Seems appropriate for Faux News Also, I think.

LooktotheLeft

GOP Cake recipe:

2 cups of hypocrisy
1 cup of lies, h*ate, and innuendo
1/2 cup of repressed s*exuality
1 stick of nauseatingly fake religiosity
1 cup of jingoism (blind patriotism may be substituted)
2 teaspoons of fear mongering
1/2 teaspoon of shameless pandering
2 cups of harmful, v*ile, and inappropriate humor
a pinch of charlatanism (to taste)
� stick of t*orture

Bake at 350 degrees until u*gly on the outside and dark on the inside.

Let fester for 15 minutes

Toss into the garbage

Questions About "Overseas" Donor Who Gave McCain $70,000 In One Day

Little known about man who has sent thousands to GOP

By Andrew Zajac, Ray Gibson and Bob Secter Tribune reporters
October 29, 2008
Big campaign donors typically come with deep pockets and influence. But in Illinois this election cycle, no one not running for office himself has given more to the nation"s federal campaigns than Shi Sheng Hao of Roselle, a virtual unknown in business and political circles.Before September 2007, Hao"s name had never appeared in the 15-year-old federal database of campaign contributors. Since then, however, his donations have topped $120,000 � including $70,100 on a single June day to Republican presidential candidate John McCain.Over the same time frame, a network of Hao relatives has kicked in more. The take from this group over the last 13 months exceeds $269,000, a small amount to Democrats but most of it to McCain and the Republican National Committee, records show.Hao didn"t register to vote at the northwest suburban address attached to his donations until October 2007, a month after he wrote his first political check, $25,000 to the RNC. LinkHere

Dismal December Retail Sales; Wal-Mart Slashes Forecast

Wrapping up one of the weakest Christmas seasons ever, Retailers report dismal December sales.

Figures confirmed fears that the holiday season was the weakest since at least 1969, the malaise cut through practically all areas from kitchen gadget stores to jewelry purveyors and teen apparel retailers.

The deep discounts that began well before the official start of the holiday season spurred a number of merchants to cut their earnings outlooks, fueling more concerns about the health of the industry.

The International Council of Shopping Centers-Goldman Sachs same-store sales tally dropped 1.7 percent for December, worse than the already reduced estimate for a 1 percent decline. That means that same-store sales for the November-December period dropped 2.2 percent, making it the weakest holiday period since at least 1969, when the index began.

For the calendar year, retail sales rose on average a modest 1 percent, the weakest year since at least 1970, according to Michael P. Niemira, chief economist at the ICSC. The tally is based on same-store sales, or sales at stores opened at least a year, which are considered a key indicator of a retailer"s health.

Wal-Mart same-store sales rose 1.2 percent. Excluding the impact of declining gasoline prices at the pump, the gain was 1.7 percent.

Target Corp., which has been stumbling because its merchandise focuses more on nonessentials like trendy clothes, announced a 4.1 percent decline in same-store sales, better than the 9.1 percent drop that Wall Street analysts predicted.

Costco Wholesale Corp. reported a 4 percent decline in same-store sales, but excluding the impact of lower gas prices and currency fluctuations, it actually posted a 4 percent gain.

Sears Holdings said its December same-store sales dropped 7.3 percent.

Macy"s Inc. reported that same-store sales fell 4 percent in December, less than the 5.3 percent decline that analysts had expected.

J.C. Penney Co."s same-store sales within its department store division fell 8.1 percent, better than the 10.3 percent decline analysts had expected.

But luxury stores fared far worse as affluent shoppers sharply cut back on buying Gucci handbags and other status goods, spooked by the financial meltdown that led to massive layoffs on Wall Street and shrinking investment portfolios.

Saks Inc. posted a 19.8 percent drop for the month, worse than the 10 percent decline Wall Street expected.

Neiman Marcus Group Inc. suffered a 27.5 percent decline in same-store sales.

Limited Brands Inc. posted a 10 percent drop, larger than the 7.8 percent decline analysts predicted. The company also lowered its fourth-quarter earnings outlook.

Gap Inc. suffered a 14 percent drop in same-store sales, worse than the 9.3 percent decline that analysts had expected. It also cut its earnings outlook.

Teen apparel retailers also suffered through a miserable holiday season. Wet Seal Inc. reported a 12.5 percent decline, larger than the 11.9 percent analysts expected, as its Arden B chain dragged down results. Abercrombie & Fitch Co. reported a 24 percent drop, in line with the 23.5 percent drop analysts had forecast.

Kitchen gadget chain Williams-Sonoma Inc., which didn"t break out December figures, said its same-store sales dropped more than 24 percent for the eight-week period ended Dec. 28 and warned its fourth-quarter profit will likely come in at the low end of expectations.

Wal-Mart Slashes Profit Forecasts

Bloomberg is reporting Wal-Mart Leads Retailers in Slashing Profit Forecasts.

Wal-Mart Stores Inc., Macy�s Inc. and Gap Inc. slashed earnings forecasts after the worst holiday- shopping season in 40 years squeezed retail profit margins.

Wal-Mart, the world�s biggest retail chain, said today that fourth-quarter profit will miss its earlier forecasts after sales at stores open at least a year rose 1.7 percent last month, missing analysts� estimates.

�That does not bode well going into January-February, where we go into a lull period and there�s really no reason to buy until spring,� Adrienne Tennant, an analyst at Friedman, Billings, Ramsey & Co. in Arlington, Virginia, told Bloomberg Television.

Rising unemployment and tightening credit may have spawned the worst holiday-shopping season in four decades. To attract customers, some U.S. retailers cut prices by as much as 70 percent, which threatens to erode their profit margins in the fourth quarter, the most important of the year, and into 2009.

�The margins are getting killed,� Tennant said.

U.S. December same-store sales dropped 1.7 percent, the International Council of Shopping Centers reported today. The New York-based trade group said sales declined 2.2 percent in the last two months of the year, the biggest such drop since it started tracking the data in 1970.

Sears Holdings Corp., the largest U.S. department-store company, forecast fourth-quarter profit that exceeded analysts� projections. Its sales fell 7.3 percent in December. The shares climbed $7.08, or 17 percent, to $47.63 at 10:38 a.m. New York time on the Nasdaq Stock Market.

Macy�s cut its fourth-quarter profit forecast to as little as 90 cents a share from a previous minimum of $1.10. It also announced the closing of 11 of its 859 stores.

Nordstrom Inc., citing �competitive markdown pressure across the industry,� said it wouldn�t meet its fourth-quarter per-share profit forecast of 35 cents to 45 cents.

Same-store sales at luxury retailer Neiman Marcus Group Inc. sank 28 percent in December. Saks Inc. posted a 20 percent sales decline, twice as large as the drop analysts estimated, even after markdowns of as much as 70 percent on designer goods.

�This kind of discounting is a big concern,� Perkins said. �January will be a heavy clearance month, with further downward margins pressure, and we might see more forecasts cut.�

Limited Brands Inc. slashed its fourth-quarter profit projection to as little as 55 cents a share from a previous range of 85 cents to $1.

J.Crew Group Inc., which sells $200 cashmere sweaters, slashed its full-year forecast for a fourth time. In the fourth quarter, it predicts a loss of as much as 29 cents a share, down from profit of as much as 10 cents, because of �aggressive inventory actions� to clear out merchandise. Bebe Stores Inc. reduced the low end of its forecast to 5 cents from 12 cents.

Gap cut its full-year profit forecast to as much as $1.30 a share from a previous high of $1.35 after December merchandise margins fell. The shares slid 69 cents, or 5.1 percent, to $12.87.

�It�s almost like Pavlov�s dog,� said Craig Johnson, president of retail-consulting firm Customer Growth Partners LLC in New Canaan, Connecticut. �Consumers have become so accustomed to markdowns that nobody wants to pay full retail anymore.�

Sales Down, Forecasts Down

Sales are down as is forward guidance. Expect to see this theme play out time and time again throughout 2009.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

One Reason that the Stock Market is Rising While Unemployment is Soaring

Daniel Gross points out that part of the reason that the American stock markets are going up even though unemployment is rising and the real economy suffering is because multinational corporations headquartered in the U.S. are experiencing strong sales abroad:

Here"s a puzzle: The stock markets are doing very well, yet the performance of the underlying economy doesn"t seem to justify optimism. The buoyant S&P 500 has risen 53 percent since the March bottom. And while the economy expanded at a 3.5 percent rate in the third quarter, unemployment is high, incomes are stagnant, and consumers are shaky...

It could be that the notion the stock market is an accurate gauge of the domestic economy"s temperature is outdated.

The Dow, the S&P 500, and the NASDAQ are primarily indices of large U.S.-based companies, not main street businesses: more Davos than Chamber of Commerce. These increasingly cosmopolitan firms have been busy globalizing and expanding their operations overseas. In 2006, according to Standard & Poor"s, 238 members of the S&P 500 broke out revenues between U.S. and non-U.S. sales. These companies notched about 43.6 percent of sales outside the United States. For large companies that had already saturated the U.S. market, the home market was something of an afterthought. In the second quarter of 2007, 66 percent of Coca-Cola"s beverage business came from outside North America.

And thanks to the long recession, demand for products and services of all types in the United States has shrunk even since 2006. Yes, the global economy in 2008 experienced its first year of shrinkage since World War II. But growth has resumed, and in some places�Peru, China, India�it never stopped. As a result, the globe"s economic geography has continued to change, with the United States accounting for a smaller chunk of global output and demand each year. For much of the past two years, virtually all growth in economic activity has taken place outside America"s borders. As a result, U.S.-based companies are becoming even more reliant on non-U.S. customers and operations for sales... in two years, big companies" proportion of sales coming from outside the United States rose 9.8 percent. It"s likely the 2009 figure will be something very close to 50 percent.

Don"t American Workers Win?

The fact that companies based in America are raking in profits from sales abroad is good for American workers, right?

No.

Gross points out that American workers don"t benefit because a lot of the goods sold abroad by American multinationals are made abroad:

If companies participated in foreign markets primarily by exporting U.S.-made goods, this shift would be good news for the U.S. economy and workers. But that"s not how it works. In fact, in the months after the global credit meltdown, U.S. exports plummeted. They bottomed in April, at $120.6 billion, and though they have been rising, the August 2009 total is still 20 percent below the August 2008 total. Globalization is changing the way we do business. It"s not a matter of U.S. companies exporting goods�burgers, soda, cars, software�made in the United States to Beijing but rather, making goods overseas and selling them overseas...

"Based on a Russian fairy tale and produced in Russia using local talent, the film is the latest step in Disney"s broad push into local language production," the FT reports. As Disney CEO Robert Iger put it: "We would not be able to grow the Disney brand � if we just created product in the US and exported it to the rest of the world." If Book of Masters succeeds, it will be good for Disney"s American shareholders but won"t do a whole lot of good for its U.S.-based employees. Or consider American icon General Motors. GM"s sales in China are rocking. In the first nine months, the company sold 1.3 million cars in China, including more than 181,000 in September. By contrast, GM in the United States in the first nine months sold 1.5 million cars in the United States, down 36.4 percent from the year before. And in September, GM sold just 156,673 cars in the United States. That growth in China is good for GM"s shareholders and for some of its executives. But since most of the cars sold in China are produced there, with parts produced by suppliers in China, rising sales in the Middle Kingdom won"t translate into jobs for unionized workers in the Middle West.

The rising U.S. stock market and a weak, slow-growing U.S. consumer sector aren"t really in contradiction. Given the large-scale trends transforming the global economy�and the role of large U.S. companies in it�it may be possible to have a sustainable rally in American stocks without a sustainable rally by American consumers.

Don"t Multinationals Pay A Lot in Taxes?

Well, at least the multinationals are paying a good chunk of taxes into the American economy, right?

Not exactly.

The Washington Post notes:

About two-thirds of corporations operating in the United States did not pay taxes annually from 1998 to 2005, according to a new report scheduled to be made public today from the U.S. Government Accountability Office...

In 2005, about 28 percent of large corporations paid no taxes...

Dorgan and Sen. Carl M. Levin (D-Mich.) requested the report out of concern that some corporations were using "transfer pricing" to reduce their tax bills. The practice allows multi-national companies to transfer goods and assets between internal divisions so they can record income in a jurisdiction with low tax rates...

[Senator] Levin said: "This report makes clear that too many corporations are using tax trickery to send their profits overseas and avoid paying their fair share in the United States."

Indeed, as Pulitzer prize winning journalist David Cay Johnston documents, American multinationals pay much less in taxes than they should through a variety of widespread schemes, including:

• Selling valuable assets of the American companies to foreign subsidiaries based in tax havens for next to nothing, so that those valuable assets can be taxed at much lower foreign rates

• Pretending that costs were spent in the United States, so that the companies can count them as costs or deductions in the U.S. and pay less taxes to the American government

• Booking profits as if they occurred in the subsidiary"s tax haven countries, so that taxes paid on profits are at the much lower safe haven rate
  

• Working out sweetheart deals with certain foreign governments, so that the companies can pretend they paid more in foreign taxes than they actually did, to obtain higher U.S. tax credits than are warranted
  

• Pretending they are headquartered in tax havens like Bermuda, the Cayman Islands or Panama, so that they can enjoy all of the benefits of actually being based in America (including the use of American law and the court system, listing on the Dow, etc.), with the tax benefits associated with having a principal address in a sunny tax haven.
  

• And myriad other scams

As Johnston documents, the American economy is hurt by the massive underpayment of taxes by the huge multinationals.

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Gross: "Talk Of Rate Hikes Is Comical"

Yahoo!Finance is reporting Fed Can"t Raise Rates.

The Federal Reserve"s decision to hold the line on interest rates was the only move the central bank could make considering the state of the US economy, PIMCO chief Bill Gross said on CNBC.

Reacting to the Fed"s move to hold its key interest rate at 2 percent, Gross called talk of rate hikes "comical."

"We"re in a recession. When has the Fed ever raised rates in a recession?" he said. "Unemployment is headed toward 6 percent, mortgage rates on home buyers are at 7 percent, and these guys want to raise rates?"

My Comment: I often disagree with Gross, but this is extremely easy to follow logic that I am 100% in agreement with. The Fed is not hiking.

Gross said the central bank has a responsibility now to provide liquidity.

"We"re in an asset deflation of near-historic proportions. That calls for the use of the government"s balance sheet and not for the Federal Reserve to raise interest rates," he said. "To the extent that the central banks now must prevent that deflation, interest rates don"t go up, they go down."

My Comment: In the US, the only asset deflation of historic proportion we are seeing is in housing. However, commercial real estate is coming, as is equity deflation.

In parts of the world (China and India for example) an equity crash of historic proportions is indeed underway. And to top it off credit risk is soaring in spite of the Fed"s historic efforts to increase liquidity.

With this backdrop, screams of inflation are ridiculous.

"In the US, 2 percent is pretty much the floor. I think the Fed made that clear," he said. "They"re going to provide liquidity in different forms and fashions."

As for investments at this point in the market, Gross advised against junk bonds and toward government-backed securities.

My Comment: It remains to be seen if 2% is the floor or not. I doubt it. Restraints on the Fed will also be lifted depending on what the dollar and commodities do. Actions of foreign central; bankers also come into play. Finally, things also depend on whether or not the Fed gets authority to pay interest on reserves.

The statement about providing liquidity in other fashions is certainly true as witnessed by an alphabet soup of lending facilities (TAF, PDCF, TSLF)which have now been extended.

Gross"s advice against junk bond is rock solid. Junk will get hammered as default risk rises.

"We want to stay under the umbrella to the extent that we have an umbrella that shelters large banks and to the extent that we have an umbrella that shelters the agencies, Fannie (FNM) and Freddie (FRE), that"s where you want to be," he said. "Why mess with junk bonds? Let"s stick to high quality and stay under that umbrella. Let"s stay dry."

My Comment: Gross made his bet, and that bet was that Fannie and Freddie would be bailed out at taxpayer expense. That bailout has been estimated at $25 billion. $250 billion might be closer. One does not have to like it (I sure don"t) but it is what it is.

Point by point I agree with Gross. What I frequently disagree with Gross about are his proposed solutions, such as but not limited to, bailing out Fannie Mae.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

Leading Indicators at 33 Year Low, Consumer Sentiment Drops Most on Record

The Economic Cycle Research Institute ECRI reports Weekly Leading Index Growth at 33-yr Low.

A measure of future economic growth in the United States fell to its worst level in 6 years and its annualized growth rate had its biggest weekly decline in almost four decades to hit a fresh 33-year low, a search group said on Friday.

The Economic Cycle Research Institute, a New York-based independent forecasting group, said its Weekly Leading Index fell to 117.0 in the week to Oct. 10, down from 120.6 in the previous period. It is at its lowest level since Oct. 25, 2002, when it stood at 117.0.

The index"s annualized growth rate slid from a downwardly revised minus 14.8 percent to negative 17.1 percent, its lowest since Jan 31, 1975, when it was minus 17.9 percent, according to ECRI data.

"With its biggest weekly plunge in 37 years WLI growth has dived to a new 33-year low. This data objectively shows that financial market turmoil is rapidly worsening an already-grim recessionary outlook," said Lakshman Achuthan, managing director at ECRI.

ECRI data showed the index fell due to unfavorable moves in all components except for jobless claims.

Consumer Sentiment Falls Most on Record

Bloomberg is reporting U.S. October Consumer Sentiment Falls Most on Record

Confidence among U.S. consumers fell by the most on record in October, raising the risk that spending will slump as job losses mount and financial markets crash.

The Reuters/University of Michigan preliminary index of consumer sentiment fell to 57.5 from 70.3 in September, the biggest decline since monthly records began in 1978. The measure, which averaged 85.6 in 2007, was lower than forecast.

Americans felt less secure after the Standard & Poor"s 500 Index fell every trading day but two so far this month, the credit crunch intensified and businesses cut more jobs. Further cutbacks in consumer spending, which accounts for more than two- thirds of the economy, will deepen a recession.

"Even gasoline-price decreases were overpowered by the massive destruction of wealth," said Michael Feroli, an economist at JPMorgan Chase & Co. in New York. "Things are pretty awful in the economy and that should make itself felt through weaker consumer spending."

[See Winter Heating Costs: What Can Consumers Expect?]

A government report earlier today showed housing starts in the U.S. fell more than forecast in September as construction of single-family homes plunged to the lowest level in a quarter century. Work began on 817,000 houses last month, down 6.3 percent from August"s level, the Commerce Department said in Washington. Construction of single-family homes dropped 12 percent to a 544,000 rate, the fewest since February 1982.

[See Single-Family Home Starts Fall to 26-Year Low].

The index of consumer expectations for six months from now, which more closely projects the direction of consumer spending, dropped to 56.7 from 67.2.

A gauge of current conditions, which reflects Americans" perceptions of their financial situations and whether it is a good time to buy big-ticket items like cars, slumped to 58.9, the lowest level ever, from 75.

Canada Consumer Confidence Drops to 26-Year Low

Things look equally grim, for Canada as Canadian Consumer Confidence Drops to 26-Year Low.

Canadian consumer confidence is at its lowest level since 1982 this month as more families expect their financial situation will deteriorate, according to a survey by the Conference Board of Canada.

The board"s consumer confidence index fell 11.9 points from the month before to 73.9, the Ottawa-based group said today. The share of consumers who anticipated their finances worsening over the next six months rose to 17 percent, an increase of 4.3 percentage points from September. Also, 17 percent of respondents said they were worse off than six months ago, an increase of 2.5 percentage points.

The Bank of Canada unexpectedly cut its key rate to 2.5 percent from 3 percent on Oct. 8 as part of a coordinated bid by policy makers across the globe to ease the worst financial crisis since the Great Depression. BMO Capital Markets Chief Economist Sherry Cooper predicts the Canadian economy will sink into a recession caused by tumbling demand from the U.S.

German Investor Sentiment Slumps

In Germany, Investor Sentiment Slumped as Crisis Deepened

German investor confidence dropped for the first time in three months in October, to near a record low, as the global credit crisis threatened to tip Europe into a recession.

The ZEW Center for European Economic Research said its index of investor and analyst expectations slumped to minus 63 from minus 41.1 in September. The gauge reached an all-time low of minus 63.9 in July. Economists expected a decline to minus 51.1, the median of 35 forecasts in a Bloomberg News survey shows.

"The financial-market turmoil is the main cause for the drop in the index," Sandra Schmidt, an economist at ZEW, said in an interview on Bloomberg Television. "There"s concern that it will spread to the real economy."

Germany"s benchmark DAX share index dropped 22 percent last week, the most on record, as concern grew that bank failures and a credit-market freeze will drag the world into recession. German growth will slow to 0.2 percent in 2009 from 1.8 percent this year, the country"s leading economic research institutes forecast today

French manufacturing confidence slumped in September to the lowest in 15 years as new orders dropped "markedly" and the economy probably fell into a recession, the Bank of France said today.

The German economy contracted in the second quarter and may not have recovered in the third as exports faltered and consumer spending waned. Business confidence dropped to the lowest level in more than three years last month.

Sentiment Indicators Summary

• US leading indicators have biggest weekly plunge in 37 years.
• US leading indicators are at 33-year low.
• US Consumer sentiment drops most on record to 57.5 from 70.3, the biggest decline since monthly records began in 1978.
• US big-ticket purchase sentiment slumped to 58.9, the lowest level ever, from 75.
• Canada Consumer Confidence Drops to 26-Year Low.
• German investor expectations slumped to minus 63 from minus 41.1 in September.
• French manufacturing confidence slumped in September to the lowest in 15 years.

In other news, economists still debate whether or not the US is in recession. By the time they figure it out, the world will be in a recession. Well, actually, it already is.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

Qld Floods, Blocked Culvert

Asian Stocks Drop To 4-Year Low

Please consider consider Asian Stocks Drop to 4-Year Low on Growth Concerns

Asian stocks slumped, sending the region"s benchmark index to the lowest level in four years, as Japanese exports missed estimates and commodities prices tumbled, deepening concern the global economy is headed for recession.

Mazda Motor Corp. plunged the most since 2000 as the yen surged against the euro and Japan"s September exports rose a third as much as projected.

The MSCI Asia Pacific Index lost 4.4 percent to 83.96 of 12:22 p.m. in Tokyo, set for the lowest level since May 2004. The gauge has plunged 47 percent this year.

South Korea"s Kospi index plunged 8.6 percent as the won continued a meltdown sparked by concerns about the nation"s financial and economic health. Hong Kong"s Hang Seng index fell below 14,000 for the first time in three years.

The Nikkei only needs to fall about 600 points to be back at a level last seen in 1982. The generation since then saw both the rise of Japan as a manufacturing superpower and subsequent deflationary spiral that hindered growth for more than a decade.

For more on the Yen and other currencies see US Dollar, Yen, Treasuries Soar In Risk Aversion Moves.

The most striking thing to ponder is that it has been nearly two decades since the Japanese stock market peaked in 1990. After 19 years the Japanese stock market is down a whopping 78%!

Think that can"t happen here? I will explore the question in my next post.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

"I pray God, Barack Obama is elected,"

Bush-Supporter Dennis Hopper Switches His Vote: "I Pray" Obama Wins

One of Hollywood"s few Republicans has switched his vote. Dennis Hopper, 72, told reporters in France that he"s praying for an Obama victory, despite decades as a Bush supporter.
"I voted for Bush, father and son, but this time I"ll vote for Obama," he told journalists at the opening of a show on his life and work.
"I was the first person in my family to have been Republican," he added. "For most of my life I wasn"t on the left."
"I pray God, Barack Obama is elected," he said, calling the current administration"s many "lies."
Hopper stars in "An American Carol," a conservative comedy that spoofed Michael Moore and last donated money, in 2004, the RNC.
French Culture minister Christine Albanel also named Dennis Hopper as Commander of the "Ordre des Arts et des Lettres" medal on Monday night.

July Payroll Playbook

The July Employment Report from the BLS will be out on Friday. ADP has released its employment reports for July already. Let"s take a look starting with The ADP National Employment Report.

Nonfarm private employment increased 9,000 from June to July 2008 on a seasonally adjusted basis, according to the ADP National Employment Report�. The estimated change in employment from May to June was revised up from a decrease of 79,000 to a decrease of 77,000.

This month�s employment gain was driven by growth in the service-providing sector which advanced 74,000. July employment in the goods-producing sector declined 65,000, while manufacturing employment declined 49,000, marking their twentieth and twenty-third consecutive monthly declines, respectively.

Two sectors of the economy hit hardest by recent problems in mortgage markets have been residential construction and financial activities related to home sales and mortgage lending. Today�s report suggests some lessening of the recent strain on employment in these industries.

In July, construction employment dropped 16,000. Though this was the twentieth consecutive monthly decline, and brings the total decline in construction jobs since the peak in August of 2006 to 350,000, it was one of the smallest declines in recent months. In addition, employment in financial activities rose 4,000 during the month.

Small Business Report

The ADP Small Business Report offers continuing evidence of the weak employment situation. Here are the Nonfarm Private Employment Highlights.

� Total employment: +9,000
� Small businesses: +50,000
� Medium businesses: -9,000
� Large businesses: -32,000
� Goods-producing sector: -65,000
� Service-providing sector: +74,000
� Manufacturing industry: -49,000

Small businesses represent payrolls with 1-49 employees
Medium businesses represent payrolls with 50-499 employees
Large businesses represent payrolls with more than 499 employees

July Is A Revision Month For BLS

Looking ahead to the report on Friday, it important to consider that January and July are revision months for the BLS. Guessing at what the Birth/Death Model revision will be is certainly fraught with danger, but I am going to go out on a limb anyway.

My guess the Birth Death revision will be -425,000 and the actual reported jobs number for July will be -178,000, with unemployment rising to 5.7%. If the jobs number is negative, it would be the 7th consecutive monthly contraction. These are the kind of guesses that can make one look silly but there they are.

I am also anticipating the first outright contraction in the service sector even with the strength that ADP is reporting in small businesses. Whatever that strength is, I expect it to be flooded by losses this month and next given this June 25th report: U.S. Retail Store Closures Are Flirting with Six-Year High.

Bannkrupt home furnishings retailer Linens "n Things" disclosure this week that it plans to dispose of 120 locations is the latest burst in the retail sector"s growing flood of store closings this year that has the industry"s real estate disposition firms scrambling.

Home Depot recently said it would shut 15 existing stores this year and reduce the number of new store openings by almost half to 55. Then the Hilco Organization and Gordon Brothers Group, new owners of Sharper Image, announced that they will close all 86 of the chain�s remaining stores. And, Gap Inc. plans to close an unspecified number of stores while downsizing many of its remaining locations.

�You are going to see a lot more closings; we are not even close to the end,� says Graiser. �There are a few thousand more stores� coming on the market.

On top of that report Starbucks recently announced it will cut 600 stores. Looking ahead, note that Bennigan"s Is Bankrupt, Faces Chapter 7 Liquidation.

In light of the above, I would expect the treasury market to react favorably to the jobs data (assuming of course my predictions don"t look silly on Friday morning).

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

Paper: Olmert Asks Bush to Prepare for Iran Strike

Tel Aviv /Washington - Israeli Premier Ehud Olmert will ask President George W Bush Wednesday to step up US and international action against Iran and prepare for a possible military strike against its nuclear facilities, the Yediot Ahronot daily reported.
Citing "officials close to Olmert," the daily said Wednesday the Israeli leader would tell the president that the measures taken so far to stop Iran"s nuclear programme had run their course and had not yielded results.
Israel views Iran as its main existential threat, given Tehran"s nuclear drive and President Mahmoud Ahmadinejd"s often-repeated statements that the Jewish state needs to be erased from the map.
Olmert, speaking Tuesday night to the American-Israel Public Affairs Committee (AIPAC), called Iran "the most serious and imminent threat to global security and stability" and said that "the Iranian threat must be stopped by all possible means."
"International economic and political sanctions on Iran, as crucial as they may be, are only an initial step, and must be dramatically increased," he told the AIPAC policy conference in Washington.
LinkHere

Weekend Fun with Sallie Mae and Countrywide CEOs

For some weekend fun please consider point 2 of last Wednesday"s Five Things Sallie Mae CEO Just Wants to "Get the F*ck Outta Here!"

Sallie Mae CEO Just Wants to "Get the F*ck Outta Here!"

Seriously. He does. But we"ll get to that in a moment.

• First, Sallie Mae (SLM) CEO Albert Lord told investors in a pretty defensive conference call that an increase in borrowing costs would hurt the company"s profit growth.
• Lord said that as a result of the failure of the $25.3 billion J.C. Flowers deal to go through, the company will need to raise capital despite the higher cost.
• That"s about all he said.
• The call was otherwise an exercise in futility.
• In one particularly hostile exchange, Lord said he "didn"t know" the answer to the question what SLM stock is worth.
  "We"re trying to put together projections together here, Al," one questioner said. "We"re trying to figure out what your stock is going to be worth and you"ve got to give us some guidance."
  "You should give Steve [McGarry, Managing Director of Investor Relations] a call," Lord said.
  "But you"re the CEO," the questioner objected.
  "That"s right. I"m the CEO," Lord replied. "Next question."
  
• Let"s cut to the chase. We"re no public relations expert, but here"s a tip: It"s probably not a good idea to close out a particularly testy investor call by saying, "Steve, let"s go, there"s no questions, let"s get the f*ck outta here."
• But hey, that"s just us.
• Check it out at the 26:40 mark via the mp3 file here.

It looks like Sallie Mae is more than a little testy over the fact that the deal between Sallie Mae and J.C. Flowers collapsed. But this is an amazing first conference call for a new CEO.

Countrywide CEO with Hoofy and Boo



Click here for some practical advice for Angelo Mozilo CEO of Countrywide.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

Stocks plunge almost 400 points

US STOCKS PLUNGE nearly 400 points amid fears of "70s style stagflation.

Oil prices shoot up nearly $11 a barrel before settling at record $138.54.

LinkHere

$137: Oil Reaches Record High, Analysts Predict $150 By Early July

Unemployment Rate Jumps 5.5 Percent... Highest In More Than 20 Years

China to Switch Off Bubble-Blowing Machine?

As noted previously, China experts say that the Chinese government has been blowing a huge bubble (and see this).

But the government is apparently going to switch off the bubble-blowing machine.

China expert Michael Pettis writes:

Today bank stocks were down, on rumors that the very high and clearly unsustainable loan growth rates would soon come to an end.

And the BBC writes:

It comes as the government looks to tighten its monetary policy to prevent the risk of asset bubbles, loan defaults and rapid inflation.

Meanwhile, the Chinese city of Hangzhou has started tightening mortgage lending terms, ahead of any changes to monetary and credit policies by the national government.

The signs that China may ditch its loose monetary policy dragged down bank stocks in Hong Kong and Shanghai on Wednesday.

Print this post

Palin: Obama"s Tax Plans Could Mean Nightmare Communist State

Palin Bizarre Rant Warns of Communist Nightmare State

Sarah Palin had a few memorable moments during her campaign stop in Des Moines, Iowa, on Saturday. But the most eye-opening of them all came, it would appear, when the Alaska Governor somehow drew a connection between Barack Obama"s tax policy and an encroaching, nightmarish, communist government. The Illinois Democrat, she hysterically suggested, would, through his proposals, create a country "where the people are not free."

LinkHere

32 Story Highrise Has 1 Tenant

In case you did not realize just how bad the condo bust is in Florida, this story will clue you in: Florida highrise has 32 stories, but just 1 tenant.

FORT MYERS, Fla. � The Vangelakos" southwest Florida condominium has marble floors, a large pool overlooking a river and modern furnishings that speak of affluence and luxury. What they don"t have in the 32-story building is a single neighbor.

When the Vangelakos" travel from Weehawken, N.J., to spend a week or a few days in their Florida home, they have exclusive use of the pool, game room and gym, but they miss having a few tenants around.

A large, circular fountain in front of the building is dry. The automatic glass doors that lead to the front lobby are locked. On the front desk is a guest sign-in sheet. The last entry: Feb. 13, 2009.

Victor Vangelakos said they don"t want to move to the tower next door because they would still be paying the mortgage and maintenance costs on the condo they own. They paid $430,000 for the unit and took out a $336,000 mortgage � essentially spending their life savings.

The family"s attorney said he has filed two lawsuits on behalf of would-be tenants because the building wasn"t finished as promised. He said they expected a clubhouse, marina, private cinema and restaurants.

Ah yes , it makes perfect sense to have a clubhouse, a marina, and restaurants for 1 part-time tenant. However, the private cinema would indeed be private, just as advertised.

Addendum:

E-Recep in a comment to this post has an interesting anecdote to share ...

"The over-capacity in housing has started to look ridiculous if not tragic. Here in Turkey we have a similar situation. One of my nephews is living alone in a 12-story building which was completed last year. The outskirts of Istanbul are full of newly finished condos, most of which are empty."

Similar stories abound in China.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

Amazing Emanuel, dswhat about the dead 1 million + Iraqi citiizensm, they don"t count in your little scenario.

On Bush, On Baseball and Iraq: "He"s 0 for 2"

Delivered on the House floor:
Madam Speaker, in 1993, when professional-baseball owners were deciding how to rehabilitate the reputation of baseball, after the player"s strike, they debated whether to enact a wild-card rule to allow a second-place team into the playoffs. Only one owner at the time voted against this: Texas Rangers general partner George Bush.
When the rule passed 27-1, at the time the President said, "I made my arguments and went down in flames...History will prove me right." [Associated Press, 9/9/93]
Since then, nearly a third of World Series champions have been wild-card teams, including the 2004 World Series Champion Boston Red Sox.
The rule helped saved baseball as history has shown.
And just like his baseball predictions, President Bush sings a very similar tune about Iraq, he says, "History will prove whether I"m right. I think I"ll be right..."[Whitehouse.gov, March 29, 2006]
Really?
Five years today since his speech on "Mission Accomplished," and let"s take stock.
More than 4,000 lives have been lost.
Tens of thousands of American men and women have been injured.
We"ve spent over $475 billion in taxpayer dollars, with the price tag continually going up.
History will be the judge of whether once again George Bush"s record and America"s reputation will go down in flames.
At this rate he"s going to be 0 for 2.

LinkHere

Edward Kennedy Memorial Service John Culver 1 2, Irish Eyes

Hear the Liberal lion"s roar and get healthcare passed

To conservatives who believe that a government run healthcare system would include a �death panel", again, I say nonsense. Just look at how private insurance agencies who profit will at times deny claim benefits to realize that they are truly the active �death panel".
To conservatives who believe that a government run healthcare system would include a �death panel", again, I say nonsense. Just look at how private insurance agencies who profit will at times deny claim benefits to realize that they are truly the active �death panel". LinkHere

Olbermann Says Limbaugh May Be Inciting A Riot.

Health Insurance Stocks Down As Reform Hopes Rise

Health insurance stocks took a dive Tuesday, with the S&P Health Care Sector index becoming the worst-performing segment of the S&P 500, largely because of health insurance companies.

The followed a public declaration of war by the health insurance industry"s lobbying arm against the White House"s health care reform efforts.

America"s Health Insurance Plans, or AHIP, released a methodologically questionable study on Sunday claiming that the Senate Finance Committee bill would result in higher premiums for families.

Aetna started the day trading at 26.38 per share, went down -3.1% and closed at 25.59.

Cigna started the day at 29.57; went down -3.14% and closed at 28.71.

UnitedHealth Group Inc. opened at 25.17, went down -3.73% and closed at 24.31.

Interestingly, after a majority of members of the Senate Finance Committee voted for the health care reform legislation offered by Sen. Max Baucus, D-Mont., many of those stocks started to creep back up. The Baucus bill does not contain a government-run health care option to compete with private insurers � an option AHIP and its members oppose.

AHIP is now running TV ads against the effort in many states, as ABC News" Teddy Davis takes a look at HERE.

"Is it right to ask 10 million seniors on Medicare Advantage for more than their fair share?" asks the ad"s narrator. "Congress is proposing more than $100 billion in cuts to Medicare Advantage. The nonpartisan Congressional Budget Office says many seniors will see cuts in benefits." LinkHere

Iraqis demand end to "occupation:

Iraqi opposition and resistance groups have renewed their demands for an end to all negotiations with the United States while US troops remain on Iraqi soil.
LinkHere

Iraq says hope slim for security deal with current U.S. gov"t:

"There is a large possibility of postponing the signing of the long-term agreement between Iraq and the U.S., until a new U.S. administration is elected," Ali al-Dabbagh was quoted as saying by the Voice of Iraq news agency.

LinkHere

Credit Bubble Conversations

Following is a set of posts from Valueguy on the Motley Fool, various posters on Silicon Investor, and me. The topic at hand is Noland"s latest Credit Bubble Bulletin. Here is the discussion chain.

Valueguy
Mish I know you"ve addressed Noland"s views in the past. Since you enjoy doing so and since many of us are reading him, I think it"s worth thinking about what he"s saying. I for one am starting to be convinced, even though I can see commodity and house (and other) prices going down.

Noland writes:

As is reflected in the Q2 2006 Flow of Funds, there remains an overwhelming bias within the financial sector to leveraged existing assets (chiefly government, agency, and mortgage-related securities). This bias has intensified greatly during the third quarter. Ironically, the housing and economic decelerations are to this point engendering only a moderate slowdown in Non-Financial debt growth, while Financial Sector Expansion Goes into Overdrive. The system"s liquidity mechanism has not only become detached from the actual financing needs of the real economy, there is today a Powerful Propensity for Financial Excess to Accelerate Rapidly as the Economy Decelerates Only Moderately (too many waiting patiently to profit from another round of Fed largesse). This is a very important development.

To be sure, speculative leveraging these days in the fixed-income markets has an unparalleled capability of creating abundant liquidity for the markets and system generally. And as bond prices inflate in response to heightened speculative leveraging and resulting liquidity creation, those that had been positioned for higher rates (both speculations and hedges) are forced to unwind these trades � in the process creating only more price inflation and liquidity over-abundance. Meanwhile, the yield curve gyrates and causes bloody havoc for myriad curve and rate speculations.

I will be quite surprised if the Financial Sphere Horse does not once again pull the Economic Sphere Cart. Benchmark Fannie Mae MBS yields have now dropped 65 basis points from June highs. To what extent lower mortgage rates reignite housing markets will likely vary significantly by market. But they will surely incite an increase in transactions and, most likely, acceleration in already strong refinancings and equity extractions. Total Mortgage Debt growth can be expected to quicken from the first half�s 10.1% pace.

There is certainly nothing like a concurrent descent in energy prices and bond yields to get the inflation doves chirping rather maniacally. Yet, the reality of the situation is that sinking bond yields and attendant gross liquidity excess are poised to stoke fires for sectors already demonstrating flaming inflationary biases. Sitting near the top of the list, you should assume Mr. Income Inflation is salivating from recent market trading dynamics.

And, yes, Income Inflation is supporting inflated home prices that sustain the Mortgage Finance Bubble - that maintain over-consumption - that assures endless massive Current Account Deficits - that guarantee massive foreign buying of U.S. securities while writing yet another chapter in History�s Greatest Bond Market Bubble.

Valueguy Continues
What he"s saying is that all the assumptions that markets will crash because of an economic downturn may be false. Most of us see that we are having a slowdown, maybe margin compression, and as always Wall Street reacts violently. Well, he"s saying it"s just not true, he"s arguing that the fundamentals are detached from the market. Well, usually such views are wrong, and Noland himself (I think) believes that eventually stocks will crash. But why are people not scared?

Mish
Interestingly enough similar discussions were taking place on Silicon Investor.
Following is a chain of posts on SI

Jimmg
There is a good interview on financialsense.com with my old friend Doug Noland this week. He thinks the economy will surprise on the upside for the short/intermediate term.

Orkrious
Another bear capitulates.

Jimmg
Doug is very bearish longer term but thinks the strong credit growth is leading to wage inflation which will support the economy and housing much better than most think. He might be right but I tend to think we are much closer to the bust.

Rarebird
This year has been remarkably similar to 1994 with a time lag of about a month. If the same pattern holds, I"d expect a very nice correction in mid October. I want to see Volkmar Hable capitulate and see OEX Option Traders buy tons of calls on the initial leg down. That is likely after the next fling to the upside. Currently I"m modestly long. But I"ll be short when it matters most.

Mish
Money supply as measured by M1 has been contracting.
Housing prices and sales are dropping fast in spite of whatever else is happening.
If there is extra liquidity, how much actual GDP is produced by it? Any?
It seems to me that it is taking enormous expansion of credit right now just to keep the ship from sinking.
The stock market may be acting well but the junk bond market and treasury markets are telling another story.
My conclusion is that "financial sector overdrive" is unsustainable in the current environment. Still that does not put a timeline on sustainability so let"s look at a few indicators to see what they are saying.

Here is a chart of junk bonds spreads vs. treasuries produced by Orkrious on Silicon Investor.



Orkrious maintains that chart daily and posts updates frequently on Silicon Investor. You can follow along here.

Notice how stocks topped in May when the spreads narrowed. That was a perfectly normal action. Right now we have a huge divergence (the divergence can always get bigger of course), but I am inclined to believe the bond market.

Here is the yield curve as of 2006-09-25



The treasury market and credit spreads both seem to be saying one thing while the stock market is pricing in a soft landing or better. One of them is wrong. A similar situation took place in 2000.

Bart at NowAndFutures disputes Noland"s idea of wage inflation.
Here are a couple of charts produced by Bart in cooperation with from John Williams at Shadowstats.

Employment Cost Index



Average Hourly Earnings

Bart explains his version of the CPI in The Consumer Price Index, A Big Lie.

Regardless of whether or not one believes the "lie figures" as produced by Bart, there is no doubt the CPI has been manipulated for political purposes, just as the unemployment rates is manipulated for political purposes. The only real question is on the extent of the lies.

At any rate, the above charts show a decreasing employment cost index and modestly increasing hourly wages. I have several comments on wages.

1. Averages are misleading.
2. The biggest raises went to a small percentage of workers.
3. Wages are a lagging indicator.

In addition, wages tell one story but job growth tells another. We have now had five consecutive months of subpar job growth including four consecutive misses prior to the latest month.

Wages and jobs are both important, not just wages. The only real bright spots in this recovery as far as job growth is concerned are medical related jobs and housing. There is no candidate to take up the slack for declining housing related jobs.

Note that cash out refis are drying up. The implications of that are pretty substantial. CalculatedRisk addresses mortgage extraction in GDP Growth: With and Without Mortgage Extraction and Mortgage Extraction and the Trade Deficit.

There are many stock market divergences as well including herding into winners, advance decline ratios, stock market breath, and an enormous divergence between the DOW and DOW Transports. For now the market seems fixated on a pause, sinking commodities (as if that will save consumer spending), as well as various improbable "Goldilocks" theories.

Reading Noland"s post in entirety I am not sure if this is exactly capitulation by another bear or not. That said, I obviously have a vastly different opinion from Noland on the yield curve, wages, commodities, inflation expectations, and a host of other issues.

I disagree with Noland"s proposal that the bond market will cause an "acceleration in already strong refinancings and equity extractions". For starters, refinancings are not "strong" at least compared to previous peaks, and equity extraction is not likely to be "strong" in a now rapidly sinking housing environment. CalculatedRisk"s charts would seem to agree. Secondly, it appears that lenders are finally ready to address credit lending standards. A tightening of credit standards is likely to negate any effect of lowered interest rates. Finally the idea that "Income Inflation is supporting inflated home prices that sustain the Mortgage Finance Bubble" is simply fallacious. Home prices and transactions have crashed since June of 2005 even as wages have risen modestly. It seems Noland is forgetting about affordability, the shrinking pool of eligible buyers, and lack of pent up demand. After all, who doesn"t have a house that wants one and can afford one? Noland"s capitulation may be debatable but he sure is missing the boat on many key issues.

Mike Shedlock /Mish
http://globaleconomicanalysis.blogspot.com/

Howl

The Republican Party is shrinking, and screaming as it does so. If these town hall "protests" are any indication, what we have is a GOP so demonstrably starved of ideas that all they have left is howling disruption and mindless noise. It may be effective in the short term, but it is yet another indication that the Republicans have little to offer the nation except sound, and fury, and nothing. LinkHere

All That Stands In Way Of Universal Health Care Is Greed, Lies And Gullibility

It was the blooper heard round the world. In an editorial denouncing Democratic health reform plans, Investor�s Business Daily tried to frighten its readers by declaring that in Britain, where the government runs health care, the handicapped physicist Stephen Hawking �wouldn�t have a chance,� because the National Health Service would consider his life �essentially worthless.�
Professor Hawking, who was born in Britain, has lived there all his life, and has been well cared for by the National Health Service, was not amused.
Besides being vile and stupid, however, the editorial was beside the point. Investor�s Business Daily would like you to believe that Obamacare would turn America into Britain � or, rather, a dystopian fantasy version of Britain. The screamers on talk radio and Fox News would have you believe that the plan is to turn America into the Soviet Union. But the truth is that the plans on the table would, roughly speaking, turn America into Switzerland � which may be occupied by lederhosen-wearing holey-cheese eaters, but wasn�t a socialist hellhole the last time I looked.
Let�s talk about health care around the advanced world. LinkHere

Skepticism On Free Trade?

The Wall Street Journal is reporting Republicans Grow Skeptical On Free Trade.

By a nearly two-to-one margin, Republican voters believe free trade is bad for the U.S. economy, a shift in opinion that mirrors Democratic views and suggests trade deals could face high hurdles under a new president.

The sign of broadening resistance to globalization came in a new Wall Street Journal-NBC News Poll that showed a fraying of Republican Party orthodoxy on the economy.

Six in 10 Republicans in the poll agreed with a statement that free trade has been bad for the U.S. and said they would agree with a Republican candidate who favored tougher regulations to limit foreign imports.

Though President Bill Clinton famously steered the Democratic Party toward a less-protectionist bent and promoted the North American Free Trade Agreement, his wife and the current Democratic front-runner, Hillary Rodham Clinton, has adopted more skeptical rhetoric. Mrs. Clinton has come out against a U.S. trade deal with South Korea.

One fresh indication of the party"s ideological crosswinds: Presidential candidate Ron Paul of Texas, who opposes the Iraq war and calls free-trade deals "a threat to our independence as a nation," announced yesterday that he raised $5 million in third-quarter donations.

[Mish comment: Ron Paul"s actual position on free trade can be found Issues 2008. He has valid reasons to object to the WTO and some provisions of the other agreements but all in all he is making a mistake on free trade. NAFTA is not going to make a single nation out of Canada, the US, and Mexico any more than the EU made a single country out of Italy, France, and Germany. I support Ron Paul but he is wrong on free trade]

Poll Question / Results
Which of the following statements comes closer to your point of view?

• Statement A: Foreign trade has been good for the U.S. economy, because demand for U.S. products abroad has resulted in economic growth and jobs for Americans here at home and provided more choices for consumers.
• Statement B: Foreign trade has been bad for the U.S. economy, because imports from abroad have reduced demand for American-made goods, cost jobs here at home, and produced potentially unsafe products.

Statement A/foreign trade has been good ..... 32
Statement B/foreign trade has been bad....... 59

The WSJ should know better that to phrase a question like that. Statement B plays on recent unsafe products made in China even if the flaw was a bad design or bad inspection by a US company. Statement A leaves out the biggest benefit of free trade: lower cost on tens of thousands of items.

In essence, the "because" clause as phrased in the Statements A and B are so biased that it is hard for many to to answer A. What I suspect happened is that any hard advocate of free trade answered A on general principles, and everyone else answered B.

Consider these alternative statements:

• Statement A: Free trade means lowers prices of goods at stores like Wal-Mart, Target, Best Buy, and Bed Bath and Beyond. Free trade benefits me because I shop at those stores.
• Statement B: I would gladly pay higher prices on everything even if it only saved a few U.S. manufacturing jobs.

A completely different answer would likely have been given in response to those alternative statements. There does seem to be a rising tide of protectionism, but that flawed poll is sure not proof of it.

Tariffs Are Not The Answer

Tariffs are not the answer to trade issues, nor are import restrictions, nor is competitive currency debasement.

It is simply impossible to stop globalization and global wage arbitrage via import restrictions or tariffs without destroying the economy. The Smoot Hawley Tariff Act proved that.

The interesting thing is this saber rattling is coming at a time when imports are starting to decline on their own accord. See Cargo Decline Portends Consumer Weakness for more are shipping container declines and consumer weakness.

In response to weak consumer demand, Wal-Mart (WMT) is cutting prices. Other stores such as Target (TGT), Best Buy (BBY), etc. will be forced to follow suit. Now imagine the effect if legislation was enacted that forced the prices of those goods back up.

The politicians (and unfortunately the WSJ as well) are playing on the seen (the loss of U.S. manufacturing jobs and unsafe goods). The unseen is all the shipping jobs, doc jobs, trucking jobs, etc that were created in this trade boom. Also part of the unseen is currency debasement by the Fed and Congress that is the root cause of consumers getting rid of dollars as fast as they can.

Tariffs are not the solution to trade issues when the problem is currency debasement by the Fed. Since currency debasement is the problem, it cannot be the solution as well. That is the message behind the recent rise in the price of gold.

Is Fair Trade The Answer?

Some would argue the solution is "Fair Trade".

The problem with "Fair Trade" is that "Fair" is in the eyes of the beholder and no one wants to lead by example. Every country has a different definition of fair, and every country wants concessions from everyone else first. For example, the EU will not give in on agricultural subsidies no matter how unfair those subsidies are to third world countries (and they are blatantly unfair). The U.S. has taken the convenient position that it is all in favor of eliminating agricultural subsidies if the EU acts first.

I believe the first country that actually practices free trade, reduces regulation, and gets government out of the lives of private citizens regardless of what any other country does will flourish. Sadly, no one wants to be first, especially the U.S. and EU.

Addendum

After Posting I found this article by Ron Paul"s weekly Texas Straight Talk column: Regulation, Free Trade and Mexican Trucks.

Free trade is not complicated, yet NAFTA and CAFTA are comprised of thousands of pages of complicated legal jargon. All free trade really needs is two words: Low tariffs.

Free trade does not require coordination with another government to benefit citizens here. Just like domestic businesses don"t pay taxes, foreign businesses do not pay tariffs � consumers do, in the form of higher prices.

If foreign governments want to hurt their own citizens with protectionist tariffs, let them. But let us set a good example here, and show the world an honest example of true free trade. And let us stop hurting American workers with mountains of red tape in the name of safety. Safety standards should be set privately, by the industry and by the insurance companies who have the correct motivating factors to do so.

That is a much more sensible position than claims that NAFTA is going to unite the U.S., Canada, and Mexico into a single country. As described in the above article Ron Paul is correct. All free trade needs to work is elimination of tariffs and removal of government interference. His weekly straight talk comes across much better on free trade than he does in Issues 2008.

Mike Shedlock / Mish
http://globaleconomicanalysis.blogspot.com/

Olbermann airs extensive list of McCain flip flops

By David Edwards
reddit_url=window.location.href
John McCain has claimed that the 2008 election �is about trust and trusting people�s word � Senator Obama�s word cannot be trusted.�
Keith Olbermann asks if the American people trust someone who has flip flopped on so many issues. He then goes on to enumerate GI educational funding, lobbying reform, campaign reform, immigration, gay marriage, abortion, nuclear waste � torture of detainees, the Iraq War � and a long, long list of other issues on which McCain has shifted positions.
This video is from MSNBC�s Countdown, broadcast June 30, 2008.

Media Covers Raw Politics, Not the Policies of Recovery Package

It seems oddly fitting that on the day that President Barack Obama is set to sign his economic stimulus package into law, that the press is mainly obsessed with the fact that he"s doing so in Denver, Colorado. What does It All Mean? What statement does it make about Magical, Wonderful Bipartisanship? What can be divined by Obama"s decision to Avoid Washington? Pure window-treatment stuff. But what can you expect? The media have come to the end of a month of politicking over the economic stimulus and, from what I gather, have managed to mostly unlearn as much as they could about the principles upon which the proposed plan is based.
If you were a member of the public who wanted cogent answers to questions such as, "How will infrastructure stimulate the economy?" or "Can targeted tax cuts add value to the package?" or "What type of spending translates into the fastest job growth?" -- you know, the nuts and bolts of a set of ideas that voters are asked to take on faith -- you were basically out-of-luck. Instead, the press was filled with daily news of the soap opera over bipartisanship. Can any idea really be a good idea if eighty people won"t vote for it? If the overall package gets less effective on the road to consensus, will the economy hand out extra credit points, because of the fantastic procedural accomplishment? These were the inane obsessions of the professional political media.
And here is a nice litany of their accomplishments: LinkHere

Sean Hannity"s Apocalyptic Stimulus Plan Montage (VIDEO)

President Obama"s stimulus plan may be met with dismay by conservatives such as Sean Hannity, but it has clearly stimulated a flourishing of creativity among his Fox News video team. Opening his show tonight was a 2-minute video montage, set to the ominous sounds of "O Fortuna" from Carl Orff"s Carmina Burana (you"ll know it when you hear it), that painted the passing of the stimulus bill as a practically apocalyptic event.
The clip splices together scenes of GOP leaders denouncing the push to pass the stimulus spending (such as John Boehner"s theatrics before the House last Friday) while Democrats aggressively argue for their agenda. The piece ends with an undeniably cheesy graphic showing a recent edition of Newsweek--the one with the headline declaring "We Are All Socialist Now"--rising up from the ocean to tower above the Statue of Liberty and the Lincoln Memorial.
Watch it in all its operatic glory.

Men In Green / Keith Taylor

There was a Mish oversight that needs to be corrected.
I failed to give proper credit to Keith Taylor and The Wall Street Examiner for use of the image Men In Green in my post Mish"s Movie Review.



Keith Taylor is nothing short of brilliant with his graphic images.
Here are a few more.

Barn Door Economics
Does this sum up Fed policy or what?



How about this one?
Strong First Impressions?



Not only does Keith do a fantastic job but Lee Adler and his entire crew at The Wall Street Examiner do.

Occasionally I post there as do a few other of my friends from Silicon Investor, most notably Russ Winter. Time constraints including The Survival Report, podcasts on Howe Street and other commitments such as keeping this blog running have me more than over allocated at the moment.

It seems I have far more stuff to write about than I have time to write.
Can anyone clone me? Would you want to if you could?

Mike Shedlock / Mish
http://globaleconomicanalysis.blogspot.com/

Weekly Economic Potpourri December 7, 2008

Every week there are a numerous headlines that are worthy of mentioning but I simply run out of time. Here are a few headline news reports of interest from the past week.

Bank of England mulls "nuclear option" of cash injection

In what would be a major departure for British monetary policy, the Bank is considering pressing the button on printing presses by engaging in a so-called policy of quantitative easing. It emerged after the Monetary Policy Committee cut borrowing costs by 1pc to just 2pc - the lowest level since 1951.

In the statement published alongside its decision, the Bank warned that "it was unlikely that a normal volume of [bank] lending would be restored without further measures."

The measures under consideration include direct purchases of assets, such as government debt or commercial investments, by the Bank or the Treasury, as well as expanding the Bank"s balance sheet, a means of pumping extra cash into the banking sector.

Sharp drop in Vancouver home sales

The housing market slowed dramatically in Greater Vancouver last month, with the number of existing homes sold falling by 70 per cent from the year before.

Last month, 874 resale homes were sold through the Multiple Listing Service (MLS), compared with 2,883 sales in November, 2007, according to information released yesterday by the Real Estate Board of Greater Vancouver (REBGV).

The benchmark price declined by 13 per cent from May to November, from $568,411 to $495,704. For the 11 months ended in November, prices have fallen by 8.3 per cent. In the past three years, prices are up by 20 per cent, and they are up by 60 per cent over the past five years.

Investors sue Countrywide to force loans purchase

A group of bond investors sued Bank of America (BAC)-owned Countrywide Financial on Monday demanding that Countrywide buy every mortgage loan for which it agrees to reduce payments under a predatory lending settlement deal.

Countrywide and its Bank of America parent would be liable to pay hundreds of trusts a total of about $80 billion for loans it modifies, said lawyers for the plaintiffs who filed the complaint in New York State Supreme Court.

Bank of America said it was "disappointed in this attack on a program intended to keep at risk families in their homes" and help stabilize the housing market.

"Countrywide believes that plaintiffs" lawsuit represents an unlawful effort to assert rights of the trusts," the bank said in a statement. "Accordingly, Countrywide intends to pursue plaintiffs for any and all remedies available to it, including the recovery of its costs incurred in having to defend this improper action."

The lawsuit was filed on behalf of Greenwich Financial Services Distressed Mortgage Fund 3 LLC and QED LLC.

The complaint said Countrywide does not plan to bear the $8.4 billion cost of the loan modification but to shift that cost to 374 trusts into which its loans were securitized, harming bond investors.

I believe the bond investors are legally correct and BAC is playing a ridiculous moral sentiment card. Ironically, it is possible that Greenwich Financial Services is better of with work arounds than it would be without them and taking over houses in bankruptcy. What a mess.

Crude Oil Caps Biggest Weekly Drop Since 1991 on Lower Demand

Crude oil fell for a sixth day, capping the biggest weekly drop since the Persian Gulf War in 1991, on concern demand will decline after a report showed U.S. employers cut jobs in November at the fastest pace since 1974.

Oil is down 25 percent since Nov. 28 as the recession deepened in the U.S., Europe and Japan.

�After the jobless number, any bulls that were left in the market will become extinct,� said Nauman Barakat, senior vice president of global energy futures at Macquarie Futures USA Inc. in New York. �There are no redeeming features in these numbers.�

Merrill Lynch warns oil prices could fall to $25

Merrill Lynch on Thursday warned that oil prices could fall as low as $25 a barrel in 2009 if the recession hitting the US, Europe and Japan extended to China, the world"s engine of commodities demand growth in the last few years.

Francisco Blanch, head of commodities research at Merill Lynch in London, said his main scenario is for oil prices to average $50 a barrel next year, but warned: "A temporary drop below $25 is possible if the global recession extends to China."

Nymex January RBOB unleaded gasoline traded for the first time ever below the $1 gallon mark, although it later recovered to $1.008 a gallon, down 0.3 cents on the day, in spite of news on Wednesday of a 1.6m barrels fall in US petrol stocks, compared with the consensus forecast for a 0.9m barrels increase. Lower consumption pushed gasoline prices down.

I view this a possible contrary indicator, just as calls of $200 or even $300 were a contrary indicator not that long ago. My how oil has crashed and this is the first $25 call I have seen.

I thought oil would fall to $60 or possibly $40 when crude was near $100, but it blasted all the way to $140 on zero fundamentals. At that time I was told oil would never dip below $80 again, and might not even dip below $100 again. Someone told me I was a contrary indicator for pointing out a chart of oil when it fell back to $100.

Well, here we are at $40. Now the calls are for $25. Hmmm. Maybe. Maybe not. If we do see $25 China will likely be in serious economic trouble along with the whole rest of the world.

AIG Lobbied for India Nuke Deal (Really!)

As AIG was on the brink of bankruptcy and facing a government takeover, the insurance giant made sure Congress knew where it stood�on U.S.-India nuclear relations, that is.

AIG deployed its lobbyists to Washington last month to influence a bill that allows U.S. companies to sell nuclear technology to India. Signed by President Bush earlier this month, the bill overturns a 30-year-old ban on such sales imposed after India first developed a nuclear bomb. (Critics complain that the U.S.-India deal undermines non-proliferation efforts.)

Why would AIG care about a U.S.-India nuclear pact at a time when its own existence was uncertain?

�We were looking at this to see if there�s a potential business aspect� for AIG, company spokesman Nick Ashooh said. �We do a lot of business in India.� Ashooh said he was �not sure� if that business included insuring contracts between U.S. military technology companies and their Indian counterparts.

Leading up to and following the government�s bailout of AIG last month, the company�s lobbyists kept busy. (AIG �suspended� its lobbying this week after coming under fire from senators.) Between July and September, the company spent more than $2 million to lobby Congress, the Treasury Department, the Federal Reserve and the White House, records show. (Between April and June, it spent more than $3 million). Apart from its own in-house lobbyists, AIG employed five lobbying firms and 20 lobbyists to influence 20 bills and several other policy matters.

Credit-Card Fees Targeted by Retailers Who Say Banks Overcharge

Retailers such as Target Corp. say banks make so much money from the fees that they give credit cards to people who can�t pay their debts, just as they provided mortgages to homeowners who can�t afford them.

�It�s another version of subprime lending,� said Mallory Duncan, chairman of the Merchants Payment Coalition representing trade groups for 2.7 million gas stations, drug stores, supermarkets and other retailers. �The system should be fixed before we are in a position of having to bail out more banks.�

The merchants want an antitrust exemption so they can band together to negotiate with banks over the so-called interchange fee, usually between 1 and 2 percent of the purchase price, that a retailer�s bank pays the cardholder�s bank each time a customer swipes a credit card. The retailer�s bank then collects the fee from the merchant. Consumers don�t see the charge, which merchants say is built into their prices.

U.K. November House Prices Fall for 13th Month, Nationwide Says

U.K. house prices fell for a 13th month in November as the financial crisis deterred homebuyers and banks rationed mortgages, Nationwide Building Society said.

The average cost of a home slid 0.4 percent from October, when it fell 1.3 percent, the Swindon, England-based mortgage lender said in an e-mailed statement today. Prices dropped 13.9 percent on the year to 158,442 pounds ($241,180).

Consumer spending fell the most since 1995 in the third quarter as unemployment rose and house prices dropped, government data showed yesterday. Bank of England Governor Mervyn King said Nov. 25 that getting banks to lend again ``is more important than anything else at present.""

Obama Plans Largest Building Program Since 1950s

President-elect Barack Obama said he�ll make the �single largest new investment� in roads, bridges and public buildings since the Eisenhower Administration to lift the sagging economy and create jobs.

Obama, in his weekly radio speech today, said his plan to create or preserve 2.5 million jobs will also include making public buildings more energy efficient, repairing schools and modernizing health care with electronic medical records.

�We won�t just throw money at the problem,� he said. �We�ll measure progress by the reforms we make and the results we achieve -- by the jobs we create, by the energy we save, by whether America is more competitive in the world.�

Translation: We are going to throw money at the problem and we will not measure the results.

Lawmakers close to deal on carmaker bailout

Congressional leaders will work through the weekend with the Bush administration to try and reach a final accord to provide emergency financial relief to the Big Three car makers, aides said. A vote on a proposal could come as early as Tuesday.
The Wall Street Journal reported late on Saturday, however, that the talks had hit a snag: Congress and the White House were arguing the role of an "auto czar" who would oversee a restructuring of the industry.

Both sides want such an adviser, the Journal reported. But the administration wants to name the oversight chief immediately, giving President Bush a big say over the industry restructuring, while top Democrats want President-elect Obama to appoint the adviser.

The three companies are asking for a total of $38 billion in loans from the federal government to enable them to survive the current financial meltdown.

Good Lord. We are up to $38 billion now, and have to suffer with an Auto Czar as well.

Bank account set up for dog beaten with hammer

Murphy, the dog who was found beaten with a sledgehammer in a DeKalb County park early this week, is up and around.

The 9-year-old German shepherd mix was able to stand up on his own and spent most of the day Thursday out of his cage, said Stephen Pope, the veterinarian and medical director at Pets Are People Too, in Dunwoody, where Murphy is being treated.

Joseph �Joe� Waters, 48, the man that police said smashed the dog in the head with a sledgehammer, remained in the DeKalb County Jail on a felony count of animal cruelty, according to DeKalb Sheriff�s spokeswoman Mikki Jones. Waters is being held under $25,000 bail.

Murphy, meanwhile, was stretching his legs and even giving staff at the Dunwoody clinic an occasional tail wag. �He is out on his own, seems to be able to see out of his good eye and is recovering nicely,� Pope said.

On Thursday, with offers pouring in to help the dog, Kennedy set up a trust fund to help with the cost. Donors can make a gift at any Wachovia Bank branch, to the Murphy the Dog account, number 1010209642669.

Something for everyone including weekend animal stories.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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