Consumer Prices in U.S. Decline 1%, Most on Record

Consumer Prices in U.S. Decline 1%, Most on Record (Update2)
By Bob Willis - - Nov. 19 (Bloomberg)

HIGHLIGHTS

The Cost of Living: in the U.S. fell by the most on record as fuel costs plummeted and retailers used discounts for cars and clothing to entice consumers hobbled by job losses and sinking home values.

• Consumer Prices Plunged: Down 1 percent last month, more than forecast and the most since records began in 1947, after being unchanged the prior month, the Labor Department said in Washington. Excluding food and energy, so-called core prices unexpectedly fell for the first time since 1982.
  
• David Resler, Chief economist at Nomura Securities International Inc: ``We are moving into an environment where prices are falling across the board,'' he said, in an interview with Bloomberg Television. ``That is going to continue. Deflation is spreading across the economy.''
• Housing Starts: fell 4.5 percent in October to an annual rate of 791,000, the lowest level since the Commerce Department began keeping the data in 1959.
• Price Rollbacks: Eduardo Castro-Wright,`Wal-Mart's U.S. stores chief, stated,`You'll see a lot of rollbacks,'' at a Morgan Stanley conference in New York. Rollbacks refer to price reductions the retailer scatters throughout grocery, pharmacy and other departments to spur sales.

COMMENTS

Deflation: is showing up in the numbers for the first time in decades. It is spreading and the remedies will be different than an inflationary recession. The growing number of bankruptcies seem to indicate to survivors change is in the air.

To Big to Fail: Is a fine line to walk and difficult to reward with taxpayers money. Where do you draw the line. From Banks, Insurance companies, Auto Makers, maybe we should ask , Who shouldn't we bail out? The list might be shorter.

Bargains: There will be plenty, but wait if you can. The pricing cycle is still in the first year of a multi year downturn. Preservation of capital and access to credit will continue to be critical during this World Wide Down turn. Your focus should be more on survival at the moment not opportunity. New rules and regulations yet to be developed will make it difficult for you to choose intelligently. Patients will be rewarded.

Jim

U.S. Unemployment Rate Climbs to 14-Year High of 6.5% (Update2)

U.S. Unemployment Rate Climbs to 14-Year High of 6.5% (Update2)

By Bob Willis and Rich Miller

HIGHLIGHTS

Nov. 7 (Bloomberg) --

The U.S. unemployment rate rose to the highest level since 1994.

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• Jobless Rate Rose: to 6.5 percent in October from 6.1 percent the previous month, the Labor Department reported today in Washington.
  
• Employers Fired: 240,000 workers after a loss of 284,000 in September, the biggest two-month slide since 2001.
• 25-Year High: The total number of unemployed Americans jumped to 10.08 million last month, the highest level in a quarter-century, today’s report showed.
  
• Nariman Behravesh, chief economist at IHS Global Insight: “We’re heading for a deep recession -- banish the word mild from your vocabulary -- it’s big, it’s bad and it’s broad-based,” said in Lexington, Massachusetts.
  
• Goldman’s Forecast: Goldman Sachs Group Inc. analysts downgraded their projections for the economy after today’s report, foreseeing the biggest contraction since 1982 in the fourth quarter. Goldman also projects that the unemployment rate will soar to 8.5 percent by the end of next year.
  
• Faltering Economy: and imploding financial markets helped push Obama ahead of Republican rival John McCain, a senator from Arizona, particularly in hard-fought states like Ohio and Florida where unemployment rates have jumped.

COMMENTS

Presidency: "It's the economy, stupid." prove again to be the winning theme for the the Democratic party. Time will tell how effective the new team will be. But there are no magic bullets to this Global Financial Bubble that has been building over the past 20 plus years. It will take a number of years to repair and rebuild the economy.

Bottom Up: Getting money and jobs into the hands of the middle and working class will be the challenge. Solutions that foster growth and opportunity at the grassroots level will help turn this economy around.

Paradigm Shift: Free market behavior will now be shifting to control and regulate. Let us hope that wise policies will be constructed and the pendulum will not swing to far over to the extreme of the other side.


Near Term: More of the same; higher unemployment along with lower stock market & International Commodity Prices. Why? because buying power and access to credit at the consumer level is continuing to drain out of the US and Global populations resulting in increasing bankruptcies. Cash will continue to be King. As has been said before in this blog, we are in a deflationary downturn. Meaning remedies to problems faced in the past will require a different strategy in order to archive success by both Government and Business.

James Monachino

Greenspan Concedes to `Flaw' in His Market Ideology

Greenspan Concedes to `Flaw' in His Market Ideology (Update2)

By Scott Lanman and Steve Matthews Oct. 23 (Bloomberg) --

Highlights:

Former Federal Reserve Chairman Alan Greenspan: said a ``once-in-a-century credit tsunami'' has engulfed financial markets and conceded that his free-market ideology shunning regulation was flawed. He stated I was ``partially'' wrong in opposing regulation of derivatives and acknowledged that financial institutions didn't protect shareholders and investments as well as he expected. Forecasting is an inexact science.

Greenspan opposed increasing financial supervision: as Fed chairman from August 1987 to January 2006. Policy makers are now struggling to contain a financial crisis marked by record foreclosures, falling asset prices and losses tied to U.S. subprime mortgages.

``What went wrong": former chairman wondered, with global economic policies that had worked so effectively for nearly four decades?''Greenspan reiterated his ``shocked disbelief'' that financial companies failed to execute sufficient ``surveillance'' on their trading counterparties to prevent surging losses.

Greenspan Revised Recommendations: Firms that bundle loans into securities for sale should be required to keep part of those securities and other rules should address fraud and settlement of trades.


Commentary

Falling Giant: Alan Greenspan, was once considered the most powerful and well respected man in finance has now lived long enough to see it turn around. We cheered him on when he helped us and now sneer because he failed us.


New Deal Regulation: It appears we are on the verge of a paradigm shift in free market regulations and oversight. Stay tune for a litany of new laws and oversight after the new administration comes into power in 2009.



Jim

Freddie & Fannie Resurrection

COMMENTARY

Freddie & Fannie Resurrection

The Bailout ($$$ Trillion plus) is running wild. The danger is we have an administration who is writing the checks knowing that they won't be around to justify all the additional next generation taxes they are creating in the form of interest and principle payout.

One last hurrah for the Darwinian Capitalism, survival of the fittest - - Only the strongest and most influential corporations will dine for free at the taxpayers table. This is self selection in a manner that rewards privilege and resource.

How can this be? Upon selection, let's examine the new collection of Wallstreet retreads Treasury Secretary Paulson will chose to work with.

It will be interesting to see the teams that are chosen and if they had a past role they had in creating the original problem we are trying to solve. In additional, none of them work cheap. Their skills are worth millions of dollars in compensation so taxpayers pay again. No new regulation, rules, limits, or compensation caps, business as usual one more time.

Another Way ---

Since the American tax payer has all ready bailed out Freddie and Fannie I would like to suggest that Secretary of Treasurer Henry Paulson consider working more predominately through these two agencies.

A handful of executives got excessive compensation bonuses but the rest of the organization did not. For decades these organizations did what they were charactered to do. Adjust the mandate, monitor the compensation, and regulate their leverage and let them propose some programs.

Recommendation: Freddie and Fannie submit a joint draft detailing how they would mop up the targeted toxic mortgages along with additional suggests on how to stabilize the real estate market by Thanksgiving.

Why? Having worked with these two agencies in various capacities, I can tell you most of the employees don't have a rip and tear mentality often found on the Wallstreet.

In Addition:
* They have a corporate infrastructure in place to handle the size that will be necessary.
* They have the ability to drill down to the loan level and help stabilize the underlining problem of price erosion of real estate properties.
* They have the ability to quickly launch a series of new origination products that can mop up the toxic mortgages.
* They are a known an accepted International Organizations.
* Untied States Tax payer is the primary owner of these two GSA's and deserve to benefit of any profit, if there is one.

Finally, Regulation, Oversight, and Compensation controls can be monitored and adjusted to reflect fair value for all employees and participates.

Obviously there is more, but this project can work and within the confines of the existing financial platforms.

Jim

Congress Pushes for Changes to Paulson Bailout Plan (Update2)

By Laura Litvan and James Rowley

HIGHLIGHTS

Sept. 24 (Bloomberg) --

• Congressional leaders are weighing new ways: to revise a $700 billion Wall Street rescue plan after it became clear that U.S. Treasury Secretary Henry Paulson's proposal faces resistance from both Democrats and Republicans.
• House and Senate Democratic leaders: huddled late yesterday to consider new strategies, including the possibility of approving only a $150 billion initial installment for the government to purchase troubled assets from financial firms. Senator Charles Schumer of New York, the No. 3 Senate Democratic leader, said Paulson wouldn't have time to use the full $700 billion before the Bush administration left office on Jan. 20.
• House Republican leaders: told Paulson that his proposal is facing resistance in their party and invited him to speak to all Republicans at a closed-door meeting this morning, said Michael Steel, a spokesman for House Republican leader John Boehner.
• Bloomberg/Los Angeles Times poll: found that by a margin of 55 percent to 31 percent, Americans say it's not the government's responsibility to bail out private companies with taxpayer dollars, even if their collapse could damage the economy.
• Senate Majority Leader Harry Reid: said after a weekly meeting of Democrats that Congress may need more time.``It's important that we get it right, not get it done fast''.

COMMENTS:

History in the Making: Watch, listen, and participate in a manner that you can even if it means sending; email, fax, letter, or telephone calls to your Senator or Representative describing what you think.
What is the Big Hurry?: For years the Federal Government was focused on free market deregulation now they want to buy out all the bad debt in the country. In the stroke of a pen transfer all the problems and fiscal burdens from what was some of the wealthiest corporate owners in the country to the United States taxpayer.
What's Wrong with this Picture: Hurry, Hurry, Hurry, if we don't do it quickly and the way Treasury is proposing something terrible will happen, " the world and the USA could see their economies begin to shrink". Please note, to date we have yet to recognize officially that US economy is in recession. Maybe it is time to revise and update some of the indicators which are suppose to guide Main Street and Wallstreet to be more reflective of current economic trends.
Status Quo: $700 billion plus dollars seems like a steep price to pay to preserve the status quo. We as a country don't have enough money to bail everyone out who has a problem loan.

Finally, who is accountable for all of this. Enron occurred and we seemed to learn very little. I suggest that we serious look at the meaning of accountability and regulations with some bite to protect society and the business world from an overly focus emphasis on blind profit.

Jim

Person Harry Reid

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Retail Sales in U.S. Unexpectedly Dropped in August (Update1)

Sept. 12 (Bloomberg) Retail Sales in U.S. Unexpectedly Dropped in August (Update1) By Timothy R. Homan

Highlights

• Retail Sales dropped in August: The 0.3 percent fall followed a 0.5 percent drop in July, the Commerce Department said today in Washington. Excluding automobiles, purchases were down 0.7 percent, the most this year.
• Producer Prices: fell 0.9 percent, more than forecast, in August. So-called core producer prices, which strip out fuel and food costs, rose 0.2 percent.
• Seamus Smyth Economist at Goldman Sachs Group Inc.: ``By July, essentially all the rebates had already been distributed, and so were no longer providing support to incomes.'' In a note to clients on Sept. 2. ``Combined with weak job growth and tight credit, consumers had no way to fund additional consumption.''
• Ford Motor Co.'s Chief Executive Officer Alan Mulally: said in a speech this week. ``I've never seen anything quite like it.'' ``Not only is the U.S. in a recession, but the rest of the world is slowing down,''
• Consumer spending: will stall from July to September, three months earlier than predicted last month, according to the median estimate of economists polled from Sept. 2 to Sept. 9. The slump will slow growth to less than half the prior quarter's pace.

Comments

White Christmas: While the Farmers Almanac is calling for a cold white Christmas, it doesn't look like we will have a green Christmas for retailers.

Deflation at the Wholesale Level: Yes, a .9 drop in the PPI August numbers appeared - - a nice start for what I believe will continue into the Winter of 2008.

Interest Rates: Look for World Wide interest rates (Including the US) to continue to sag lower due to falling International demand and De-Leveraging of International Banking & Institutional Finance Portfolios resulting in tighter credit constrains for business and consumers.

Housing Crisis: Near term look for more of the same; higher foreclosure numbers as banks learn how to process and liquidate properties quicker and prices to continue to erode. This is all part of the multi-year readjustment process.

Jim

U.S. Payrolls Fell 84,000; Jobless Rate Jumps to 6.1% (Update3)

Sept. 5 (Bloomberg) -- By Shobhana Chandra

Highlights

• Jobless Rate: jumped to 6.1 percent, from 5.7 percent the prior month raising the unemployment rate to a five- year high.
• Payrolls Fell: "by 84,000 in August, and revisions added another 58,000 to job losses for the prior two months."
• William Poole, former president of the Federal Reserve Bank of St. Louis: ``It certainly increases the probability that we really are in a recession,'' `It is a weak number, including the revisions.''
• Effects of the housing slump and the credit crisis: Can be seen in payrolls as builders fell 8,000 after decreasing 20,000. Financial firms trimmed payrolls by 3,000 for a second consecutive month.
• Today's Report: brings the total decline in payrolls so far this year to 605,000. The economy created 1.1 million jobs in 2007.

Comments

CRB Commodity Cash Index: is now trading below 500. Look for continued decline in a slow saw tooth price pattern. Why? Because global demand is dropping for goods reflecting falling demand for commodity products - - Big time. Similar to a canary in a mineshaft the commodity markets are foreshadowing troubled times ahead.

The Perfect Financial Storm is now coming Ashore
Resulting in:

* Rising unemployment.
* Falling real wages in the middle and working class sector of the economy.
* Continued Eroding Families net worth, creating downward pressure on consumer confidence.
* De-Leveraging of Banks and Large Financial Institutions resulting in tightening of domestic and International credit which will have a negative impact on consumer spending and business growth.
* Contracting profit margins along with rising bankruptcies.
* Elevated Deficient spending in Government and Private sectors will exacerbate recovery as Businesses and State, Local, and Federal Government begin to try and balance their books.

Deflation is the flip side of Inflation: Few people really understand it and what it means to their pocket book let alone the International Economy. But we will find out as this economic cycle continues to unfold.

Jim