News

Complexity is a grand and glorious thing:  It enables people to hide the truth right in front of themselves and even go so far as to deny its reality. Against that backdrop, please consider:

• If you had purchased an item in 1999 that cost $100 (back then) the same thing today would (using Fed figures) cost $140.17.

• Some things cost more, housing is less:  The uneven serial sectoral; inflations mask the underlying dynamics of the Second Depression.

• Similarly, more than 6,000 bank  branches have been closed since the IndyMac failure. How soon we forget!

• However, again, this is “masking” in that a few branches were acquired by other banks and some portion of the shuttered branch business had already migrated to the Internet.  It won’t be back.

• The Dow Jones Industrials are touted as hitting “all time highs” by the me-too financial press.  Yet this figure is mentioned in the absence of an honest long-term inflation context.

• The Dow so far this year has hit 15,589.4 yet when one uses the Minneapolis Fed inflation calculator, we see that the January 14, 2000 high of 11,722.98 should be 15,897.07.

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As every morning, I begin on an economic note since our roots around here are sustainable living, long wave economics, and couple of nickels from from confiscation by government (inflation and taxes) and charlatans in finance (the Bernies et al) who seem to appear at every turn.

But this morning’s insight from my daughter Allison tells more about the condition of America that years of schooling and whole reams of economic data.  Best of all, it’s simple for anyone to comprehend.

Allison works, as I think I’ve mentioned, in the communications industry in sales in the Seattle area.  She works long hours, trains hard, has encyclopedic product knowledge, and (as is the standard in our family)  is honest as the day is long so consequently she’s doing very well.  Here lately, she’s been working a lot of overtime and I asked her about that.

“Well, dad,” she began “We had an ad out here last week to hire some new sales reps.  We had a total of 75 resumes come in.   But then, when we called and basically invited all of these people to come in for interviews only six expressed any interest!  I was talking to a friend of mine in our HR department and she said if we’re lucky three will actually show up and then we will find one…maybe two…that are worth hiring.  And we could hire five….”

I trust you see the dynamic at work here?  It’s summertime.  People who are on unemployment in many states need only to demonstrate that they have applied to three or four places per week, not that they actually went somewhere when a potential job called back, did an interview, or actually followed up in a meaningful way.

Now, this is just a wild-ass guess on my part, but seems to me that if 75 people were invited in for interviews at least 25% ought to be interested enough to show up.  Historically, in really hard times, the number showing up would be more like 50% or more…

No, I’m not arguing that welfare, food stamps, and unemployment comp should change.  But just presenting the data from a trusted observer.

Attn. HR Folks: Research Requested

If you know anyone in an HR position, ask them what their current “call-to-interview rate”  and the “interview-to-offer” rate is running.  Then, if they keep good records, ask them what their ratio was, say, five years ago…or better: 10-years ago.

My bet is that we have seen a large decrease in the call-to-interview ratio as people have become much, much more selective about the kinds of work they are willing to do, and how much effort they will put in to getting a job.  They can get a subsistence easy enough, so why put forth real effort?

Meantime, California is likely to cut extended unemployment comp.  The dynamic there is that if California rolling three month unemployment dips under 9% then 10-weeks of benefits dry up.

One other note about unemployment:  Fresh figures are out from the Labor Department this morning:

“In the week ending July 13, the advance figure for seasonally adjusted initial claims was 334,000, a decrease of 24,000 from the previous week’s revised figure of 358,000. The 4-week moving average was 346,000, a decrease of 5,250 from the previous week’s revised average of 351,250….”

With this latest bit of data integrated and with options expiration today, we look for the market to have a reasonably steady day (barring left field events) with volatility to increase next week and a possible down-side bias.

Student Loan Deal:

Inflation Forecasting School

There’s some excellent leg-work on what’s ahead buried in the report from the DesMoines Register which reports on a new deal being cut which may resolve student loan rates at least for a while into the future.

How so?  How does one infer the direction and magnitude of coming interest rate increases, the return of inflation, and such? 

It’s a two-part process.  First you get a sense of where Big Ticket interest rates are presently.  For this, flip over to the Federal Reserve’s Consumer Credit (which is really debt from where you and I sit) and notice the present new car loan rates.  For new cars it is about 4.13%.

You might want to make up a basket of rates:  Refi’s of home loans are in the 3.5% rate presently (basis a 15-year loan) and the 10-year US bond yield is running about 2½ percent.

Now, flip over to the present student loan rates:  They used to run a modest 3.4% for direct subsidized loans which had a first disbursement date between July 1, 2011 and June 30th of this year.

Now, however, a new student loan is running 6.8% (ibid).

The synthesis of this morning’s Des Moines Register report and a little common sense gives us two interesting thoughts to mull over.

First, the DR reports that democorps won a lifetime of loan cap of 8.25% while the cap for grad students would be 9.5% and for parent loans (PLUS loans) would be capped at 10.5%.

Which means – reading between the lines – that econometric modeling by lenders and government off in the back rooms is looking at interest rates going up another roughly 2-3% from current levels in the immediate future.  At least for now.

But there’s one other observation that comes into view which causes me a bit of consternation:  The marketplace presently provides more of an incentive to buy a new car than to get additional education.

Which, near as I can figure, is not the way to build a competitive country.

A number of groups are calling out the Fools on the Hill on this, but they have a track record of being “hard of thinking” when it comes to sacred cash flow cows of campaign-buying banksters.  The global chieslor cartel gets to borrow money from the Fed cheap, mark-up as loans to students, take spreads…

The future, seems, still has to be a profit center for the banker-class.  EBM* at work, again.

Is there hope?  Maybe: as Jesse Eisinger (NYT Dealbook/ProPublica) notes: “Finally, Bank regulators have had enough.”  It’s a little early to be celebrating…years early.

*Everything’s a Business Model

That Signpost Up Ahead?

India’s outlook on the economy has turned down in the latest Business Today-C fore Business outlook.  Snip from their press release:

“The turmoil in the foreign exchange market undid the gains of the last three quarters and the confidence level of businesses has dipped for the first time in four quarters.

Normally, I’d start up a report with something economic – like this morning’s consumer price report which we’ll get to in a second – but the first thing out of the hopper this morning is to note the report from the American Radio Relay League (the ham radio society I’ve told you about umpteen times) that the “HAARP Facility Shuts Down.“

According to the ARRL report, the Gakona Alaska facility has been shut down since early May and while a new contractor may come along for some finishing up research this fall and winter, the diesel generators on site no longer meet Clean Air Act requirements….

All of which leads to an intriguing question:  What about all the reports on the net about supposed “HAARP signals” impacting the mainland of the USA which seem to still be out there being reported this morning?  I’m not hearing HAARP on my ham rig…

It leads to some uncomfortable conjecture about the alternative reality called the Internet.

I guess we’ll need to find some other means of constructing a portal for alien reptiles to enter this dimension.  Hey!  Wait!  Isn’t that was CERN is for?  And what about using HAARP for mind control programs?  Does that mean we’ve been running out of control for two months now?

Time to double up on the meds….

Consumer Prices

OK, they came out this morning and as one might expect the continue to show modest inflation at the retail/consumer level:

“The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.5 percent in June on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today.

Over the last 12 months, the all items index increased 1.8 percent before seasonal adjustment.

The gasoline index rose sharply in June and accounted for about two thirds of the seasonally adjusted all items change. Other energy indexes were mixed, with the electricity index rising, but the indexes for natural gas and fuel oil declining.

The food index increased in June as the index for food at home turned up after declining in May. The index for all items less food and energy increased 0.2 percent in June, the same increase as in May. Advances in the indexes for shelter, medical care, and apparel accounted for most of the rise, with increases in the indexes for new vehicles and household furnishings and operations also contributing.

The indexes for airline fares, used cars and trucks, and recreation all declined in June. The all items index increased 1.8 percent over the last 12 months, an increase from last month’s 1.4 percent figure.