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World View & Market Commentary.
Forest first; Trees second.
Focused on Real & Knowable facts that filter through the "experts" fluff and media hyperbole. Where we've been, what the future may hold and developing a better way forward.
Highlights
Layoffs continue at a rate not consistent with a recovering jobs market. Initial claims rose 12,000 in the June 12 week to 472,000 with the prior week revised 4,000 higher to 460,000. The four-week average slipped slightly to 463,500 but is still about 10,000 higher than this time last month which points to another disappointing monthly employment report.
Continuing claims rose 88,000 in the June 5 week to 4.571 million, retracing about a third of the prior week's big dip. Here the four-week average is slightly below this time last month though the unemployment rate for insured workers ticked higher to 3.6 percent.
The outlook for the U.S. economy has been improving despite troubles in Europe and despite still high jobless claims. But employment growth is a necessity for a healthy domestic economy. Stocks are falling and demand for Treasuries is rising following the report.
NEW YORK (CNNMoney.com) -- Seeking to appease deficit hawks, Senate Democrats scaled back unemployment benefits and Medicare physician reimbursement measures on Wednesday.
The revised jobs bill eliminates a $25 weekly supplement for the jobless that had been part of the last year's stimulus act. Those currently receiving the supplement in their unemployment benefits check will continue to do so until they exhaust their extended benefits, or until the week of Dec. 7, whichever comes first. That cut will reduce the bill's cost by $5.8 billion over the next decade.
Highlights
Over the last two months, consumer spending power has increased and not just because of income gains. A buck actually goes farther as prices have dropped on average, tugged down largely by lower gasoline prices. In May, overall CPI inflation declined 0.2 percent, following a 0.1 percent dip in April. The latest number matched the market forecast. Excluding food and energy, CPI inflation rose 0.1 percent, following no change in both March and April. Analysts had projected a 0.2 percent boost in the core rate.
Checking out the components, energy component fell 2.9 percent, following a 1.4 percent dip in April. Gasoline decreased 5.2 percent after a 2.4 percent fall the prior month. Food price inflation came in at flat after posting a 0.2 percent rise in April.
Helping to keep the core rate soft was no change in the owners' equivalent rent subcomponent. This series has either been flat or negative for several months. Also, recreation was flat and medical care edged up only 0.1 percent for the latest month.
Year-on-year, overall CPI inflation slowed to 2.0 percent (seasonally adjusted) from 2.2 percent in April. The core rate in May was steady at 1.0 percent. On an unadjusted year-ago basis, the headline number was up 2.0 percent in May while the core was up 0.9 percent.
Bond yields edged down marginally on the news with an unexpected but small rise in initial jobless claims also contributing. Equity futures eased but were still positive. Today's report validates the Fed's recently ongoing decision to keep short-term interest rates low for an extended period of time. This outcome from the CPI report should partially offset disappointment over the modest rise in initial jobless claims.
Highlights
The purchase index rose 7.3 percent in the June 11 week for its first increase in six weeks, its first increase since the end of second-round stimulus. The report said it is unclear whether the gain is a one-time gain or whether a rebound is underway. The refinance index, up 21.1 percent, has been on the rise, the result of low mortgage rates. Mortgage rates were mixed in the week with 30-year loans little changed at 4.82 percent.
Highlights
Homebuilders are playing it cautiously after the close of the special tax credits program. Housing starts in May fell back 10.0 percent, following a 3.9 percent boost in April. May's annualized pace of 0.593 million units came in well below the market projection for 0.650 million units and was up 7.8 percent on a year-ago basis. The decline in the latest month was led by a 17.2 percent decrease in single-family starts, following a 5.6 percent gain in April. The multifamily component actually rebounded 33.0 percent after a 5.1 percent drop the prior month.
By region, the drop in May starts was led by a 21.3 percent plunge in the South Census region with the Northeast declining 6.3 percent. The West and Midwest posted gains of 10.8 percent and 4.9 percent, respectively.
Permits declined 5.9 percent, following a 10.9 percent fall in April. The May rate of 0.574 million units annualized was up 4.4 percent on a year-ago basis.
Today's numbers are disappointing-showing more weakness than expected. We could get some bottoming in starts soon if more homes close from the special tax incentives program and eat into new home inventory. The deadline for signing a contract was April 30 but the deadline for closing is now the end of June. Equity futures and Treasury yields declined on the news.
Highlights
Although this morning's earlier housing starts report disappointed, industrial production certainly did not-coming in hotter than expected. Overall industrial production in May surged 1.2 percent, following a 0.7 percent boost the month before. The latest number was stronger than the consensus forecast for 1.0 percent.
Manufacturing has been robust over the last three months with this component gaining 0.9 percent in the two latest months and jumping 1.2 percent in March. For other sectors in May, utilities output was up 4.8 percent and mining slipped 0.2 percent.
A jump in motor vehicle production added significantly to May's overall production boost. Motor vehicle production jumped 5.5 percent, following a 1.4 percent dip in April. Nonetheless, gains were widespread in other industries.
On a year-on-year basis, industrial production improved to 7.6 percent from 5.2 percent in April.
Capacity utilization continues its upward trend, reaching the 74.7 percent mark in May from 73.7 percent the prior month. May's figure topped analysts' forecasts for 74.5 percent.
Clearly, manufacturing continues to lead the economy despite concern that exports could slow to Europe. Apparently, demand for U.S. goods remains strong domestically and in many overseas markets. On the news, equities futures and interest rates firmed. The earlier news on weak housing starts had weighed on both.
Highlights
Gasoline prices pulled down the PPI but not as much as expected due to sharp gains in some narrow components of the core. Overall PPI inflation weakened even further to a 0.3 percent drop in May after dipping 0.1 percent in April. May's decline was less negative than analysts' projection for a 0.5 percent decrease. At the core level, the PPI gained 0.2 percent, matching the rate in April. The consensus had called for a 0.1 percent uptick. The core was boosted largely by jumps in prices for tobacco products and for light trucks.
The decline in the headline PPI was led by a 1.5 percent drop in energy costs, following a 0.8 percent dip in April. Gasoline fell 7.0 percent in May after slipping 2.7 percent the prior month. Also adding to weakness in the headline number was a 0.6 percent decrease in food prices after a 0.2 percent decline in April.
At the core level, the mild acceleration in May was led by a 2.2 percent spike in tobacco prices and a 0.8 percent boost in light truck prices.
For the overall PPI, the year-on-year rate eased to 5.1 percent from 5.4 percent in April (seasonally adjusted). The core rate rose to 1.3 percent from 1.0 percent the month before. On a not seasonally adjusted basis for May, the year-ago increase for the headline PPI was up 5.3 percent while the core was up 1.3 percent.
Despite some firming in the core, inflation at the producer level remains subdued.
Highlights
Solid describes June's Empire State report that shows steady and firm month-to-month acceleration in orders and shipments. New orders rose more than three points to 17.53 to indicate significant month-to-month growth in this most important of all readings. Shipments, which follow orders, rose nearly 8-1/2 points to 19.67 with the workweek rising to 8.64 vs. no change in May. Delivery times slowed significantly in the month, to 9.88 vs. May's minus 6.58 to indicate stress on the supply chain. Manufacturers in the region are adding employees but at an index of 12.35 they are adding fewer employees than in May or April when the index came in just over 20. The headline business conditions index, steady at 19.57, reflects the overall strength underway.
Price acceleration eased reflecting lower energy prices as prices paid fell back more than 17 points to 27.16. Pass-through of costs is minimal with the prices received index steady at 4.94. Inventories remain a key negative in the report, at minus 1.23 to indicate a marginal draw this month as businesses continue to keep a tight grip on costs. Like inventories, unfilled orders are also a negative at the same minus 1.23 reading to indicate a slight month-to-month draw. Employment and inventories really won't get going until backlogs begin to build.
Despite the negatives, today's report is a plus for the manufacturing outlook pointing to strength for Thursday's report from the Philadelphia Fed and for the monthly ISM purchasing report to be posted at the beginning of next month.
Highlights
Import prices fell 0.6 percent in May reflecting a steep 5.0 percent monthly decline in import petroleum prices. Excluding petroleum, import prices rose 0.5 percent following the same 0.5 percent rise in April. While prices for inputs fell, the result of the fall in energy prices, prices for finished goods remain little changed, at plus 0.2 percent for capital goods and at plus 0.1 percent for consumer goods. The rising value of the dollar points to easing pressure for import prices in the months ahead.
For exports, the rising dollar points to greater gains as foreigners have to pay more for less. Export prices rose 0.7 percent to extend solid gains for a third month. Here the wildcard is agricultural prices which rose 1.4 percent. Excluding agriculture, export prices rose 0.6 percent for a third solid month of gains. Prices of finished capital and consumer goods edged fractionally lower in the month.
The inflation outlook right now is benign and shouldn't stand in the way of policy makers. The rising dollar is a big plus that will keep import prices down and help keep inflation in check.
U.S. Identifies Vast Riches of Minerals in AfghanistanThere are just so many angles that could be played from this, I don’t even know where to begin... Do they think they are going to have Halliburton put the Afghanis to work digging mines? That’s the future for Afghanistan? We have U.S. Generals now who are experts on economies? Well, you have to give them an ‘A’ for creativity and stick-to-itiveness. Now our nation’s longest running war in history, we are still clueless as to what “victory” looks like or why the hell we are still there (besides the obvious feeding of the military industrial complex and bankrupting of our nation, of course).WASHINGTON — The United States has discovered nearly $1 trillion in untapped mineral deposits in Afghanistan, far beyond any previously known reserves and enough to fundamentally alter the Afghan economy and perhaps the Afghan war itself, according to senior American government officials.
The previously unknown deposits — including huge veins of iron, copper, cobalt, gold and critical industrial metals like lithium — are so big and include so many minerals that are essential to modern industry that Afghanistan could eventually be transformed into one of the most important mining centers in the world, the United States officials believe.
An internal Pentagon memo, for example, states that Afghanistan could become the “Saudi Arabia of lithium,” a key raw material in the manufacture of batteries for laptops and BlackBerrys.
The vast scale of Afghanistan’s mineral wealth was discovered by a small team of Pentagon officials and American geologists. The Afghan government and President Hamid Karzai were recently briefed, American officials said.
While it could take many years to develop a mining industry, the potential is so great that officials and executives in the industry believe it could attract heavy investment even before mines are profitable, providing the possibility of jobs that could distract from generations of war.
“There is stunning potential here,” Gen. David H. Petraeus, commander of the United States Central Command, said in an interview on Saturday. “There are a lot of ifs, of course, but I think potentially it is hugely significant.”
The value of the newly discovered mineral deposits dwarfs the size of Afghanistan’s existing war-bedraggled economy, which is based largely on opium production and narcotics trafficking as well as aid from the United States and other industrialized countries. Afghanistan’s gross domestic product is only about $12 billion.
“This will become the backbone of the Afghan economy,” said Jalil Jumriany, an adviser to the Afghan minister of mines.
Armed ethnic clashes rage in Kyrgyzstan; thousands fleeIt’s amazing how debt tensions always turn into “ethnic violence.” Don’t look now, but there go another four missiles from a drone in Pakistan, “ethnic violence” to follow… in other news, shares of defense contractor Halliburton (HAL) gap higher despite their involvement in the Gulf oil spill disaster – Cramer recommends ‘Buy, Buy!’
(CNN) -- Tens of thousands of Uzbeks are fleeing ethnic violence in southern Kyrgyzstan amid what one aid official described Sunday as a "humanitarian catastrophe," according to the International Committee of the Red Cross.
At least 114 people have been killed in the clashes and another 1,458 have been wounded, Kyrgyzstan's national news agency AKI press reported. Earlier Sunday, the government put the figures at nearly 100 people dead and more than 700 hospitalized since fighting broke out Thursday night.
According to one report, the death toll is much higher. Officials in Osh, the city most affected by the violence, said at least 500 ethnic Uzbeks have been killed, according to Ferghana.Ru, an independent news agency.
An estimated 80,000 refugees have fled across the Kyrgyz border into neighboring Uzbekistan, according to ICRC spokeswoman Anna Nelson.
Obama Presses for Aid to Cities and StatesAnd Hell and Brimfire damnation will befell you all, least you fail to support more bailouts, more debt, and higher taxes across the land.
From Jackie Calmes and Sheryl Gay Stolberg at the NY Times:
President Obama on Saturday implored Congress to provide more aid to states and cities to blunt “the devastating economic impact of budget cuts” by local governments that imperil the jobs of teachers, the police, firefighters and other public employees.
In a letter to Democratic and Republican Congressional leaders, Mr. Obama said the “mounting employment crisis” in the states “could set back the pace of our economic recovery.” ... education secretary, Arne Duncan, has said that without federal aid, up to 300,000 fewer teachers would be in classrooms this fall ...
The WaPo quotes Obama as writing there will be "massive layoffs of teachers, police and firefighters" without the additional funds.
State Plan Makes Fund Both Borrower and LenderSick and twisted – but hey, at least he’s not holding teachers and children hostage… yet.Gov. David A. Paterson and legislative leaders have tentatively agreed to allow the state and municipalities to borrow nearly $6 billion to help them make their required annual payments to the state pension fund.
And, in classic budgetary sleight-of-hand, they will borrow the money to make the payments to the pension fund — from the same pension fund.
As word of the plan spread, some denounced it as a shell game and a blatant effort by state leaders to avoid making difficult decisions, like cutting government spending or reducing pension benefits.
“It’s a classic Albany example of kicking the can down the road,” said Harry Wilson, the Republican candidate for comptroller, who holds an M.B.A. from Harvard.
Under the plan, the state and municipalities would borrow the money to reduce their pension contributions for the next three years, in exchange for higher payments over the following decade. They would begin repaying what they borrowed, with interest, in 2013.
But Mr. Paterson and other state officials hope the stock market will have rebounded to such a degree by that time that the state’s overall pension contribution burden will have been reduced.
Another oddity of the plan is that the pension fund, which assumes its assets will earn 8 percent a year, would accept interest payments from the state that would probably be 4.5 percent to 5.5 percent.
This week, Mr. Paterson called borrowing “a last resort,” but added, “I have never said I wouldn’t borrow.”
U.S. Home Foreclosures Climb 44% to Record in MayOh yeah, we exited recession all right, gee, I wonder if we’ll see a “double-dip?” BANG, BOOM! Did I mention that we must work hard to fight them over there?
June 10 (Bloomberg) -- U.S. home foreclosures reached a record for the second consecutive month in May, with increases in every state, as lenders stepped up property seizures, according to RealtyTrac Inc.
Bank repossessions climbed 44 percent from May 2009 to 93,777, the Irvine, California-based data company said today in a statement. Foreclosure filings, including default and auction notices, rose about 1 percent to 322,920. One out of every 400 U.S. households received a filing.
“We’re nowhere near out of the woods,” Rick Sharga, RealtyTrac’s senior vice president for marketing, said in a telephone interview. “We’re likely to set a quarterly record for home seizures if June is anything like May.”
Lenders are completing the “inevitable progression” of taking properties from homeowners who stopped paying, Sharga said. He predicted last month that another 5 million delinquent mortgages will end in foreclosure in addition to properties that had already been repossessed.
Almost 3.1 million properties have been seized by banks since April 2005, Daren Blomquist, RealtyTrac’s marketing communications manager, said in an interview today.
“The second quarter won’t be the peak,” Sharga said. “I’m not even sure 2010 will be.”
The previous record for seizures was 92,432 in April. Last month was the first in which every state had an increase in repossessions from a year earlier, according to RealtyTrac.
Iraq Central Bank attacks leave 15 deadDoh! It would seem the Iraqis have figured out where the real power is. BADA BOOM!Explosive attacks and exchanges of fire at the compound of the Iraq Central Bank in Baghdad have killed at least 15 people and injured more than 40 others.
Those behind the attacks on Sunday triggered eight explosions and took hostages, prompting a siege at the bank's whereabouts, AFP reported.
Bank workers comprised most of the casualties, said one defense official.
It is yet to unclear whether the assailants had meant to empty the vault, destroy the building or target the employees.