Not Saying "I told you so", But...

In case you missed my January 1 late night radio discussion on Coast-to-Coast AM about what's ahead for the economy in 2008 after applying a little common sense, the latest Fed Consumer Debt report, and applying a little East Texas windage, the month of January was pegged like so, based on the linguistics research from www.halfpasthuman.com and my read of it:

• January “secrets Revealed” something comes out that is ‘unauditable’ and we see some of the presidential wannbe’s pull out of the race over disclosures of their links to what in model space is the finance/powers-that-be.

 

• USA-Pop begins a shift out of paper assets into defensive positions to protect their retirements which will be coming into question. Perhaps due in part to the continuing CMO/CDO paper collapse and how much has gone into pension funds.

So, with these predictions made almost two weeks ago, (think of it as 'broke' and 'unauditable' if you're not fully awake yet) let's see how they are working out, shall we?

Going Broke

With the Chinese and Kuwaiti money about to bail ouit Citibank, and with the Dow busting through our first line in the sand at 12,743 as I outlined to www.peoplenomics.com subscribers last weekend, we should not be surprised by two things.  One:  The AP headline of the Friday session: "Stocks Slammed by Bad Credit Fears" and two, the possible test of my second line-in-the-sand at 12,518 this coming week.  A more comprehensive description of my personal trading strategy tomorrow for Peoplenomics readers.  This could be one of those times when with the right trades a person could pick off two to ten times returns over a matter of months, is the big picture events work out in a particular way, and if events go just so.

I don't know about you, but when I see a chance to buy what amounts to a $2,000 'lotto ticket' with perhaps a 5-10% chance of a $250,000+ payoff in four or five months, that seems like a reasonable way to deploy a few FeRN's.  Besides, I'm much to busy at the moment to head to a more honestly labeled casino in Louisiana or Nevada. 

Now, on to the second highlight about January, the 'unauditable' and secrets revealed....

Unauditable Meme: NH Vote Theft?

First off, let me thank reader "bilrum" who sent me the PDF of "Integrity Vulnerabilities in the Diebold TSX Voting Terminal"  from the University of Connecticut Voting Technology Research Center.  The University carefully discloses on it's website that:

This report presents certain integrity vulnerabilities in the Diebold AV-TSx Voting Terminal. We present two attacks based on these vulnerabilities: one attack swaps the votes of two candidates and another erases the name of one candidate from the slate. These attacks do not require the modification of the operating system of the voting terminal (as it was the case in a number of previous attacks). These attacks against the voting terminal can be launched in a matter of minutes and require only a computer with the capability to mount a PCMCIA card file system (a default capability in current operating systems).

The security problems are present in the system despite the fact that a cryptographic integrity check appears to be employed in the voting system’s memory card. The attacks presented in this report were discovered through direct experimentation with the voting terminal and without access to any internal documentation or the source code from the manufacturer.

You can download the report here,  although keep in mind the University says that "The AV-TSx voting terminals are quite different from the AccuVote Optical Can terminals, and the vulnerabilities presented in this report do not apply to the Optical Scan terminals used by the State of Connecticut."

So, how about them optical scanning machines? In September of 2007, the UConn Voting Technology Research Center did an analysis of how the Optical system did in an audited comparison with a hand count.  The report concluded that:

1. The overall discrepancies between the machine counts and hand counts are not statistically significant.

2. The effect of individual machines is not significant (a single machine was used in each district).

3. The machine counts and hand counts are proportional with the proportionality constant 1, although the machines have a tendency to overcount, on the average by 1/2 vote.

4. The accuracy of the voting machines did not affect the election results (although no audited races were particularly close). One needs to be careful, however, in relying on machine counts when the total number of ballots is small, especially in multi-opening races.

Now, let me put on my skeptics hat for a minute. 

FIRST: There should be NO - ZERO! - difference between a hand count and the machine tally!

SECOND: Only one machine was tested in each district!

Reason for skepticism?  Oh, I'm sure there's a statistical case that the systems are legit - no doubt about that marketing effort.  But, to me, and I expect most Americans, the 'acceptable margin of error is ZERO'.  I put it into the same category as packing a parachute.  I was NO errors, not just a few below some threshold.  Would you want to jump from an airplane with an error free 'chute or one with an 'insignificant margin of error'?  Pretty damn simple choice, at least to this 'ol Texas goat roper  (choose a goat roper definition  here) , yet elections officials have been sold a different kind of bill - one of/for high technology.

There ought to be random reliability testing during the voting day, quality routines to ensure that if input is even close to marginal, it's not accepted, and the business case / use case requirements are pretty easy.  And, unhackable.  Doesn't anyone besides me remember dial-back modems around here?  Wouldn't you think it would be a little more difficult to hack the whole SS-7 layer than an IP address?  That'd be my guess without going back and reading some of my back issues of 2600...

Write this down somewhere:  The acceptable margin of error for voting machines is:

ZERO

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OK, why am I briefing you up like this?  I mean it's Saturday morning and I have a field to bush hog, siding to put on the goat barn, and a ton of consulting work to do plus writing Peoplenomics.  Why go over all this?

Because of headlines like this:  "Was the New Hampshire vote stolen?"

Is this a 'non-issue'?  Not hardly.  A click over to www.checkthevotes.coim shows that in hand counts on the democorp side, Obama won New Hampshire while Clinton won in machine counts.  And the site shows that on the republicorp side in hand counts Ron Paul beat Giuliani, Hunter, Thompson, and 'other'.    Oh look, here's moron (sic) the silly season....
 

The Runs: Disinfo Campaign?

The UK headlines that "U.S. corporate elite fear candidate Edwards" may be true among lobbyists in the District of corruption.  But, it's our understanding that Mr. E had received the blessings of the build-a-burger types a while back, so I would have to conclude that it depends which of the 'elites' you're talking about.

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Say, here's an idea why the semi-elite [lobbyists] would fear something like a Clinton-Edwards ticket: it would cost them more for 'access'!  Best imitation of 'democracy' corpgov can buy, huh?

Next Week: Impeachment?

We'll see if Robert Wexler files the papers.

Voicing Concerns

There's a curious story in the Seattle Times headlined "Who's the voice on radio in Iran standoff?"  There may just be a radio packing heckler in that part of the world...

Inflation Mystery Solved!

Sharp-eyed (and pretty smarter) readers around here:

"Went to Wal-Mart and noticed several things. 1) Wanted some fertilizer for the garden. It was the same price as last year so I figured I get some. But wait, it was only a 35 lb bag instead of the 40 lb bag from a year ago. 2) Kingsford charcoal was the same price as last year so figured I get some. But wait the 20 lbs and 10 lbs bags from a year ago are now only 18 lbs and 9 lbs bags. 3) Bought a box of Cheerios. Got it home and found out it had a net wt of 2 ozs less than my last box. All I can say is that I am glad inflation is under control."

So how come this reader isn't working at BLS on inflation stats?  You know why, don'tcha?

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Coping: Heated Bedrooms

Further to what we were chatting about Friday (heating bedrooms):

"Had to smile when I saw this tip—our upstairs bedrooms were never heated (or cooled)—these people have a lot more options than we did!

 

We grew up in Wisconsin and we never had heated bedrooms—the water would freeze on those below zero nights. There were 7 of us kids so hot water bottles were out of the question. Besides my father would never have sprung for them—there was one hot water bottle and it was emergencies like illness. Anyway, we did two things. Our pjs and clothes were downstairs to stay warm. The other was to heat a towel on the radiator and run upstairs with it when we went to bed and quickly wrap it around our feet.

 

Also we shared a bed with someone to keep warm that way too. But the nose was always a concern! Only solution I ever figured out was to get it under the blankets—hard to breathe that way though. Needless to say we had a pile of blankets; very heavy as I recall. Only two rooms in the house were heated (& that’s where we stayed and had fun being the last family in the neighborhood to get a tv) and the bathroom was only heated to the English standard—cold but not frozen! You are right about protecting the water lines!"

Send Snip & Save contributions to george@ure.net - the more the better.

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Friday January 11, 2008

Trade Wreck

New figures out:

"The U.S. Census Bureau and the U.S. Bureau of Economic Analysis, through the Department of Commerce, announced today that total November exports of $142.3 billion and imports of $205.4 billion resulted in a goods and services deficit of $63.1 billion, up from $57.8 billion in October, revised. November exports were $0.6 billion more than October exports of $141.7 billion. November imports were $6.0 billion more than October imports of $199.4 billion.

In November, the goods deficit increased $5.8 billion from October to $72.7 billion, and the services surplus increased $0.4 billion to $9.6 billion. Exports of goods increased $0.1 billion to $101.0 billion, and imports of goods increased $5.9 billion to $173.7 billion. Exports of services increased $0.5 billion to $41.4 billion, and imports of services increased $0.1 billion to $31.8 billion.

In November, the goods and services deficit was up $4.7 billion from November 2006. Exports were up $16.4 billion, or 13.0 percent, and imports were up $21.1 billion, or 11.4 percent.

Goods

The October to November change in exports of goods reflected increases in automotive vehicles, parts, and engines ($0.5 billion); foods, feeds, and beverages ($0.4 billion); other goods ($0.4 billion); and industrial supplies and materials ($0.2 billion). Decreases occurred in capital goods ($0.9 billion) and consumer goods ($0.1 billion).

The October to November change in imports of goods reflected increases in industrial supplies and materials ($4.7 billion); consumer goods ($0.8 billion); other goods ($0.3 billion); foods, feeds, and beverages ($0.2 billion); capital goods ($0.2 billion); and automotive vehicles, parts, and engines ($0.1 billion).

The November 2006 to November 2007 change in exports of goods reflected increases in industrial supplies and materials ($4.0 billion); foods, feeds, and beverages ($2.5 billion); capital goods ($2.2 billion); automotive vehicles, parts, and engines ($1.8 billion); consumer goods ($1.0 billion); and other goods ($0.5 billion).

The November 2006 to November 2007 change in imports of goods reflected increases in industrial supplies and materials ($12.2 billion); capital goods ($2.1 billion); consumer goods ($1.9 billion); automotive vehicles, parts, and engines ($1.2 billion); foods, feeds, and beverages ($0.7 billion); and other goods ($0.4 billion).

Services

Services exports increased $0.5 billion from October to November. The increase was mostly accounted for by increases in transfers under U.S. military sales contracts, other transportation, which includes freight and port services, and travel. Changes in other categories of services exports were small.

Services imports increased $0.1 billion from October to November. The increase was mostly accounted for by an increase in other private services, which includes items such as business, professional, and technical services, insurance services, and financial services. Changes in other categories of services imports were small.

From November 2006 to November 2007, services exports increased $4.2 billion. The largest increases were in travel ($1.6 billion) and other private services ($1.1 billion).

From November 2006 to November 2007, services imports increased $2.4 billion. The largest increases were in other private services ($1.1 billion) and travel ($0.5 billion).

Let's see how this gets flipped into 'good news'.

Consumer Confidence Sucks

OK, sucks is not a strong enough word for hitting an all time low, but you get the idea, right?

How about we go down and test 12,518 today?

Staying Sharp on Cuts

Every so often, I wake up with a single word rattling around in my head that summarizes a whole segment of human existence. It's almost like the Universe is tapping me on the shoulder saying "Word Up, Ure! Here's a word for you to key in on for the next little while - pay attention to this Word and you'll get/keep a clear head on things..."

Today the Word for the next 'little while' seems to be 'cut'.

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Cutter Ben

The most obvious starting point for the discussion is the prelude/pre-sell of the Federal Reserve rate cut coming on the 30th - or earlier, should markets get out of hand and tank as a show of impatience.

The mere fact that the Fed Chair was talking about cutting interest rates in his speech yesterday is evidence of their importance:

"Even as the outlook for real activity has weakened, there have been some important developments on the inflation front. Most notably, the same increase in oil prices that may be a negative influence on growth is also lifting overall consumer prices and probably putting some upward pressure on core inflation measures as well. Last year, food prices also increased exceptionally rapidly by recent standards, further boosting overall consumer price inflation. Thus far, inflation expectations appear to have remained reasonably well anchored, and pressures on resource utilization have diminished a bit. However, any tendency of inflation expectations to become unmoored or for the Fed’s inflation-fighting credibility to be eroded could greatly complicate the task of sustaining price stability and reduce the central bank’s policy flexibility to counter shortfalls in growth in the future. Accordingly, in the months ahead we will be closely monitoring the inflation situation, particularly as regards inflation expectations.

Monetary policy has responded proactively to evolving conditions. As you know, the Committee cut its target for the federal funds rate by 50 basis points at its September meeting and by 25 basis points each at the October and December meetings. In total, therefore, we have brought the funds rate down by a percentage point from its level just before financial strains emerged. The Federal Reserve took these actions to help offset the restraint imposed by the tightening of credit conditions and the weakening of the housing market. However, in light of recent changes in the outlook for and the risks to growth, additional policy easing may well be necessary. The Committee will, of course, be carefully evaluating incoming information bearing on the economic outlook. Based on that evaluation, and consistent with our dual mandate, we stand ready to take substantive additional action as needed to support growth and to provide adequate insurance against downside risks."  [ Full text of speech here ]

Thanks to this, and other comments in the speech (well worth reading) the markets seems to be around an 80-90% expectation that the Fed will cut a half point on the 30th.

As any student of economics knows, when rates drop below the current rate of inflation, the seeds are sown for the an even more devastating decline in the future, but if it can be pushed out a number of years, t