"Economists are pessimists: they've predicted 8 of the last 3 depressions."
--Barry Asmus

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Friday, July 29, 2011

World News!

  • In "I thought this only happened in the cartoons" news, a RAAF airman was seriously burnt when a portable toilet exploded after he lit a cigarette while using the facilities.  The airman is in serious but stable condition.
The Oceans
  • A panel of 27 leading marine scientists have concluded that the Earth's oceans stand on the brink of a sixth great extinction due to climate change.  They cite "increasing hypoxia and anoxia, combined with warming of the ocean and acidification," which "are the three factors which have been present in every mass extinction event in Earth's history."
South Korea
United Kingdom
United States
  • In "there's nothing like watching justice prevail" news, a coalition of 50 state Attorneys General are in negotiation with Bank of America, Wells Fargo, CitiGroup, JPMorgan Chase, and Ally Financial to grant them immunity to civil lawsuits by the states over "irregularities" in how they handle forclosures[1].  The banks would be required to pay up to $25 billion in penalties and commit to follow new rules in the future.  I'm sure this will work.  They already promised to halt such practices in the past, and surely we can trust them.  This time.  Right?
  • A paper published in the journal Physical Review E demonstrates that once you hit a threshold of only 10% of a group believing an idea, that idea will begin to rapidly shift the majority opinion.  Regardless of what sort of network the opinion holders are working in, or how the idea is transmitted.
  • The cost of five-year credit default swaps on Treasury debt rose 67 bps, hitting the highest level since March 2009, on concerns about the ongoing lack of resolution for the debt ceiling.
[1]  Such as foreclosing on houses that aren't late on their mortgage payments for the simple reason that they didn't have mortgages.  Or issuing promissory notes without proof of ownership.  Or robo-signing.

Q2 2011 Gross Domestic Product, Advance Figures

Brace yourselves.  This is going to be huge.  No matter what the results are.
This, of course, is Gross Domestic Product ("GDP" to his buddies) - the 800 pound gorilla of economic measures.  It is the economy, being the sum total of private domestic consumption, plus gross private domestic investment, plus government spending, plus the current trade balance.  Every other economic measure we look at is, in some sense, just a shadow cast by the GDP.  Now, what we're getting today is not the actual GDP for Q2 2011.  It's an initial estimate, subject to an initial revision in August and a final revision in September.  However, despite the fact that today's data is maya, people will still be looking at it for hints of what the future holds.  So it's worth looking at anyway
So what do our doughty Econoday-surveyed analysts expect for Q2 advance?  A 1.9% increase in GDP for the quarter, and a 2.0% increase in the price index.
And now, the moment you've all been waiting for.... the Bureau of Economic Analysis Gross Domestic Product: Second Quarter 2011 (Advance Estimate) report!  Let's give it a big hand, everyone!  And right off the bat, we see that we missed expectations.  GDP grew at an annual rate of 1.3% in Q2 (compared to Q1's 0.4%), mostly due to decreased imports, increased federal government spending, and increased nonresidential fixed investing.  The price index, on the other hand, increased at 3.2% (compared to Q1's 4.0%), although that falls to only a 2.6% increase ex-food and ex-energy.  So yes, inflation is growing faster than the economy.
Current-dollar personal income increased 4.2% in Q2, and personal current taxes increased $22.6 billion.  Interestingly enough, they don't provide what percentage this increase represents.  Personal outlays increased 3.1%.
Overall, not terrible.  But not great, either.
[1]  One of many measures of inflation, one that does not receive the "favored son" level of attention that CPI gets.

Thursday, July 28, 2011

First Time Jobless Claims

It's Thursday, and Thursday means unemployment.
The week ending 7/16, assuming the figures don't get adjusted upwards again for the 18th time in 22 weeks, had results that were disappointing but not terrible.  The analysts were looking for a seasonally adjusted 415,000 new jobless claims, and we got 418,000 - pretty close, al things considered.  The unadjusted number of initial claims came in at 464,865 (down 5,806) and the week ending 7/2 saw the total number of people claiming benefits in all programs come in at 7,325,198 - a decline of 159,696 in the last week of a month that only saw the creation of 18,000 new jobs.
The Econoday-surveyed analysts are not quite so optimistic for the week ending 7/23, calling for 425,000 initial claims.  So let's go to the Department of Labor's Unemployment Insurance Weekly Claims Report and see what happened.
And... wow.  That's interesting.
Let's get the bad news out of the way first.  The initial claims figure for 7/16 was adjusted upwards again[1][2] to a level of 422,000.  But, for the week ending 7/23, the seasonally adjusted initial claims figures came in at 398,000 -
Yes, you read that right.  398,000.  Which means a decline of 20,000.  At least until it gets revised upwards[3] next week.  But let's revel in having a positive surprise for the moment, shall we?
Yay, reveling.
The actual initial claims figure for the week ending 7/23 comes in with good results as well, falling 98,287 to a level of 366,578.  On the other hand, the total number of people claiming benefits in all programs for the week ending 7/9 rose 320,403 to a level of 7,645,601.  Of course, that's the week in which we had 470,671 unadjusted initial claims, so that's not too surprising.
So there you go:  some good news in the job markets.  We had an unexpected drop in the rate of increase in unemployment for one week.  Hopefully, this marks the start of a new trend.
[1]  Surprise!
[2]  Putting us at 18 times adjusted upwards out of 22 weeks.
[3]  Something that I figure has an 81.81% chance of happening...

Tuesday, July 26, 2011

New Home Sales

New Home Sales, an annualized look at overall sales of newly constructed homes, is another one of those powerful market-moving forces.  The Street tends to love (and fear) this report because of the potential trickle-down effect it has on the economy.  New home purchases mean new mortgages (so money is being put to work).  They also mean new durable and non-durable goods purchases, insurance purchases, and so on, all of which translates into consumer spending, which translates into GDP.
Of course, that's the positive side.  If new home sales drop, then that implies that all of that slows down.  So let's hope we won't see that.  Certainly, the Econoday-surveyed analysts aren't expecting that result:  they're looking for 321k sales, up from May's 319k sales.
The actual data comes from a joint New Residential Sales in June 2011 press release issued by the US Census Bureau and the US Department of Housing and Urban Development.  And they do not bring the happy.  May's figures have been revised downwards to 315,000 sales, and June is being reported at an expectations-missing 312,000.
Some other interesting bits of data:  the median sales price of new houses sold in June was $235,000, and the average price was $269,000.  There are currently 164,000 new houses for sale as of the end of June, representing a 6.3 month supply at the current sales rate.

Consumer Confidence

Consumer Confidence is The Conference Board's survey of three thousand households, looking for a consensus opinion about current and future economic conditions.  It's a pretty big market mover, because consumer transactions represent about one-third of GDP.  If consumers aren't confident, GDP is likely to decline.
Last month the consumer confidence index hit 58.5, and the Econoday-surveyed analysts are expecting a further decline to a level of 57.0.
We turn now to The Conference Board's press release "The Conference Board Consumer Confidence Index® Increases Slightly" which, as you may have guessed, indicates that the pessimism of the analysts was not justified.  The Consumer Confidence Index rose to 59.5, with consumer pessimism about current conditions (the Present Situation Index declined 0.9 to 35.7) being outweighed by increasing confidence about the future (the Expectations Index increased 3.8 to 75.4).  Consumers are specifically concerned about business conditions (those thinking they are good declined 0.3 to 13.4, while those thinking they are bad increased 0.6 to 39.0) and the job market (those thinking jobs are hard to get increased 0.9 to 44.1, while those thinking jobs are plentiful remained unchanged at 5.1).

World News: Seven Days And Counting!

  • The Greek government is looking to institute a voluntary program, granting banks the option to swap existing Greek debt for new bonds with up to 30 years of maturity.  Greece and the International Institute of Finance are assuming that there will be a 90% participation rate in the offer, which is estimated to cause a 21% loss to investors.  JPMorgan, among other investment banks, questions both the participation and the investment loss estimates.
South Korea
  • A paper presented at the International Joint Conference on Artificial Intelligence (held in Barcelona), has demonstrated a possible way to predict the behavior of the market.  Their research showed a strong correlation between the trends in the use of words by financial journalists and changes in the leading stock indices.  As the market draws closer to the peak of a bubble, "reporters converge on the same language - 'stocks rose again', 'scaled new heights', or 'soared'", and "they also appear to refer to a smaller-than-usual set of market events - presumably because of an increased fixation on a small number of rapidly rising stocks."
United States
  • In two televised addresses last night - the first by President Obama and the second a response by Speaker of the House John Boehner - it was confirmed that we are not particularly close to any sort of an agreement on the US debt ceiling.  The President still wants to see what he describes as a "balanced approach" to balancing the budget by combining spending cuts and tax increases, while the Republicans still want deep spending cuts and state that "tax increases will destroy jobs".
  • The text of the President's speech can be read at WhiteHouse.gov.
  • The text of Speaker Boehner's speech can be read at Speaker.gov, although that link is currently showing a "Server too busy" error.
  • In "did this happen in Pulaski County" news, McGehee Secondary School in Arkansas is being sued for refusing to allow Kymberly Wimberly, the graduate with the highest GPA in her graduating class - to be class valedictorian.  Because she is black.
[1]  He claimed to be a "Justiciar Knight" and a member of the "Pauperes commilitones Christi Templique Solomonici" or "Poor Fellow-Soldiers of Christ and of the Temple of Solomon"  If you're reading this at work the site with his actual manifesto is probably blocked.  Amongst other things, he states that the PCCTS exists to serve "the interests of the free indigenous peoples of Europe and to fight against the ongoing European Jihad" and "as an armed Indigenous Rights Organization and as a Crusader Movement (anti-Jihad movement)", and wants to preserve Western civilization by degrading women's rights and discouraging women from seeking higher education or careers.  You can read some excerpts at Pharyngula.  That's a blog written by a rather vocal atheist, so keep that in mind if you click on the link.
[2]  Surely there's no way the Syrian government would misuse a list of people forming an opposition party?