of serious delinquencies for such mortgages reflects
in part a decline in underwriting standards in
recent years as well as softening house prices.
Delinquencies on these mortgages are likely to rise
further in coming quarters as a sizable number of
recent-vintage subprime loans experience their first
interest rate resets. I will have more to say about
this problem and its implications for homeowners
later in my testimony.
At one time, most
mortgages were originated and held by depository
institutions. Today, however, mortgages are
commonly bundled together into mortgage-backed
securities or structured credit products, rated by
credit-rating agencies, and then sold to investors.
As mortgage losses have mounted, investors have
questioned the reliability of credit ratings,
especially those of structured products. Because
many investors had not developed the capacity to
perform independent evaluations of these
often-complex instruments, the loss of confidence in
the credit ratings, together with uncertainty about
developments in the housing market, led to a sharp
decline in demand for these products. Since July,
few securities backed by subprime mortgages have
Although the problems
with subprime mortgages initiated the financial
turmoil, credit concerns quickly spilled over into a
number of other areas. Importantly, the secondary
market for securities backed by prime jumbo
mortgages also contracted, and the issuance of such
securities has declined significantly. Prime jumbo
loans are still being made to prospective home
purchasers, but they are at higher spreads and have
more-restrictive terms. Concerns about
mortgage-backed securities and structured credit
products (even those unrelated to mortgages) also
greatly reduced investor appetite for asset-backed
commercial paper, although that market has improved
somewhat recently. In the area of business credit,
investors shied away from financing leveraged
buyouts and from purchasing speculative-grade
corporate bonds. And some larger banks, concerned
about potentially large and difficult-to-predict
draws on their liquidity and balance sheet capacity,
became less willing to provide funding to their
customers or to each other.
To be sure, the recent
developments may well lead to a healthier financial
system in the medium to long term: Increased
investor scrutiny of structured credit products is
likely to lead ultimately to greater transparency in
these products and to better differentiation among
assets of varying quality. Investors have also
become more cautious and are demanding greater
compensation for bearing risk. In the short term,
however, these events do imply a greater measure of
financial restraint on economic growth as credit
becomes more expensive and difficult to obtain.
At the height of the recent financial turmoil, the
Federal Reserve took a number of steps to help
markets return to more orderly functioning. The Fed
increased liquidity in short-term money markets in
early August through larger-than-normal open market
operations. And on August 17, the Federal Reserve
Board cut the discount rate--the rate at which it
lends directly to banks--50 basis points, or 1/2
percentage point, and subsequently took several
additional measures. These efforts to provide
liquidity appear to have been helpful on the whole,
but the functioning of a number of important markets
The turmoil in financial
markets significantly affected the Federal Reserve's
outlook for the broader economy. Indeed, in a
statement issued simultaneously with the Board's
August 17 announcement of the cut in the discount
rate, the Federal Open Market Committee (FOMC) noted
that the downside risks to economic growth had
The Committee took
further action at its next scheduled meeting, on
September 18, when it cut its target for the federal
funds rate 50 basis points. This action was
intended as a counterbalance to the tightening of
credit conditions and to address in a preemptive
fashion some of the risks that financial
developments posed to the broader economy.
The Committee met most
recently on October 30-31. The data reviewed at
that meeting suggested that growth in the third
quarter had been solid--at a 3.9 percent rate,
according to the initial estimate by the Bureau of
Economic Analysis. Residential construction
declined sharply during the quarter, as expected,
subtracting about 1 percentage point from overall
growth. However, the GDP report provided scant
evidence of spillovers from housing to other
components of final demand: Strong growth in
consumer spending was supported by gains in
employment and income, and businesses increased
their capital spending at a solid pace. A strong
global economy stimulated foreign demand for
U.S.-produced goods and services, as foreign trade
contributed nearly 1 percentage point to the growth
of real output last quarter.
however, the Committee did not see the recent growth
performance as likely to be sustained in the near
term. Financial conditions had improved somewhat
after the September FOMC action, but the market for
nonconforming mortgages remained significantly
impaired, and survey information suggested that
banks had tightened terms and standards for a range
of credit products over recent months. In part
because of the reduced availability of mortgage
credit, the contraction in housing-related activity
seemed likely to intensify. Indicators of overall
consumer sentiment suggested that household spending
would grow more slowly, a reading consistent with
the expected effects of higher energy prices,
tighter credit, and continuing weakness in housing.
Most businesses appeared to enjoy relatively good
access to credit, but heightened uncertainty about
economic prospects could lead business spending to
decelerate as well. Overall, the Committee expected
that the growth of economic activity would slow
noticeably in the fourth quarter from its
third-quarter rate. Growth was seen as remaining
sluggish during the first part of next year, then
strengthening as the effects of tighter credit and
the housing correction began to wane.
The Committee also saw
downside risks to this projection: One such risk
was that financial market conditions would fail to
improve or even worsen, causing credit conditions to
become even more restrictive than expected. Another
risk was that, in light of the problems in mortgage
markets and the large inventories of unsold homes,
house prices might weaken more than expected, which
could further reduce consumers' willingness to spend
and increase investors' concerns about mortgage
The Committee projected
overall and core inflation to be in a range
consistent with price stability next year.
Supporting this view were modest improvements in
core inflation over the course of the year,
inflation expectations that appeared reasonably well
anchored, and futures quotes suggesting that
investors saw food and energy prices coming off
their recent peaks next year. But the inflation
outlook was also seen as subject to important upside
risks. In particular, prices of crude oil and other
commodities had increased sharply in recent weeks,
and the foreign exchange value of the dollar had
weakened. These factors were likely to increase
overall inflation in the short run and, should
inflation expectations become unmoored, had the
potential to boost inflation in the longer run as
Weighing its projections
for growth and inflation, as well as the risks to
those projections, the FOMC on October 31 reduced
its target for the federal funds rate an additional
25 basis points, to 4-1/2 percent. In the
Committee's judgment, the cumulative easing of
policy over the past two months should help
forestall some of the adverse effects on the broader
economy that might otherwise arise from the
disruptions in financial markets and promote
moderate growth over time. Nonetheless, the
Committee recognized that risks remained to both of
its statutory objectives of maximum employment and
price stability. All told, it was the judgment of
the FOMC that, after its action on October 31, the
stance of monetary policy roughly balanced the
upside risks to inflation and the downside risks to
In the days since the
October FOMC meeting, the few data releases that
have become available have continued to suggest that
the overall economy remained resilient in recent
months. However, financial market volatility and
strains have persisted. Incoming information on the
performance of mortgage-related assets has
intensified investors' concerns about credit market
developments and the implications of the downturn in
the housing market for economic growth. In
addition, further sharp increases in crude oil
prices have put renewed upward pressure on inflation
and may impose further restraint on economic
activity. The FOMC will continue to carefully
assess the implications for the outlook of the
incoming economic data and financial market
developments and will act as needed to foster price
stability and sustainable economic growth.
I would like to say a few words about actions being
taken to help homeowners who have fallen behind on
their mortgage payments or seem likely to do so. As
I mentioned, delinquencies will probably rise
further for borrowers who have a subprime mortgage
with an adjustable interest rate, as many of these
mortgages will soon see their rates reset at
significantly higher levels. Indeed, on average
from now until the end of next year, nearly 450,000
subprime mortgages per quarter are scheduled to
undergo their first interest rate reset. Relative
to past years, avoiding the payment shock of an
interest rate reset by refinancing the mortgage will
be much more difficult, as home prices have
flattened out or declined, thereby reducing
homeowners' equity, and lending terms have
tightened. Should the rate of foreclosure rise
proportionately, communities as well as individual
borrowers would be hurt because concentrations of
foreclosures tend to reduce property values in
surrounding areas. A sharp increase in foreclosed
properties for sale could also weaken the already
struggling housing market and thus, potentially, the
Home losses through
foreclosure can be reduced if financial institutions
work with borrowers who are having difficulty
meeting their mortgage payment obligations. In
recent months, the Federal Reserve and other banking
agencies have issued statements calling on mortgage
lenders and mortgage servicers to pursue prudent
Our contacts with the mortgage industry suggest that
servicers recently have stepped up their efforts to
work with borrowers facing financial difficulties or
an imminent rate reset. Some servicers have been
proactive about contacting borrowers who have missed
payments or face resets, as experience shows that
addressing the problem early increases the odds of a
successful outcome. Foreclosure cannot always be
avoided, but in many cases loss-mitigation
techniques that preserve homeownership are less
costly than foreclosure. To help keep borrowers in
their homes, servicers have been offering assistance
with repayment plans, temporary forbearance, and
loan modifications. Comprehensive data on the
success of these efforts to avert foreclosures are
not available, but my sense is that there is scope
for servicers to further increase their
loss-mitigation efforts. The development of
standardized approaches to workouts and the sharing
of best practices can help increase the scale of the
effort, even if, ultimately, workouts must be
undertaken loan by loan. Although workouts are to
be encouraged, regulators must be alert to ensure
that they are done in ways that protect consumers'
interests and do not disguise lenders' losses or
impair safety and soundness.
The Federal Reserve has
been participating in efforts by community groups to
help homeowners avoid foreclosure. For example,
Governor Kroszner of the Federal Reserve Board
serves as a director of NeighborWorks America, a
nonprofit organization that has been helping
thousands of borrowers facing current or potential
distress to obtain assistance from their lenders,
their servicers, or trusted counselors through a
hotline. The Federal Reserve Board's staff has been
working with consumer and community affairs groups
throughout the Federal Reserve System to help
identify localities that are most at risk of high
foreclosures, with the intent to help local groups
better focus their outreach efforts to borrowers.
Other contributions include foreclosure prevention
programs, such as the Home Ownership Preservation
Initiative, which the Federal Reserve Bank of
Chicago helped to initiate, and efforts by Reserve
Banks to convene workshops for stakeholders to
develop community-based solutions to mortgage
delinquencies in their areas. The Federal Reserve
System is also engaged in research and analysis that
should help inform policy responses to these issues.
The Congress is also
focused on reducing homeowners' risk of
foreclosure. One statutory change that could help
is the modernization of programs administered by the
Federal Housing Administration (FHA). The FHA has
considerable experience helping low- and
moderate-income households obtain home financing,
but it has lost market share in recent years, partly
because borrowers have moved toward nontraditional
products with more-flexible and quicker underwriting
and processing and partly because of a cap on the
maximum loan value that can be insured. In
modernizing the FHA, the Congress might encourage
joint efforts with the private sector that expedite
the refinancing of subprime loans held by
creditworthy borrowers facing resets. It might also
consider granting the agency the flexibility to
design products that improve affordability through
such features as variable maturities or shared
appreciation. Also, the FHA could provide more
refinancing options for riskier households if it
could tailor the premiums it charges for mortgage
insurance to the risk profile of the borrower.
As I have discussed in
earlier testimony, the Federal Reserve is taking
steps to avoid subprime lending problems from
recurring while preserving responsible subprime
lending. In coordination with other federal
supervisory agencies and the Conference of State
Banking Supervisors (CSBS), we have issued
principles-based underwriting guidance on subprime
mortgages to help ensure that borrowers obtain loans
that they can afford to repay and have the
opportunity to refinance without prepayment penalty
for a reasonable period before the first interest
rate reset. In addition, together with the Office
of Thrift Supervision, the Federal Trade Commission,
the CSBS, and the American Association of
Residential Mortgage Regulators, we have launched a
pilot program aimed at strengthening reviews of
consumer protection compliance at selected
nondepository lenders with significant subprime
Finally, using the
authority granted us by the Congress under the Home
Ownership and Equity Protection Act, we are on
schedule to propose rules by the end of this year to
address unfair or deceptive mortgage lending
practices. These rules would apply to subprime
loans offered by any mortgage lender. We are
looking closely at practices such as prepayment
penalties, failure to escrow for taxes and
insurance, stated-income and low-documentation
lending, and failure to give adequate consideration
to a borrower's ability to repay. Using our
authority under the Truth in Lending Act (TILA), we
expect that we will soon propose rules to curtail
abuses in mortgage advertising and to ensure that
consumers receive mortgage disclosures at a time
when the information is likely to be the most useful
to them. We are also engaged in a rigorous, broader
review of the TILA rules for mortgage loans, which
will make use of extensive consumer testing of
Thank you. I would be
pleased to answer your questions."
And questions there were, including and especially from
Presidential hopeful Ron Paul, who says the Federal Reserve has "Robbed
American's of their wealth".
Click here for a little bit of video that might make you feel like
supporting Ron Paul... It's about 5 1/2 minutes - and more than worth
it. As Ron Paul notes, the MZM (money zero maturity) is going up at
about 20% annualized, there's nowhere for the dollar to go but which way?
"Hai! You see, Gozo, China may figure out MZM up 20%, too...and now
how close is the edge of the cliff?"
Unless you're Tony Blair, ex-PM of UK.
Then it's half a million bucks for a 20-minute speech. Chinese
papers (speech was in China) are wonder "Worth it?"
At Blair's rates, Ben Bernanke's couple of hours on the Hill yesterday would
have been worth...uh...$3-million or better...
Santa's hours may have to be cut back to 1/2 time (he might even lose his
benefits) because this year's Christmas retail sales just plain suck.
But wait! The Department of Economic Excuses is laying the groundwork
already for a "Why" story to cover.
Reports that terrorist may strike US shopping malls are being bandied about.
Yes, I can almost read the future-headlines now: "Christmas sales were
reported slow again as increased terrorism threats kept shoppers are
home..." Yeah, couldn't have anything to do with 100,000 jobs lost in
the auto sector and secondary's, or massive foreclosures, or a crashing
dollar, now, could it? A reader properly wonders:
"I am hearing people all over saying that they are going to enjoy their
families this Christmas - give gifts to the little ones and sig. others
but cut way back otherwise. The feeling doesn't seem to be "I can't
afford it" as much as " I have all and more than I want already" ....
wonder if this is a trend?"
Not to sound too much like the HPH gang, but can we be a little more precise
in language use? It's not a trend it's a consequence.
New War Distraction
Of course, another reason why we could see a terrible Christmas this year is
that the WH has ready its Iran Attack plans.
well researched analysis hints the neocons may be about to sacrifice a fleet
to pump their agenda.
Linguistically, while a large emotional release period starts about November
22 and runs through late January, it remains to be seen whether it will be
ME centered. Our current thinking though runs more economic with
next October as more likely time for full scale Middle East blow up
lasting at least a year and a half.
BTW, a reader sent in a tip that one of the radio networks this week (was it
ABC?) reported that the WH has a plan to deal with any possibility of an oil
embargo or prices that get to $160 a barrel. Those contingency plans
would include a total ban on Sunday driving and a national 55 MPH speed
Bad and Getting Worse
The situation in Pakistan
where the former prime minster has been placed under house arrest.
Shining example of democracy.
Bombs going off
and killing folks in the country now.
The republicorps are threatening to punish five states by reducing their
delegations to half normal levels if their states hold primaries early.
Another shining example of democracy, huh?
Sean David Morton was on
CoastToCoastAM last night and
made an interesting observation to the effect that America is not broken,
what's broken is the illusion of freedom. " Well said.
And that brings us to...
A Curious Appearance of
The Senate has voted to override George Bush on the Water bill.
This one is full of water projects which are needed around the country.
More important is that the Decider is not Invincible.
Bridge Collapse & Other
Don't recall bridge collapses coming up like this until recently.
another - this one in Dubai.
Then there's the flood meme... Wondering if we will get the bot
hit on winds in here, now to the 11th, although the UK storms with 50+ MPH
winds made big headlines there...
Email of the Day
Here's one for you:
"As always you are a wealth of information &
I love reading your site ………….but…………..( ya knew there had to be a but )
this morning I read the following & thought I might give ya my
perspective as a business owner here in Michigan……..
From your column: What's missing in the
economy is a new "killer ap" - a new 'gotta have it' - something with
sizzle and a $1,000 price point that people will line up for. A new cell
phone feature set (iPhone) may do some incremental good, but we need a
new killer product for consumers - a color TV, Microwave, refrig4erator,
something on that order, to get things rolling. At the moment, the
consumer is saturated, and if you're expecting them to take on more
debt, you need to find them a new sparklie. If you don't have that, you
have the road down Japan's trail.
Up here nobody I know is going to even look
at any new wiz bang toy to spend a grand on when most people are trying
to keep their home & their job…..a whole lot of people have lost their
jobs & the business people I talk to ( every day ) are loosing
confidence in the economy & how it worked or USED to work. Owners of
company’s are no longer investing in their plants because they fear
their product or service can be outsourced in a blink of an eye ….Most
are just trying to make it to the next paycheck & that is it….not good.
Most want to see Alan Greenspan & Helo Ben &
their friends [fill in your own act of justice as I don't want to go to
thought crime prison-G] because these folks are truly pissed &
feel the wall street crowd has really screwed the pooch this time. When
all is said & done America will never be the same again. All because of
a bunch of greedy bankers.
Thanks for letting me bend your ear & keep
up the good work…….[name withheld so he doesn't get on a no fly list]"
Just another day at the ranch: The Amazon delivery this week brought
two books which just about guarantees I won't get to the really important
stuff on my ToDo list.
First, there's a new Clive Cussler book out ("The Chase"). If you
saw the movie Sahara, you'll get a good sense of the Cussler genre...and if
you haven't go rent it this weekend. There goes some time while I wolf
that one down.
The other book, a much different sort, is a new copy of "Cache
Lake Country" and it's about the live-in-the-wilds life of a timber
cruiser type in the outback/up river of BC. Having spent a fair amount
of time fishing central British Columbia when my fire fighter dad got off
blocks of time off, the book is especially meaningful. The days in our
old 1949 Chevy, clinging to single-track roads up the wilds of the Fraser
River Canyon to 100 Mile House and beyond are long past, but the fresh trout
out of Canim Lake (where I was first turned loose to row our 8' home made
car-top boat) are things not easily forgotten.
You can get a sense of the country here.
Main points of the ToDo list - if any of them get done with the book
distractions, include putting in the barrel stove in the shop - you can get
a barrel stove kit to turn a 55-gallon drum into a useful source of heat for
under $100 at some Tractor Supply stores, although I didn't see it on their
The kits can be found on eBay, too. When it comes to cost of stove
per BTU, there's probably not a more efficient option around. Not for
use unsupervised, or installed inside a living space, but just dandy for the
shop and to keep the chill off for the cats this winter.
A fine week in my consulting practice with a key project coming together for
my primary client. Yup, been a good week. That and three closes of
silver over $15 puts the next target at $22 for silver and if it happens
quick enough I'd be tickled pink to pay tax on another $30K of gains.
Like Pappy used to say "Please give me a huge tax bill! Short term, long
term, whatever...Because that'll mean I've made a bunch for me..."
Thursday November 8, 2007
Subscribers - see new advisory.
About that Consumer Debt
I have to hand it to my (deflationist) friend Jas Jain: He correctly I
think notes that the most important number to watch is the consumer debt
figure, because the growth of the economy depends on people continuing to
take on ever-larger amounts of debt to keep the global game intact.
Jas is prone to signing his emails "It's the Debt, Stupid!" And with
damn good reason. Remember that money can be printed easily enough,
but it always depends on someone borrowing it into existence in a fractional
reserve bankstering system to make it 'hit the street'.
So when, as the Fed did on Wednesday, the Consumer Credit Report comes out,
I expect the LameStreamMedia to hold the presses and prepare the big above
the fold headlines about the consumer debt because, as Jas notes, it is THE
single most important number out there. Whether it's housing, new car
sales, the number of HDTV's, or something as simple as what Christmas will
be like this year, it all boils down to the Consumer Debt figure.
Now, the bankster crowd is not especially 'out front' about the importance
of the consumer debt report. In fact, they obfuscate the very meaning
of the report by insisting that it's consumer "credit" because they,
the banksters, are extending credit to us poor working types. With
our own money, no less, which is pretty cheeky. But, as the People's
Economist, I'd argue that it's not the bank's credit that lands us in
bankruptcy proceedings, it's the banks excessive issuance of debt that blows
up in people's faces in the end.
Not to nit-pick here, but this is an incredibly important point to have
fixed as a 'star to steer by' in your personal financial affairs. Debt is
That little diatribe aide, let's flip over to the most recent report, and
see "what's up":
First, we see that there are really two sets of numbers here: The seasonally
adjusted set, and the non-seasonally adjusted set. Let's pick one: Not
seasonally adjusted is my favorite, because I HATE adjustments that aren't
spelled out to a fine level of detail because I never know the kind of
machinations going on behind the scene for the 'adjustments', and I can draw
my own conclusions from the unadjusted data. Occasionally, I'll be
wrong, but at least I own the error, not some stat-pack-whack in the
Scroll to consumer debt outstanding total: September shows
$2,488.5 billion dollars. Shift the decimal point a bit and you've got
$2.4885 trillion of consumer debt. This year, the USA GDP will
be in what range, quick! Maybe $14 billion? So a little north
of 17% of our GDP is owed on Consumer Debt.
Point #2: Consumer debt compared with last year's Q3
($2.3686 trillion) is up 5%. This means that if I had to
throw a dart, I would peg inflation today as running about 5% year on year,
which is really not what people on fixed incomes getting 2.3% increases and
being told be happy with that, want to hear. Hey! I just push
the pencil around...
Point #3 (And it's along in here that I expect Jas will start to
worry, along with me), when you take the month-on-month change August to
September (0.3225%) and compound that rate for a year, you come up with an
increase in consumer spending that would track at 3.6% (plus or minus a ham
sandwich) and that is smaller than the year on year. Put
gently, the Consumer Debt increase at 3.6% annualized is slowing.
This is distinctly NOT good news for the corpgov model of not-quite-free
enterprise because it means that the real push is on to reinflate consumer
spending, which is ultimately what lowered interest rates are all about.
And remember, these numbers are a month and a half old. So is there a
recession ahead? Almost certainly. The only thing surrounded by
questionmarks is "¿How deep/how bad?"
What we also have is a HUGE disparity at the moment between the
efforts to reflate the consumer debt number (which ultimately is THE
meaningful number), and the creation of paper debt at non-consumer levels of
abstraction. Think derivatives and subprime.
Click over to Trader
Bart's site and see the reconstructed M-3 rate (which the Fed buried
about 2 1/2 years ago, not wanting to panic people, but knowing what was
going to be coming), and you'll see that the level of debt creation is
presently running about (you'll love this one):
I know what you're thinking: "How can an economy work if the
abstraction layer (bankster woes/subprime/tier three confessional dates Nov.
15) continue operating with the underlying rate of increase in the consumer
debt slowing markedly (and remember that was almost two months back...I
expect the rate has continued to slow, and for hints, see retail sales, car
sales, and Christmas forecasts).
The simple answer is: It can't. Not for long, anyway. At some point,
something's got to give. This obvious conflict of viewpoints is
working out in the financial markets while we chat. M3-b (M-3
reconstructed) is showing the hollowing out of the dollar which has brought
with it a swelling of the price of real things such as oil and gold, while
whacking the dollar's behind.
Even uglier: Declining housing values aren't reflected in the consumer debt
numbers - they sort of lag into them as homes are foreclosed and then sold
at lower prices. Oh boy....
Now how does it all work out? I bet Jas and I could talk for days
about this. Jas is concerned that deflation will romp and stomp, but
the implication of that is equities collapse and only bonds look 'safe'.
(Don't worry, it's not happening until Nov. 22-Jan 24th by
the linguistic work) and there
goes the life savings of people out the window. Argentina style. While
I can't disagree with that, I figure that concurrently, there will be a loss
of faith in paper in general (again, linguistically fleeing paper assets
into things) and so it becomes a matter of how all this works out for each
kind of asset class.
From a policy standpoint, reflating the economy sounds like the simple
option. Just lower the interest rates and people will pour spending
back into the consumer economy and everything will work out happily
Except, of course, Jas' has an inconvenient bit of history on his side:
The case of Japan following their all-time-peak of the Nikkei circa 1989 and
you're not a student of history, it's instructive to look at a long term
history of that market. No reason we should rule out going there.
What happened in Japan was that rates were lowered to zero (and below zero,
if you can imagine that!) and it still didn't stop the pernicious deflation
of asset prices. Even today, I understand, there are still banks
holding real estate paper based on "roaring eighties" valuations. The
banks have just rolled over debt on top of debt and the 100-year loan is
real. They didn't have the Nov. 15 tier-three deadline facing US
Curiously, the people in Japan didn't rise up in rebellion against a life of
debt servitude or what I call 'rent-a-life from the banksters".
Whether that same kind of 'roll over and take it' will happen here in the
USA is questionable. Anyhow, linguistically, the words rebellion/revolution
pop into modelspace shortly and I expect there are plenty of links to the
Seems the Fed's efforts to bail out the banksters has an important threshold
ahead: If they can't lower rates fast enough, and spur some consumer
debt, then the USA could head down that slippery track Japan has blazed over
the past 17 years, with the resultant impact on the retirement savings
investments of millions.
What's missing in the economy is a new "killer ap" - a new 'gotta have it' -
something with sizzle and a $1,000 price point that people will line up for.
A new cell phone feature set (iPhone) may do some incremental good, but we
need a new killer product for consumers - a color TV, Microwave,
refrig4erator, something on that order, to get things rolling. At the
moment, the consumer is saturated, and if you're expecting them to take on
more debt, you need to find them a new sparklie. If you don't have
that, you have the road down Japan's trail.
As soon as the rates for new cars comes down to zero, I think I'll buy a new
car. That'll be the patriotic thing to do. Shouldn't have too
long to wait, either. By January I figure. And by then, the Dow
could be 30% lower (or more) from where it is now. And the short-term
discontinuity between consumer debt creation and pouring money into the
financial abstraction layer, should provide a decent return in our commodity
account which is up more than 4-times our starting level from July of this
year. Don't talk to be about 'percentage' returns. I'm in
commodities and the commodity players who are good talk mostly in whole
numbers. Go M-3!
Oh yeah, let's not forget China's latest moves.
One conspiracy theory I've heard going around is that school shootings are
designed to bleed on building emotional waves in the population which would
otherwise pile on to market declines. Given
the 9 dead in the school shooting in Finland and
now Venezuela, I have to wonder about the coincidence of the timing of
such thing... Let me see: Dollar fall/collapse building, international
school shootings bleed of international building emotions, yeah, curious
I am expecting the dollar to level off and maybe bounce for a few days,
meme has hit mainstream. Cliff reminded me yesterday at he called
the 'dollar death meme" spot on during our
appearance with George Noory back on the Fourth of July. Yup, sure
France Falls In
The headline "Congress
warms to France's new President" makes a lot more sense when you look at
how crucial France falling in line for an Iran attack is.
president Musharraf says there will be elections in February in Pakistan,
I wouldn't put a big bet on that one coming true...
Although I don't see the chance of a world war until maybe next year (late)
there are sure more signs of Russia getting ready for something. I've
given you the litany of the upgrading of Topol missiles, the long range
bomber 'tweaks' of Western defenses, and now comes word that
suspending Arms Control Treaty compliance. We bought our radiation
survey meter 6-months back...
1/3'rd Billion is 'Good'?
Ford's losses less than
expected/feared. Not exactly party time when you lose that kind of
While the US Fed ponders timing of its next cut,
the ECB is holding raters steady.
Google access going on gas pumps...
Start Me Up
(Too many Rolling Stones references this week? Whatever...)
here comes an instant on laptop based on (what else?) Linux... Of
course, around here, the 3-minute reboot times are no big deal - as
everything stays on all the time...
Around here: Cookies and
I am using a new cookie munch product that I'm incredibly happy with...
MAXA Cookies Manager SE. I
was running Spyware Dr. for antivirus and cookies and MAXA found 500+ other
cookies on my machine - eye popping.
November 6, 2007
Special Subscriber Update:
A Crash Window
It's not open yet, so don't jump. But, contingency planning
is key about now, so a quick review of pre-crash planning....
More for Subscribers
Now Who's 'Crazy'?
Yes, there is a lot to talk about this morning on the economic front, as the
economy appears to be into it's Austrian School 'crack-up' boom phase with
gold headed who-knows how high, but looks
like $850 today,
$17 silver is next, and Hundred
Dollar Oil is almost a slam dunk, too, if the US dollar takes out the
0.68 Euro level as it's threatening to do any minute.
Those are facts and not speculations or suppositions. The
problem most folks these days seem to have is that they are sadly lacking
in their ability to think independently to achieve meaningful results.
Do you doubt that for a moment? The way external forces/source 'frame'
your entire decision-making process is beautifully illustrated by a joke
sent along by a reader (KW) who offers it as a commentary on why some of us
will be 'ready for what's next', but many won't be. It's called the
"Bath tub test"
"During a visit to the mental asylum, a
visitor asked the Director "How do you determine whether or not a
patient should be institutionalized"
"Well," said the Director, "we fill up a
bathtub, then we offer a teaspoon, a teacup and a bucket to the patient
and ask him or her to empty the bathtub."
"Oh, I understand," said the visitor. "A
normal person would use the bucket because it's bigger than the spoon or
"No." said the Director, "A normal person
would pull the plug. Do you want a bed near the window?"
ARE YOU GOING TO PASS THIS ON, OR DO YOU
WANT THE BED NEXT TO MINE?
This is not really a sanity test. It's a
test to determine if you have been in the public school system which,
for the purpose of social control, gets people in the mode of following
suggestions instead of thinking for themselves. "
Getting your head into a different kind of reality than the 'spoon-fed'
stuff that is passed out on corpmedia is a little challenging at times:
friends won't believe you, and when you call BS on the high
consumptive/ego-driven/conspicuous consumption lifestyle, you're bound to
lose a few friends along the way who will cling to the old paradigm like
their life depends on it. In return, you'll get scorn, denial, and a
much smaller circle of friends. But, as times change in ways that seem
to be evolving linguistically, you at least will have the good sense, in
financial terms, to pull the plug correctly and not get sucked into the
'framed decisions' that will be put before you.
Power Wobbles & Gobbles
We seem to be at the beginning of a large shift underway in the world at the
moment, one which is preconscious for most (for now) but which is
showing up if you look at events in a certain way: Change is in the air.
Linguistically, the Half Past Human
team quantifies it as a kind of 'revolution' and you see it as 'change
coming quickly' as priorities of humans change as the limits of systems are
reached on many fronts. Despite one small release period due in the
next 4-5 days, the relative calm of the emotional building period we've been
in will fall apart around November 22, and from there to January, life will
be more headline intense than it has for the past couple of months.
Complex systems break in complex ways, but I sketched some of the 'dollar
pressure points' that were apparent in 2004: A strong US military and robust
economy would keep the dollar in a 'strong' position, but a decline in
military power/prestige coupled with a financial disaster (subprime fills
this one) then the dollar tips over into a long-term decline.
Obviously, the forces at work here are still in play today, except that in
the upper right quad, the prestige of the US military is waning, not aided
by the recent
events in Pakistan, which you might picture as a localized tipping point
where the West-backed Pakistani government is headed for major change, but
worse, it could foreshadow/prototype a larger shift in US power perceptions
abroad, already in trouble.
At the the same the Euro's power as a reserve currency has grown, the
strength of the dollar weakened, and the reasons to invest in key US
companies is deteriorating quickly.
Just on this last point,
GM is telling
the world it may have to make a $39-billion charge in Q3 - this at a
time when financial stocks are pondering trillion dollar losses.
Until the thinking in Washington changes, I don't see any reason to
reverse my bets on the macro trend of dollar decline. It just about
ensures an ascending commodity market ending with $250 oil and gas lines,
although such things are never in a straight line, there's at least some
bias to the upside in prices.
The real key story to be watching is France's recent hardening on Iran.
I'd venture France increases the risks of war leading to an oil embargo
because as I sketched out in 2006, there's an almost mechanistic linking of
France getting onboard with US anti-Iran policy, and what logically follows:
So, would the US strike Iran? Depends what you mean by "US". If
you mean the folks in the White House, probably. If you mean the
members of the House, probably not. But, in the end, the House doesn't
seem to have the power to do much of anything, and that means a strike on
Iran is still 'on' - and with France coming around (as I speculated in 2006
that they would) we are now just waiting for the
Rube Goldberg type
linkage outlined above to come to pass - and whether the Straits of Hormuz
are still useable after, or whether the OPEC folks would really shut down
the oil for some period of time, remains the open question.
The bottom line is: The blow-up in the financial sector may increase
pressures for the US to reassert its super power status, and one way to do
that would be to bomb Iran. Might help the dollar, briefly, and get
the oil tuned off. On the other hand, it would be a fine bait/switch
because it would get the country's mind off the falling value of the dollar,
and in the end, that may be the most important thing.
Today's real story (from an historical perspective) may be that "Iran
has 3,000 centrifuges working at enrichment plant." Big mainstream
headlines about that, but
less on the Dick Cheney Impeachment Resolution.
Guess which web site has another Hillary picture leading today?
Hint. Meantime: While
77% polled oppose drivers licenses for illegals, her
excellency says its up to states. Dodge!
Leaves the path clear for open borders and the
www.SPP.gov plan to integrate the US, Canada and Mexico into a
single trade block, like the Europeans. Which is why the dollar is
being trashed...but that's a two beer discussion and too early for beer.
Well, then again....
London has unveiled plans for a new super sports arena due for the 2012
games. Just in time for the end of the world, LOL...
Comet Holmes is now naked eye visible. If not, see your
optometrist, or wait for the clouds to dissipate.
Tuesday November 6, 2007
Where Exciting Stops, Scary Begins
I suppose there are some of the
who would be clasping their hands about now and saying "There, told you we
would get a crack-up boom" before we sink into the real depths of a Greater
Depression. Some of the cornerstones of the Austrian philosophy, one
might observe, have been pretty well trashed of late: small government,
strict protection of private property, and support of individualism in
general. I'd also throw in strict interpretation of the Constitution,
as long as we're at it. Instead, we have damn near the mirror image of
what sound/rationalist economic thinking would suggest: Big government,
quickly merging with corporations into something I label corpgov, a
semi-state between the complete fascist integration into government, and
direct control of government by the electorate. Then we have, thanks
to eminent domain and the WOT all the attacks on civil liberties, and that
of course, shades over into the diminution of Constitutionally protected
Rights and Freedoms. Can't changed any of that before breakfast, but
it's a worthy starting point from which to reflect on the news overnight and
what it is likely to portend for the coming week or two before the
preconscious 'something's wrong with all this" pops into front-of-mind
thinking about November 22 when the next linguistic release period begins.
Just staring at that first paragraph gives me pause, Too heavy, too
early, and not enough coffee ingested yet. Let's drop back to:
"Did you notice that
Gold has popped up to $822.50 and Silver is back over $15 in today's
As if to underscore how the 'hot money' is about to rediscover the
traditional value-holding role of the precious metals, we note that India is
planning a new commodity trading bourse focusing on guess what?
Naturally, all of this is occurring because the
dollar is falling to record lows against the Euro while speculation
continues that the Fed will be pushed into a box and forced to lower rates.
On my theory that as the actual purchasing power of the dollar declines, we
will see a commensurate increase in the pricing of the Dow, this seems
likely to give Wall Street a boost today. Not that the value of the
underlying (emphasis on 'lying') assets has changed, but the fact is that it
will simply take more watered-down paper dollars to keep the relative price
of the asset intact. Ergo, just as an apar5tment house value goes up
during inflationary times, so too does the aggregate market position
valuation of American companies when the printing press is being kicked up a
I hold to the idea that lowering the Fed rate is wrong-headed policy, and
that just like sparing the rod spoils the child with kids who grow into
monsters, so too this latest hype about how we need to save the bankster
class will have the same effect; namely a worse outcome later. When
the talk of stringing banksters up from light poles gets serious - within a
year or so linguistically - the case will be made, but by then the Internet
will be down, electricity will be rationed, along with food, and all the
events you're seeing in other countries at that having moments of crisis.
Pakistan where the courts are in lockdown.
The cheapening of the US dollar just about guarantees $100 oil. If
not today, then perhaps this week - all depends on how quickly the dollar
I'm giving up on being an outlandish critic, as the time when the we could
get a soft, or even moderately hard landing is past. You'll want your
financial seat belt really snugged on this one. The high flying
entering a flat spin. With emphasis on spin.
markets fearing that the total loss from toxic debt could exceed $1-trillion,
a more reasoned appraisal is that this is on the toxic debt part, not the
derivatives blowing up part.
There's a certain beauty in being out of dollars:
Supermodel Gisele Bundchen, for example will only work for
I've been rolling out of dollars and into 'things' as I've told you for a
couple of years. The additional farm acreage I stewed over a year and a half
back is now out of my own price range, and the price of farm equipment seems
headed up, too. All of which means food price increases, and their
reciprocal, shortages, will be along shortly. Too shortly for most of
the unaware citizenry.
The 10KW generator head I bought from Harbor Freight for $199 a year ago is
up to $299 on sale - and example of 33% inflation - and I'd
expect it to pass $400 soon enough, as the declining.
I figure that whenever the
price of shop tools is under a dollar a pound, while steak is at $10 a
pound, there are extreme pressures afoot in the economy. While I'm not
looking for food to get cheaper, I am looking for tools to get way more
This weekend I'll be getting into more of this in "Life by the Pound" for
Peoplenomics subscribers, but you get the idea. No, the world is not
ending. But you may not have enough connections and assets of the
right kind to stay aboard much longer.
Think it's the bottom of the housing mess?
Not if this
report is anywhere near right.
Jumping Gas Jack is a Flash
Sorry for the poor reference to the Rolling Stone's Jumping Jack Flash, but
this is the very column where I told you last week that as soon as the
elections are over, gasoline prices will be going up. With
elections today, the leading edge of the prediction are arriving in
headlines near you with words like
":Gas Prices Jump Back Above $3 a Galloon". OMG, look surprised. Duh.
It may be easy enough to dismiss some of my observations and expectations as
rants from a fast-track renouncer of the corporate game who has retreated
from the mainstream to seek a different Path. Fine.; But,
how do you dismiss Leo de Bever of the Victorian Funds Management
Corporation who sees a massive crash of share prices coming?
Bernard at our Houston Bureau Bureau also sends along a note from the
Guardian with the headline: "The
worst crisis I've seen in 30 years: The latest financial downturn is the
final nail in the coffin of the conservative free-market world-view."
If our linguistic pals are right, we're now within a week or so of the big
'winds' event, and the start of the 'release period' around the 22nd of the
month. Now, a reader in the Netherlands have been doing a little
research and recalls that the Crash of 1987 coincided with a major storm in
sent along this forecast of what's ahead for later in the month in
that region with an implied "Oh oh..."
Ron Paul's Money
35,000+ folks donated $4.2 million in a 24-hour push yesterday.
How much money does it take before LameStreamMedia takes Paul Seriously?
Especially since 80% of adults now use the internet says a study...
Murdoch Fears Google
Here's a curious note about concerns that Rupert Murdoch has about Google.
Mulling whether this is corpmedia vs. freemedia or corpmedia vs.
Inflation and Dress Sizes
Several readers have written in with various comments about Elaine's dress
size observation: The same size dress is being given lower numbers as a
'feel good" move. So here's the definitive email on point:
"The reason that Elaine's dress size is
shrinking starts fairly straight forward. She is gaining weight below
the rate of the average woman in America.
The way size is determined is this: Clothing
designers utilize "Fit Models" to establish baseline measurements for a
size - within 1 of typically 3 size ranges - Petite, Missy (Baseline),
and Women's. They will use fit models who are in the middle range of
each category (each has different proporational rules for sizing up or
down). Based on that middle ground, the sizing is extended up and down
to the limits of the range for that category. The middle ground is
determined by post sales analysis at the retail level and then
propagated via the larger organizations in the fashion industry - the
modeling companies, May Company, Walmart, etc.
When I was in the biz, middle ground for
Missy was a traditional size 12 or so. That same company now uses a
traditional 14. "Traditional" is measured by classic fit rules...which I
cannot quote at this point!
Now - with this you have to of course add
the marketing component. If size ranges are going to slide - lets take
advantage of that to make other changes as well! So, there is indeed a
component of feel-good marketing going on...but the baseline is that
sizing is relative and changes SEASON to SEASON...of which there are 5.
Perhaps an index should be created which can be used to measure the
relative health of the modern day woman - based on clothing fit trends.
You can bet that the fashion industry has a stake in providing the right
balance of sizing to the market in a given season considering that
retailers generally return the items or sell them at deep mark downs
which the manufacturer has to absorb if stock goes stale.
Finally...a use for what I thought was a
truly useless piece of "Rag Trade" trivia!
Keep it up"
Hmmm...seems to be the cause of it: 5'8" E is the same 126 she was
graduating HS which was back in [classified/redacted/run for it!].
Monday November 6, 2007
Urgent Subscriber Update
In the weekend Peoplenomics.com report I referenced a .PDF document at
as part of our discussion of how implementing of a two-tier currency system
might work. Please use caution if you try to print this file!
I have had two reports of the file not printing using the current
Acrobat Reader. My computer locked up when I tried to print it, too.
(yeah, I got the date fixed!)
Markets to be Citi-fied
Stand by for a morning roller coaster if the futures have it right:
Big changes at Citi over the weekend, but more important is the notion
slowly dawning on the investment community that "Gee, the era of the free
lunch is over for the big financial companies..." The rest of their
awakening will come later this year when the mess they've made begins to
spill over into other parts of economic life.
For now, the story is that
one-time Treasury boss
Robert Rubin (a one-time powerful Goldman-Sachs boss, too) is jumping
in to take over the reins from
Charles Prince who's out.
Feels good to write "Gold's down to $803."
Shade Your Bets
While most of the market is off worrying (with good cause) that there's a
lot more filth to come out of the write-down teams in the major US financial
houses, there's a continuing problem on the horizon about whether the Fed
will really be able to lower rates any further than they already have.
"Why would you think that, George; everyone knows the Fed is going to
drop another quarter at their next meeting,." you're thinking.
Well, maybe not. Have you considered the implications of the headline
"Japan's central bank governor hints at a future rate hike."
The simple concept is that if a country lowers its rates too far, the hot
money blows town and when that happens the price of everything (especially
gold and oil) go through the relative roof.
Two-tier currency, anyone?
It seems odd to report that the price of gold is down to almost $800
because it was only recently that gold was on the other side of that number.
But, the reason is simple: The US dollar is going through a little bit of a
bounce this morning, which means that you will have to pay closer to 1.44
than $1.45 to buy a Euro, and it means that despite the small dip today,
the price of oil is holding up near $100 on both supply worries and the low
value of the buck.
There have been reports that Pakistan's president Musharraf would be place
under house arrest following his declaration of a state of emergency.
Nope. Musharraf, who's gone from the poster-boy for a democratic
to what he really is; e.g. strongman with beat & 'em and lock 'em up if they
No doubt, there are a lot of people in Washington who are watching this,
because one could speculate that this is a 'dry run' for how a strong man in
power can cancel elections and get away with it by wrapping himself up in
the cloak of 'democracy' and 'freedom'. The Powers That Be (PTB) and
the leading/bleeding edge of the me4rger of corporations into government
(corpgov) are probably chomping at the bit to try the same act here.
That's why I focus on economic discussion.
Whether you realize it, or not, there's a
Washington which would make it illegal to be critical of the US Government
(H.R. 1955) and it's getting painfully little press. The
apologists for corpgov are quick to point out this is only a 'commission to
study' kind of thing. On the other hand, the blatant and specific
attacks on the internet and the genuine exercise of free speech are obvious
swipes at what little remains of the Constitution.
So, as you watch the events unfold in Pakistan (which the predictive
linguistics crew thought would be here in September (sorry to be early on
this, but dates slips around a bit) try to kmeep pinching yourself and
repeat after me "It CAN happen here."
You know the situation is dire when lawyers start protesting.
Bigger Than Big
is now larger than Exxon Mobil. Is $1-trillion big enough? Size
Not only has NBC chose to go green (replete with Al Gore appearance) this
week, but now I'm reading how the
"World carbon market seen doubling this year: IETA"
Let me see if I can figure out how carbon credits help anything other than
the PTB/illuminati/ruling élites: I'm a farmer and I sell a carbon
credit to an aggregator of carbon credits and get $1 year per acre to lock
my my grazing land for 10-years with no inflation adjustments. Then,
middle men add $3 to the credit, and then sell it to big corporations for $4
or more on some kind of exchange.
I must be simple-minded because I don't see how this does anything more than
simply add another line to the corporate expenses which get passed on to
guess who? You and me, bucko!
that there's a trend in Japan for PC shipments to slow down as the huge
number of purpose built computing devices comes along. Not to
mention the fact that besides pictures, I'm waiting for cell phones to be
able to reheat leftovers.
Call me old-fashioned, but I'm still a dyed-in-the-wool PC guy. When
QuickBooks comes out with a version of Pro for the X-Box, would you let me
to Launch New Ad Pltform, Expand Targeting Platform." Social
networking gets visually busier, I expect.
The Week Ahead
Elections tomorrow. Like they say in Chicago vote often. Or in
Florida: it won't matter.
Wednesday the "Consumer Credit" report comes out. Deliberately
mislabeled, so as not to alarm you about how far past our armpits in debt we
are, the Fed Consumer Debt report is THE KEY INDICATOR about how bad the
ride down from November 22 to the middle of January will be. Less debt
equals deflation says a fellow end-of-the-roader.
Friday's trade balance and sentiment indicators are yawners, at least to me.
Elaine's New Inflation Observation
Elaine may have spotted what she thinks may be a new kind of inflation.
She said something to the effect this weekend that "Why is it that if I
weigh 126 now, I am buying a size four dress, yet back when I was getting
out of high school, I weighed the same but the dress was a Size 8?"
Being of a conspiratorial bent, I have two competing theories. One is
that women are wearing smaller clothes (visually, this is a fine thing, as I
see it). But more likely: Over time, the average American woman
may have put on a few pounds, and so as a result, dress sizes are moving
down to give women a 'feel good' factor. Given everything else being
equal, a woman would, I'd venture, buy a Size 4 over a Size 6, right?
Hell, I'd buy a pair of jeans marked 36 over a pair marked 38, too,
everything else equal...not like men don't have the same denial
Like the pathological watering down of the dollar's purchasing power, this
dress size creep only shows up if you know someone who has hung onto a
couple of pieces of clothing from high school days and who can still get
into them. But, curious, huh?