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Sunday, October 12, 2014

I've About Had It With Race Mongers

This country is going to go hard right so fast it ain't funny.

Yesterday Jesse and the Duncan family gave a press conference saying Duncan didn't get the right treatment for racial reasons. They wanted him flown to either Emory or Nebraska. 

Well guess what - Duncan got all sorts of measures you and yours ain't gonna get, because CDC just changed their guidelines to "avoid AGPs". This means that if you get sick, you aren't going to get ventilation, intubation, or kidney dialysis unless you get very, very lucky. CDC also recommends keeping labs to the absolute minimum. You'll be lucky to even get an IV. It's more likely that when you get really sick they'll tie you to the bed and roll you into the dying ward. They may give you some liquid morphine if you are able to swallow.

I told my family a while ago to prepare for home care if this thing takes off, and that's where we are. We're working on a possible protocol at the clinic. If this gets out, hospitals are unlikely to be a good bet. It's been very clear that Ebola virus has been spreading through the clinics in the affected countries, and it will here too. That Dr. Sacra was working in a maternity ward totally separated from any Ebola cases. And he was an experienced missionary doctor. He still got infected. Which matches perfectly with our experience here and in Spain. You need special wards and special equipment to safely treat these people, and we don't have them in any quantity.

Why are we letting people come in from affected countries? I have no idea. The doctors I know are appalled and amazed at what's happening. 

What are the chances that it gets out? Well, unless the affected countries are locked down quickly, very good!  

Here's where the open southern border is a killer. If you don't let people in through the air, they can just fly to some South American country and come in over the southern border. If they do, before long it's in South America. What are our chances if this gets out dwn there? Very poor. 

Anyway, preparing for rolling quarantines is a good idea. I noticed the local supermarket started being unable to keep the bleach stocked last week. I'm sure it is health care workers and their families buying it. So get yours while you still can. 

The problem with containment is that there are carriers. If you get a small viral dose, you may not get overtly ill. But you can still be infectious with intimate contact. 

So all bets are off. Bullets and bleach and gloves. That's the ticket. If you think I'm joking, you're wrong.

The reason I've been talking to my family about this already is that a few weeks ago, the clinic started getting calls from the African immigrant families who are patients. They all had relatives who were visiting and just wanted to come in for tests. Unspecified. Needless to say, we did not take them. 

The only way you can get tested for Ebola exposure is to go to a hospital, but if you are not symptomatic you are not going to get tested. We've referred several regular patients who believed they might have been exposed, but they aren't getting tested. It's probable that we already have four or five carriers in the country. God help us if one of them tries to make a living as a prostitute. 

Bullets, bleach, gloves, masks, chastity and prayer. That's the ticket.

I am bitter, because I think there is a good chance I will get killed by the whacky sort of wishful thinking that has governed the decision making in this country for some time. I was making huge progress with what I was doing. I'm not going to quit, because the clinics have to stay open, but it's not a good bet. 

We saved two absolutely terminal patients this last year, and dramatically improved medical status of many more using this method. So I'm not going to quit. But I sure will die pissed as hell if I get killed before I get a chance to formalize this and dump it out there.

If you know a doctor, start being nice. REALLY NICE. 

Wednesday, October 01, 2014

So, October Data Begins

Okay, on the last post someone asked me about recession odds. First, I wasn't looking at a 15-20% chance of recession next year. I was seeing a 15-20% chance of AVOIDING recession next year. 

The earliest time when I could meaningfully update that forecast would be late in October, as we got a read on the rolling impact of price changes and attempts to adapt. Well, it is October. As I get 'em I will try to post 'em.

The first read is CMI covering September. Published yesterday, it showed a hard fall in credit indicators for manufacturing, with the weakness concentrated in the unfavorable factors. This is the one I have been watching most closely, because it leads other indicators by several months. I expected it, it is not dire, and we are not yet in the realm of spiraling negative correlations, but it is certainly not encouraging. Some of the words used in the narrative were "collapse", "not a small reversal of fortune", "almost shocking", and "intense concern".

Services didn't improve either, but the problem is much milder. Is it an adjustment? I don't know and I don't think anyone can tell right now. It's very possible that over the next few months this could clear through and growth could continue on a somewhat lower trajectory.

So far this has been pretty classic, with credit standards loosening as everyone attempts to keep the wheels of commerce greased. The sole very definite thing one can say about yesterday's CMI (I'm not sure if we are allowed to link it any more), is that the negatives are harsh enough that credit issuance is going to have to tighten. From there, it's anyone's guess.

The standard PMIs and so forth won't tell me much until about December. They are later in the sequence.

We do have some good things which may help to offset the difficulties of the last year. We also have some bad stuff. The fall in oil prices helps, food prices are still a strong negative, but that may be starting to fall out, rents are WAY too high (very intractable), forget the housing market, strong dollar is not a good thing for manufacturers, but strong dollar does attract some refuge money.

Ebola? Not a help. The CDC issued a guidance to funeral homes in the US, which made my heart stop. I feel no confidence there.There will be multiple arrivals in the US, and this first one was not handled in a way to generate confidence.

Europe looks to be in real trouble. The weaker Euro can help only over months, and Germany's Mittelstand is apparently now walking through mud. But the weaker Euro imposes costs on US manufacturers. As of August, the durables report showed a roughly balanced situation. But the dollar is too strong and the international situation too difficult for this to continue.

Transportation (ATA truck tonnage and rail) have been showing strength. The weakness is all in consumer finances.

Friday, September 26, 2014

Why I Laugh When I Read Bloomberg

Or, for that matter, when I read the FOMC. 

Fresh from this morning's GDP release, here are two tables looking at real Food at Home & GDP changes:

The above is the rolling six month change. Broad orange line is real spending on food at home. Generally, this is either in line with population increase or above. In times when it is above, the economy is doing well. We have had a problem since 2012, which is why the Fed is trying to shove the economic train down the tracks.

The correlation becomes clearer when you look at the rolling 12 month changes:

As you can see, a startling divergence between reported GDP and an increasingly hungry population has emerged. For more than a year, we have spent most of the time sticking below the recession-inducing level of shrinking food purchases per capita.

If you will go back to the first graph, you can see that in mid 2013 we were climbing out and then we took a hard fall the last two quarters. 

This will either reverse or we will land in recession. It also has a hell of a lot to do with what happened in Ferguson this past summer. 

I think the fall in energy prices plus lower utility spending this summer may have given us enough to stagger through the winter without falling out, but I await some more data. And if it is a very bad winter, it won't be enough. We are still on very thin ice.

Note that the policy of importing large numbers of immigrants in order to deflate wages when the population as a whole is getting hungrier is a recipe for placing ruling heads on pikes. Historically, this has always produced the same result.

As for the Fed, if they truly intend to increase interest rates significantly, it will be a unique action. "Unique" is the politest term I can use. Generally, you do not want to increase interest rates in a depression, which at least 40% of the population is now experiencing.

I apologize for not blogging. I am extremely busy. 

Friday, August 01, 2014

Employment Report, Interesting

In most respects this is a good report. Again, the two-month tally of jobs gained has a strong correspondence between the Household survey and the Establishment survey, which should raise confidence in the results. 

The unemployment rate ticked up to 6.2%, but this was due to increased participation, with the number of persons coming back into the workforce higher by 141 thousand. So the Household survey shows 131,000 new jobs, but 197,000 more unemployed persons, with the not-in-labor force tally dropping by 119,000. This usually indicates a stronger labor environment. 

My attention was caught by the rise in the unemployment rate for women. The rate for adult men did not change at 5.7%, but it rose from 5.3% to 5.7% for adult women. Checking A-10, which gives the age breakdown, one sees that it is mostly in the 55 and over women. For that cohort, unemployment over the year increased over the year (4.2% -> 4.6%) and over the month (4.1% -> 4.6%). 

Usually such a change is due to weak household finances, but I checked the geezer table (A-6) to be sure, and indeed it is not in the 65 and over crowd.So I think this is reflective mostly of tight household cash for a cohort of low-to-moderate income households.

The Establishment survey shows that the relative weakness in job gains this month compared to last month is in services. At 140K that is low, and lower than last July. It was widespread except for government, which has racked up increases in June and July. But I think this makes sense, given the strong services hiring in preceding months, and is not an indicator of problems. Goods-producing employment was reported as being very strong at 58K. 

So I think the picture is pretty consistent. The question is whether US households can maintain final demand. Cooler summer weather in summer regions should be helping household finances, but of course it also raises concerns about what the winter will be like! 

In most respects the current reports are coming in very consistently, with just two outliers. Chicago PMI showed a sudden drop in which I do not quite believe, and petroleum demand seems to be too low for the other reports. I can possibly argue the distillate figures as being attributable to lower utility demand and increased rail freight, which is exceedingly real. Yet the gas doesn't match the jobs either. 

Rail has been, as always, extremely indicative of the movements in the overall economy this year, so I am watching rail for signs that would indicate the next slowdown. B2B credit has been showing increased signs of money shortages along with an increased rate of economic activity, so now it is just a question if we can consolidate our finances in time to ride through what looks likely to be another bad winter. July B2B looked better than June. 

Small Business (NFIB) shows that there are real inflationary pressures in the economy, with hiring desired but apparently being unaffordable for too many small businesses. I am waiting for the next NFIB report to see what it all means - it is one of the large survey samples so it should tell the tale.. Prices for small businesses have risen sharply against flat plans, so the money crunch is real, and compensation costs are rising over planned. The June NFIB report and the June CMI agreed. Improvement in July CMI published yesterday may auger improvement in the July NFIB. 

There's a Main Street crunch which means that costs that should be trending down over the next six months may not. Feed prices should be falling and therefore consumers should be getting assistance, but it looks like everyone is trying to make up lost ground. 

So I am still at the 15%-20% chance of escaping recession next year, and biting my nails over the suspense!

PS: Update to Depressing Graph:
It is absolutely the case that persons may not be able to afford to work.

Monday, July 28, 2014

The Depressing Post

I've made several attempts at this, but they are all so depressing that I end up wandering off with a headache. So now I'm just going to dump it. 

A) You may or may not have noted the Yellen (Sweet Monetary Manna Mama, aka SMMM)/Bullard-Fisher contretemps (Axis of Purported Liquidity Rationalization, aka APLR)

SMMM claims that theoretical unemployment rate masks an underlying labor slack that is very destructive to the economy, and thus rate increases will be deferred. APLR claims that conditions are such that the Fed has met its goals and must proceed quickly to raise rates while they still can. 

Who's right? First, I think the Fed really had a meeting and drew lots to distribute the Inflation Hawk suit. They're worried enough about that 4.5 T on the books that this time there were two short straws. Thus the flight of APLR falcons. We may all pause to admire their arabesques through the skies of NYC as they attempt to bring down the Black Ben Helicopters. But don't pause for too long, because it's all a play done to convince CYNK-buying financial types that WE ARE ON THIS THING WE HAVE IT UNDER CONTROL DO NOT WORRY about inflation.

Fisher may be taking his role a bit too seriously, because he mentioned the unmentionable in his July 16th speech - tailing off on reinvestment of that 4.5T. Right now they are reinvesting principal and interest proceeds, which far exceeds the theoretical QE that they are tailing off. So until they all start talking about letting that portfolio run off, they are not serious about liquidity constraints. It's just a fireworks display. 

But why are they willing to do make fools of themselves in public? They have two huge problems. They don't know how to manage either, much less the two together. 

Problem 1
This is the population-adjusted core employment graph. It's the number of the employed among the 25-54s divided by the civilian free-roaming 25-54s population. It is clear we DO have labor slack. Note that there is a considerable degree of part-time employment in there.

Problem 2 is, yea verily, like unto it, an unlovely thing cursed of G_d and man.

This is the ratio of trade receivables (cash coming in) of non-financial corporates divided by total liabilities (what they owe) of non-financial corporates. I have helpfully added the Fed Funds rate indexed on the right. These figures come from the Flow of Funds report.

In short, the Fed response has caused the acceleration of debt-loading of corporates, to the point that they are very susceptible to any increase in interest rates. Since the end of the last recession US corporates have added about 2.4 Trillion in corporate bond debt and over  2 Trillion in credit market debt.

Households have lightened up a bit, but not nearly enough. This is the equivalent graph for Households & Non-profits:

So it is clear that our reckless spending is not going to bail the corporations out, no matter how sapphire the screens get.


The implications are that households and corporations are both extremely negatively sensitive to interest rate increases. They are both extremely negatively sensitive to tax increases. They are extremely negatively sensitive to cuts in government funding.

Now note the long time period these graphs cover. Much has been made of the post WWII expansion, but the population and the business population then had relatively high cash flows in relation to liabilities, which implied that they were extremely favorably responsive to both tax rate cuts (it was a high tax environment) and interest rate cuts. 

There was a huge recession in the 50s - one of the most severe ever - and when Eisenhower was building those roads he was funding expansion. When Kennedy showed up, his tax cuts had an impressive pay back.

But now we really don't have much room for tax cuts. We don't have much room for ANYTHING. 

All of the financial machinations of the Fed have really done very little to change the long term trajectory of the US economy, which in fact they conceded already. Have you looked at their long term growth forecasts lately? This is their March projection, and here is their June projection. Compare to their June 2013 projection.

So the reason for the Fed-and-Booty Play being enacted in the skies over NYC is that they are trying to talk the markets into anticipating better rates, so that they have the room to raise them without shocking the real economy. I don't think it's going to happen, given the regime in DC.

Absorb this, and then we can go onto the ACA/economic weather forecast thing. You folks may have stronger constitutions, but there's only so much misery I can handle at one time.

Saturday, July 19, 2014

Materials and Strengths

Like probably just about everyone else, I have been appalled by the latest news. It seems that most everywhere one looks, new conflicts and new refusals to deal with them are popping up even while our pretend solutions for previous problems are wearing very thin. 

I mean, it's a damnably depressing day when one's reaction to Israel going into the Gaza strip is "Finally!" 

I will get back to posting, but first, something that's the opposite of depressing

It's supposed to go into production soon, and this 3D printer can print carbon-fiber on a matrix. 

This is causing me intense positive emotions, and I am going to enjoy just thinking about the possibilities for a few days. 

Surely US education is all wrong? We are wasting tremendous sums of money educating a lot of people in skills we don't need, when the basic education to work with such tech is really almost absent. There can never have been a time when a basic technical education can provide any individual with such huge opportunities? 

If you have kids, getting them into this sort of thing very early - late elementary school to junior high - would be a great investment.

 

Monday, July 07, 2014

PS: Full-time Jobs Level

This depresses me, and hey, it's Monday, so I just have to share. This is the LEVEL of full-time jobs, long view, seasonally adjusted:



Short view:

Yes, it has recently fallen, but if you look at the little sawtoothed formations that have shown up each year at this time post the GR, that is the effect of education jobs plus SA. Our economy is still top-heavy to government and education, and when those campuses shut down for the summer it looms up in the stats. 

So I can't say whether the recent trend to add full-time jobs is still intact or not. It requires a few months.

In service economies, full-time jobs drop off hard after recessions and only recover years later. Only in manufacturing economies do you see the quick fall and quick rebound. 

Next, ACA and employment.

Sunday, July 06, 2014

Employment - What Does It Really Say?

First, I think that the employment report was so-so. Not great and not terrible. Not a promise of endless prosperity, and not a harbinger of doom.

The claims that the number of jobs are very favorable economic omens generate skepticism. The details of the report make it look like marginal job creation. Because of the end of school, these may be part-time jobs that really are not substitutions for full-time jobs - seasonal adjustment is very tricky in June. 

But even if that is true,  this sort of thing is just BS, cubed:
Job growth blew past expectations and the unemployment rate fell to the lowest level since before the financial crisis peaked six years ago, creating a firm foundation for a stronger U.S. economic expansion.
It really should ping everyone's nonsense meter, too, because this shortly follows:
The 1.39 million increase in employment over the past six months is the biggest over a similar period since early 2006. 
What was happening in 2006? We were slipping into an industrial recession, which was consequently followed by the end of the financial cycle in 2007. We all know the rest of the story. . If we had not been in the middle of a large credit expansion in 2006, with PCE being increasingly fueled by funny money borrowing, we would have seen recession much earlier - although of course it would have been much milder. 

It's better to take honest recessions as they come rather than trying to go postal, monetarily speaking. But the BIS just tried to explain all that, and word has it that Krugman is still frothing at the mouth and leaping at the windows, so perhaps I should drop that topic for this post.

The problem is that job creation, as is also true for asset valuation, does not serve as a good predictor for economic expansion over the next year. There's usually a late spike in employment figures - it's not even a good six month predictor. 

Now one indicator that was favorable until June was the growth of full-time jobs. Unfortunately that did reverse in June, but it may return again in the fall. 


This is YoY percent change in three employment indicators - all, full-time, and part-time. It's a bit busy, so:
This is just all and full-time - the green line is all. But you can't see much detail, so:
Between the two you can get a sense of what's what. In earlier times, the US was a highly industrial economy, and employment was more predictive although the changes were sharper. Nowadays, we are a service-heavy economy, and services don't respond to output as much as consumer spending. 

If you will refer to the long series and the short series, you can see how absolutely odd the employment shift looked in 2006 - but that's because we didn't need to work. We could all just borrow more money on our houses. So it took a long time to sag out, although doom was clear in 2005. 

We do not have the same opportunity this time.

Other things are apparent. There is usually a spike in full-time employment and employment right before the trend shifts. There is often a difference in the initial shift - full-time employment falls whereas that green line (all) hangs in there a bit. I believe that is due to better uptake of part-time jobs rather than better creation of part-time jobs. I do watch for that pattern a bit, although I basically ignore most employment stats when figuring trends. 

There is one employment stat I have found predictive - the YoY change in covered jobs from the initial claims database. This one, in a service economy, does seem to have some predictive value. It at least tells you when to get nervous when the rest of it looks a bit dispirited:
Note that in a manufacturing economy, it doesn't. If you look at the short version so you can see more detail:
You can see that it does seem a bit predictive of when the trend is ending and can generally be used to give about a year's warning.  Again, this is PERCENT CHANGE YOY, not simple levels. 

However I am a bit skeptical of that indicator right now because ACA should be playing a part, and I am not sure how much of a part. The earlier trend in this number you see before downturns is not causative - it's a result of the factors causing the slackening of growth. So my reasoning right now is that this may be showing the result of ACA, and should be less reliable this time.ACA should distort this UP, so it may be more predictive!

What is strongly predictive? Causative factors, such as percent change in real personal disposable income, PCE (we generally consume less if we don't have money), and gross private domestic investment. There are two types of slumps  - business-led and consumer-led. Once one half of the slump really gets going it generally will draw in the other.

Now, should I do this? On July 4th weekend? Well, I'm going to, because I have a busy week ahead and I probably won't get to it otherwise, but I'm sorry. 

I know this is busy, but basically when these all start to correlate, ya gotta problem. We've had this problem for over a year. GPDI joined the party last quarter. 

The reason why we had low inflation was basically that we at a level of economic activity associated with recession. It's one of those economic factors that gets you out of recession, or prevents you from really falling into it, because it increases real disposable personal income. Note that a lot of the spikiness in real disposable personal income has been due to tax changes - timing of dividends and payouts, plus FICA. But the FICA effect has fallen out. Now it's just going to be whatever's going on in the economy - and the employment report did not support any theory that we are all suddenly going to be earning more in a real sense. 

GPDI is on the right side of the graph and it's just percent change. It's naturally pretty spiky. Still, aside from fracking, it's hard to figure out how many companies are going to be spending more. Profits aren't good, the money really isn't circulating on the consumer side, export orders are a bit light in many industries, and the business climate can best be described as BOHICA. 

I know we are not in an active recession now (in which a majority of these factors knot up around each other and start pulling each other down), because if we were freight would show it, and it doesn't (it did show the decline in the first quarter and then the resurgence). Q1 was just the combination of bad factors in a structurally weak economy. The inventory cycle rolled through, and we got a couple of better months. 

But ACA has got to be an additional negative correlating factor, because ACA affects most people who got insurance through their employer, and the changes now afoot pretty much require individuals to pay more for less. This means that statistical real disposable personal income is significantly overstated, and that we are heading into a sustained Keynesian spending tunnel.

The green line (GDPDI) is going to come back up. But I don't expect it to come up that far. 

The bottom line is that this expansion is getting old, and without a real surge in income, it sags out and then collapses:
The reason you could have such a big hit in the first quarter was just that growth is minimal, so we are always kind of rotating around the axis of recession.

Friday, July 04, 2014

Happy Independence Day!!!!

The significance is that this is the day that we officially got the right to address our own problems. 

We got a shot at it. That's all, and it's a wonderful thing! There isn't much better in life.

I hope you all enjoy the day.

Thursday, July 03, 2014

Not Bad - Update Tomorrow

What's nice about today's employment report is that the Apr-June gains reported in the Household Survey started to mesh with the gains reported in the Establishment Survey.

I will expand tomorrow, but look at the Household survey. Unemployment rates dropped sharply for adult women, for those with just a high school education, and for those with some college but no degree. Unemployment rose a tad for those with a college degree or better.

Unemployment dropped sharply for blacks - thank heaven!!! That rate has been far too high for far too long. Overall a lot of that has been due to a younger population, but enough's enough. ...

Part-time employment rose by 275K compared to an overall monthly gain of 407K. 

We have finally escaped the rule of 58, with the emp/pop ratio coming in at 59.0. Finally!!!!



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