We hold to the silly notion that there is both “news” and “anti-news” in the world. Sort of like “matter” and “anti-matter.” In case you’re not clear on what “anti-news” is, it’s the sheep feed. Stuff that fills up people’s minds with base emotionalism, but doesn’t put anything on the personal bottom line.
Before we get into the real news, a few “anti-news” stories that have caught our eye. Remember the metric is: “How does this help me live better?”
- Your preferred beer reveals your personality traits, study claims
- Biggest celebrity social media blunders of 2018
- Meghan, Duchess of Sussex, honors wedding dress designer in surprise appearance
On the other hand, there are also “useful truth leaks” to be found:
- Wharton professor writes op-ed arguing against academics as a success indicator.
- And this lil gem: “‘Truth isn’t truth’ tops list of notable quotes in 2018.”
We judged these two useful because in the one case, how many computer companies were founded by drop-outs? And the second story tells us “not all is as it appears.”
Well, except for here of course. We focus mainly on making and keeping your financial person intact so you can afford the more useful distractions.
Now, About That PPI Report…
Since it’s football season (for people who have too much money and like to sit outside in the cold for reasons that escape us), we will begin by “going long” for a moment:
This is the long-term relation between what things cost when you buy them (the consumer price index) and what things cost to make (the long-term PPI).
Depending on your caffeine loading, you may notice the red line (Consumer Prices) began to seriously diverge from costs to make things (PPI) circa 1980, or so.
Looks to us like two factors are in play: Rising tax loading on the one hand, and increased corporate profits on the other. Off to the side, we have moved into an “information-based” economy, as well. Which means that the “Producer Prices” likely don’t adequately count the cost of producing lines of code.
Back in 2010, the Gallup organization reported a couple of very interesting facts: “Gov’t. Employment Ranges From 38% in D.C. to 12% in Ohio – Federal, state, or local government employs 17% of U.S. workers nationally.”
While much has been made (by disingenuous politicians) about how the “size of government” is being reduced, when we look into the data we see there has been a fair amount of “off-loading employment” onto private corporations.
Take prison management, for example: In 1980 there was relatively little non-government “caging people” but today it’s commonplace and a “growth area.” Regardless of the government employee body count, though, it still costs money and that shows up in higher property, sales, excise, income, and business taxes. The myth is “businesses pay taxes” but the sad reality is they’re just another pass-through costs, sometimes marked up. (Sand in the Vaseline, anyone?)
I don’t mean to go off into the weeds about this, but look at when “The CPI/PPI Gap” began spreading and you’ll find it was shortly after American Peak Prosperity. Back in the time when one person in a household could support a family including a home and car. The compounding interest effects on government deficits is now arriving and this will hurt over time. Government won’t lose (they are rulers after all!).
With such a cheerful outlook, here’s the press release from Labor:
“The Producer Price Index for final demand edged up 0.1 percent in November, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. Final demand prices advanced 0.6
percent in October and 0.2 percent in September. (See table A.) On an unadjusted basis, the final demand index moved up 2.5 percent for the 12 months ended in November.
In November, the rise in the final demand index can be traced to a 0.3-percent increase in prices for final demand services. In contrast, the index for final demand goods decreased 0.4 percent.
The index for final demand less foods, energy, and trade services moved up 0.3 percent in November, the third consecutive increase. For the 12 months ended in November, prices for final
demand less foods, energy, and trade services advanced 2.8 percent.
Final demand services: The index for final demand services moved up 0.3 percent in November, the third straight rise. The broad-based November advance was led by a 0.3-percent increase in the index for final demand trade services. (Trade indexes measure changes in margins received by wholesalers
and retailers.) Prices for final demand transportation and warehousing services climbed 1.2 percent, and the index for final demand services less trade, transportation, and warehousing inched up 0.1 percent.
Product detail: Most of the November advance in prices for final demand services can be traced to margins for fuels and lubricants retailing, which jumped 25.9 percent. The indexes for health, beauty, and optical goods retailing; cellular phone and other wireless telecommunications services; airline passenger services; food wholesaling; and truck transportation of freight also moved higher. Conversely, prices for guestroom rental fell 3.5 percent. The indexes for machinery and equipment wholesaling and for portfolio management also declined. (See table 4.)
Final demand goods: The index for final demand goods moved down 0.4 percent in November, the largest decrease since falling 0.5 percent in May 2017. The November decline was the result of a 5.0-percent drop in the index for final demand energy. In contrast, prices for final demand goods less foods and energy climbed 0.3 percent, and the index for final demand foods advanced 1.3 percent.
Product detail: Leading the November decrease in the index for final demand goods, gasoline prices dropped 14.0 percent. The indexes for liquefied petroleum gas, electric power, fresh fruits and melons, jet fuel, and primary basic organic chemicals also moved down. Conversely, the index for pharmaceutical preparations rose 1.5 percent. Prices for fresh and dry vegetables and for residential natural gas also increased.
After the report (which we viewed as slightly deflationary) the futures continued up 232 on the Dow. “Why so you think that was?” we asked. Then cameth the Light of EBM! (Everything’s a business model)
The Market Doesn’t Care
Why should it? You did catch the part about pass-throughs, right? Here’s our daily look at the One Chart That Matters:
We’ve got a soft case that the market will move up for a couple of days and then resume down next week. The key is the Fed meeting and rate decision next Wednesday. If you look at the six month view of the 10-year Treasury Note over here, you’ll see the bond market has been thinking that rates are done going up.
One of our readers (Don Bondi) who’s a Texas bond trader, thinks a lot of people have it wrong. He’s figuring a 90 percent chance of a hike since government has to keep rates going up in order to get people to buy bonds. His concern is bolstered by the Reuters report out today that “Foreign investors spurn U.S. Treasuries as curve threatens to invert.”
The Fed, logically, could maintain (or grow) bond sales by doing only one thing: Raise the rates – again. This would give foreign investors a deeper discount on US bonds. There are also fears that China might be selling bonds – a tit-for-Trump – for his trade footwork. But, we shall see.
What are you doing, all this shaking?
The blue dot above is the 7.1 quake overnight in the South Sandwich Islands. It would go nicely with something in the Soup Islands….(Oops…tripping out a bit, are we?) Still, low of the solar cycle seems to be when the Earth, she shakes it.
The story Storms pack a punch in the Northwest got us to looking at the national forecast map earlier.
The yellow lines are mine – a short-hand for watching winter weather roll in waves across America. The “nice area” is between the waves.
People are still worked up over climate despite the fact there’s no sign of the solar minimum ending until at least into 2020 in the latest solar weather prediction data sets (yes, we import and chart them). Which make stories like the UN science panel chief calls for more action to curb warming somewhat amusing. The US has still reduced more CO2 than any other country on Earth, last I checked…regardless of alarmist hype about needing to sign this, or that. Where were thety when the Laurentide Ice sheet was shrinking? Didn’t that raise sea level dangerously?
But, it’s useful to remember that oftentimes people marry-up to ideas, regardless of the available data.
Along the same lines as monetizing climate change (see how well that scam is playing in France?), we see Bitcoins are down to $3,338 as of press time…and we will dutifully report when they under $3000.
An old Ure family saying – one of Pappy’s favorites – is on point.
“Don’t confuse me with facts. I’ve already made up my mind.”
We learned a lot from that…not everyone was so blessed.
Moron the ‘morrow…