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What?

Two separate exchanges have been doing something out of the ordinary this week - this time it's the currency markets.  We can share these emails we've received from highly reliable sources.

This is a Message From: GLOBEX Control Center

Effect Date: Fri June 3, 2005 09:25 am CST

Notice Number:

Message: The Euro FX, Swiss Franc, Mexican Peso, Canadian Dollar, British Pound, and Japanese Yen will re-open at 09:45 CT with a 15-minute pre- opening,

---------

This is a Message From: GLOBEX Control Center

Effect Date: Fri June 3, 2005 08:44 am CST

Notice Number:

Message: The following actions will be taken on all Euro FX, Swiss Franc, Japanese Yen, Mexican Peso, Canadian Dollar and British Pound futures and calendar spread orders prior to the market re-opening:

All day and, or session orders will be cancelled.

All GTD orders with today's trade date will be cancelled.

All orders entered as Good Till Cancelled (GTC)or Good Through Date (GTD) for future dates that have been acknowledged will remain working.

All orders not acknowledged as working will be cancelled.

Customers will be able to enter, modify, and cancel orders during the pre- opening period.

Jobs Go Lame: Will the Fed Cut?

We're starting to see pressure building on the (non) Federal Reserve to cut, or at least pass, on the next round of rates/  For instance, this morning's job report out from the Labor Department shows a gain of only 78,000 jobs for the past month.  We quote the Labor report:

Nonfarm employment edged up by 78,000 in May following a much larger increase in April, and the unemployment rate was essentially unchanged at 5.1 percent, the Bureau of Labor Statistics of the U.S. Department of Labor reported today. Pay- roll employment continued to grow over the month in health care and construction, but was little changed in the other major industry sectors.

Unemployment (Household Survey Data)

Both the number of unemployed persons, 7.6 million, and the unemployment rate, 5.1 percent, were essentially unchanged in May. The jobless rate was down from 5.6 percent a year earlier. Over the month, the unemployment rates for adult men (4.4 percent), adult women (4.6 percent), teenagers (17.9 per- cent), whites (4.4 percent), blacks (10.1 percent), and Hispanics or Latinos (6.0 percent) showed little or no change. The jobless rate for Asians was 3.9 percent, not seasonally adjusted. (See tables A-1, A-2, and A-3.)

The number of long-term unemployed--those unemployed 27 weeks and over--was little changed over the month. This group continued to account for about 1 in 5 unemployed persons. (See table A-9.)

Total Employment and the Labor Force (Household Survey Data)

In May, total employment, at 141.5 million, and the civilian labor force, at 149.1 million, continued to trend up. The employment-population ratio, at 62.7 percent, has trended up in recent months. (See table A-1.)

Persons Not in the Labor Force (Household Survey Data)

There were 1.4 million persons who were marginally attached to the labor force in May, down slightly from a year earlier. (Data are not seasonally adjusted.) These individuals wanted and were available to work and had looked for a job sometime in the prior 12 months. They were not counted as unemployed, however, because they did not actively search for work in the 4 weeks preceding the survey. The number of discouraged workers, at 392,000 in May, declined over the year. Discouraged workers, a subset of the marginally attached, were not currently looking for work specifically because they believed no jobs were available for them. The other 1.0 million marginally attached had not searched for work for reasons such as school attendance or family responsibilities. (See table A-13.)

OK, that wouldn't be too bad, and a 5.1% unemployment rate would be acceptable except as readers KP and TM note in emails this morning, the statistics are well-jiggered by the CES Birth/Death Model.

CES Net Birth/Death Model

• In 2005, the CES sample includes about 160,000 businesses and government agencies drawn from a sampling frame of Unemployment Insurance tax accounts which cover approximately 400,000 individual worksites. The active CES sample includes approximately one-third of all nonfarm payroll workers. The sample-based estimates are adjusted each month by a statistical model designed to reduce a primary source of non-sampling error, which is the the inability of the sample to capture, on a timely basis, employment growth generated by new business formations.  
• There is an unavoidable lag between an establishment opening for business and its appearing on the sample frame and being available for sampling. Because new firm births generate a portion of employment growth each month, non-sampling methods must be used to estimate this growth.  
• Earlier research indicated that while both the business birth and death portions of total employment are generally significant, the net contribution is relatively small and stable. To account for this net birth/death portion of total employment, BLS is implementing an estimation procedure with two components: the first component uses business deaths to impute employment for business births. This is incorporated into the sample-based link relative estimate procedure by simply not reflecting sample units going out of business, but imputing to them the same trend as the other firms in the sample.  
• The second component is an ARIMA time series model designed to estimate the residual net birth/death employment not accounted for by the imputation. The historical time series used to create and test the ARIMA model was derived from the UI universe micro level database, and reflects the actual residual net of births and deaths over the past five years. The ARIMA model component is updated and reviewed on a quarterly basis.  
• The net birth/death model component figures are unique to each month and exhibit a seasonal pattern that can result in negative adjustments in some months. These models do not attempt to correct for any other potential error sources in the CES estimates such as sampling error or design limitations.  
• Note that the the net birth/death figures are not seasonally adjusted, and are applied to not seasonally adjusted monthly employment links to determine the final estimate. 
• The most significant potential drawback to this or any model-based approach is that time series modeling assumes a predictable continuation of historical patterns and relationships and therefore is likely to have some difficulty producing reliable estimates at economic turning points or during periods when there are sudden changes in trend. BLS will continue researching alternative model-based techniques for the net birth/death component; it is likely to remain as the most problematic part of the estimation process.

The table below shows the net birth/death model adjustment used in the published CES estimates since the establishment of the most recent benchmark level for March 2004.

As the extremely alert TM wrote: "Please note that the Birth Death model shows an increase in 207 thousand, so considering the report of plus 75 thousand, there was a significant net loss."  Yeah, we noted.

The other thing we note is that the broader measures of labor under utilization, the so-called U-6 report, shows that the broader measure of unemployment declined from 9% last month to 8.1% this month.  So that's good news, isn't it?  No, not even.  The reason is that when people fall off of their benefits they stop counting in various ways for the U-6 table.  

All of which makes it a murky stew, unless you're a retired UAL person or any other recently screwed over class of present and former workers.  While the Bush administration  fiddles, the American worker continues to get burned bcy a combination of economic dishonestly and blind faith in "open markets" without honest money, a combination that allows corporations to play the spread between labor rates at the expense of workers everywhere.

Also - Euro Blues for the Fed

We read this morning that  Italy is the latest nation to start mumbling about the possibility of blowing out of the Euro as its official currency.  While this might give the US a short term breather as the world's reserve currency - and thus allow US to extended the game of 'spend more than we make" by another year or two, the real difficulty is "what comes next?"  The bciggest nightmare that we can think of is that some other country comes up with a currency that is solid.  For instance, this week we have heard unconfirmed reports that there has been a crash in the scrap steel market from a few readers (we'll pass along specifics as we get them) but this could fore sage a return of deflation in a serious way - another thing which will weigh on the Fed.  Think about it this way:  If the Euro is no longer challenging, and if prices for commodities like scrap steel start dropping, wouldn't you as a Central Bankster want to lower rates to stir up some action again?

The reality of it is, as we have pointed out so many times before, that there's no way to keep the economy of the whole world expanding though once you get to a point of saturation in banking.  I think we're there and while a Fed pass (or decline) might seem, like a "good" thing, the reality is that it would mean global inflation on a planet where the reserve currency is worth (how do I say this nicely?) not too much more than the paper it is printed on because of all the debt is represents.

But in Europe, the president of the EU is worried that the Euro may still be over valued. So pay attention, Watson, the game's afoot!  George is not the only one thinking this way.

Elusive Victory

825 dead in Iraq despite the new government being in power.  Say, where's that update on how 40,000 soldiers were finally going to "secure" Baghdad?

Bot Timing Mark

Several subscribers to the web bot project have written in to say "See, the mud slide stories this week?"  yeah, yeah, it's another hit, another timing mark.  The problem is still with the earthquake/ plate rises type stuff, which is a much larger concern because as we have demonstrated at least in theory, the longer a forecast event from the runs takes to get here, the larger the event turns out to be.  Remember, 13-million refugees and two major cities in ruins is this year's outlook... ughh!

Oil Prices

Are still tight on supply concerns.  Then there's the Saudi situation to keep a weather eye on...

Exploding Toilet Warning

A man in West Virginia has filed a $10-million lawsuit over a methane gas explosion that resulted from the victim lighting a cigarette while sitting down to do his business.  I'm no expert on things, but if the john was so foul as to be producing that much methane, smoking might be justified.

Peoplenomics

This weekend's report is titled "The Five Year Steak Dinner" - It's an analysis of a bet with a colleague over what would be worth the most in 5-years:  George's real estate, his precious metals holdings, or his sweat equity for a 5% share of a venture.  Very interesting bet - and with four steak dinners on the line, well, you know how cheap I am.   It's only $30 a year, so for subscription details, click here.      Peoplenomics web site.

We will publish issue #190 next week,  so if you're short of something to do today, there's a tremendous amount of reading material for Inside Report/Peoplenomics subscribers that's not in the free library.

Other Reading:  Check out "How to Live on $10,000 a year or less"  Available at our online bookstore.

Thursday

Advisory: This page is slow loading due to big graphics I don't have time to adjust, sorry.

The Productivity Illusion

Once again the sheep have a chance to read the latest fantasies about productivity with a report out from the Bureau of Labor Statistics that alleges productivity has continued to soar:

The Bureau of Labor Statistics of the U.S. Department of Labor today reported revised productivity data--as measured by output per hour of all persons--for the first quarter of 2005. The revised seasonally adjusted annual rates of productivity change in the first quarter were:

2.6 percent in the business sector and 2.9 percent in the nonfarm business sector.

In both sectors, the first-quarter productivity gains were somewhat higher than those reported initially on May 5.

In manufacturing, the revised productivity changes in the first quarter were:

4.4 percent in manufacturing, 6.3 percent in durable goods manufacturing, and 2.4 percent in nondurable goods manufacturing.

Manufacturing productivity growth was faster than reported on May 5, reflecting an upward revision to productivity in nondurable goods manufacturing. Productivity growth in durable goods manufacturing was unchanged from the figure released last month. Output and hours in manufacturing, which includes about 13 percent of U.S. business-sector employment, tend to vary more from quarter to quarter than data for the aggregate business and nonfarm business sectors. First-quarter measures are summarized in table A and appear in detail in tables 1 through 5.

========================================================= This release reports revised data on hours at work and related measures, including productivity and hourly compensation. The hours revision reflects implementation of a new methodology which utilizes information on employment and hours by primary and secondary job of nonfarm proprietors and unpaid family workers, all persons working in the farm sector, and all employees of government enterprises. These data are collected in the BLS Current Population Survey. See Change in Methodology. ============================================================

The data sources and methods used in the preparation of the manufacturing series differ from those used in preparing the business and nonfarm business series, and these measures are not directly comparable. Output measures for business and nonfarm business are based on measures of gross domestic product prepared by the Bureau of Economic Analysis of the U.S. Department of Commerce. Quarterly output measures for manufacturing reflect indexes of industrial production independently prepared by the Board of Governors of the Federal Reserve System.

The problem with the so-called productivity numbers is that they don't "tie back" to other numbers. Let's take the annual rate of 6.3% increase in  durable goods manufacturing productivity as a for instance. If there really was an increase, given that the population is a sort of near constant, then we should have noticed something (like refrigerators or cars) flying out the doors of retailers.  OR, we should see layoffs because obviously the huge increases in sales aren't really there.  You might want to check the mass layoff report as we did earlier this week, but it still doesn't tie together neatly as intelligent statistics should.

Productivity numbers are contentious because while things like computer processor speeds are considered, the real productivity of a business - the speed bumps along the path to more profits - are littered with things like how fast the sales people can sell the product and the usual limitations on typing speed and so forth - things that haven't changed much in 100 years.

Government statistics on productivity are a lot like the government trying to figure out how fast a car is going by reporting how man speedometers have sold, how big the new speedometers are, and similar nonsense.  As we learned in the 1960's muscle car days, just writing "160 MPH" on a speedometer doesn't mean the car will go any faster.  Besides there are fresh layoffs in the auto industry.  Remember, higher productivity can mean fewer jobs, everything else being equal.

And, so it is with productivity numbers: It's a series of illusions, built on assumptions, backed up by data skewered by adjustments.  Just because I drive a Pentium 4 three gigahertz laptop with hyper threading doesn't make me more productive - it just means that someone at Microsoft will put in another feature because they know I can't type any faster. 

Besides, in the end, all the talk about processor improvements reveals that much of the "increase" has been eaten up by firewalls and anti-virus software anyway.

But all of this may be ignored by the market in today's early going.  The Market remains below our 10,604 level above which a genuine rally must start.  A market that rallies on a falling manufacturing outlook as it did this week, ought to fall on "good news" such as this.  Sure it's back-asswards, but that's why I'm not playing options at the moment.

Smart Reader Comment:

George,

Since the Mogambo Guru mentioned your site I've become addicted to your daily updates.

As a recruiter/temp service operator I have to point out the journalistic simplification of your comments:

"Let's take the annual rate of 6.3% increase in durable goods manufacturing productivity as a for instance. If there really was an increase, given that the population is a sort of near constant, then we should have noticed something (like refrigerators or cars) flying out the doors of retailers."

Well, no, how many sub assemblies get shipped incomplete? To overseas "manufacturers." The amount of stuff whizzing from the most economical place to the "official" manufacturer is enough to make Adam Smith's head spin. Transmissions, turbines, mining equipt., etc.

And as for "constants" like typing speed, I'm located in the home of the Telecom, New Jersey; AT&T, Lucent, MCI, NUI, Sprint, Tyco et al have dumped scads of "Administrative Assistants" who made relative humongabucks for schmoozing to arrange meetings between related staff because software now can do their job completely and more effectively. Much of the document creation for administration has disappeared and largely replacing it (with different people who don't have 20 years of seniority) is pharma/medical documentation for clinical trials, treatments and "medical education," which we used to call advertising.

BMW claims to be the biggest auto exporter based on dollar value, Accords and Sonatas are built here, while Fords are built in Canada and GM just bought a Chinese plant yesterday.

I don't doubt that the figures are phony, but that's because the gummint doesn't know what it's counting.

In the meantime, we've got lots of walking-wounded admin assistants that we can't sell and don't have enough sweet young things with the three Rs and common sense. That's demography, and it makes our job harder but more profitable.

Half my neighborhood is "underemployed" and scrimping for mortgage payments.

Good point - lemme quote some Gospel here: "Annual indexes for manufacturing and its durable and nondurable goods components are constructed by deflating current-dollar industry value of production data from the U.S. Bureau of the Census with deflators from the BEA. These deflators are based on data from the BLS producer price program and other sources. The industry shipments are aggregated using annual weights, and intrasector transactions are removed. Quarterly manufacturing output measures are based on the index of industrial production prepared monthly by the Board of Governors of the Federal Reserve System, adjusted to be consistent with annual indexes of manufacturing sector output prepared by BLS. "

Sorry about your neighbors, but unfortunately not surprised.  I like the Mogambo, too.  Just wish I were in the business of selling him blood pressure medication - I'd be rich!

Dutch Say No!

Another country has added itself to the short list of those rejecting the European Constitution.  The Dutch would rather not have what was offered.  Not to say that the powers in place won't look for some slimy way to get around the will of the people, mind you, just as the desperate in power of France have been scheming on the notion that they know what's best for the country, the people don't.

Leaders in Germany meantime call it irresponsible of certain parties to suggest that a failure of the Euro-dollar is possible.  That's not likely to happen any time soon, although the voting in the past week has no doubt helped the US dollar's bounce.  But at some point, the forces of the market will come back into play and folks will realize that the Euro may be a sounder currency than great Borrowing Uncle's paper back by debt pyramid.

Thanks, Web Bots

Our web bot prediction about silver soaring may be about to happen with $7.62 the high this morning - and if you were paying attention when we published the report a few weeks back, you could have been in around $6.90.  We'll have to see, of course, but $10 in a month or two would not surprise us, nor would $25 by year end, but this is NOT a recommendation.  We don't do that. Still, 3 weeks and 10% is a good start considering what else is out there.

26 More Dead,...

...in Iraq bombings today.  You notice how with all these bombings the past few days we are not hearing much in the way of progress reports from the "force of 40,000" that was going to make Baghdad safe?

Hats Off to Oppenheimer

Regardless of our views of the leadership decisions (and jiggered intelligence) that got us into the war, we have undiminished respect and admiration for the brave men and women who keep this country free.  And for the few companies that adopt a unit to support.  So a "hats off" to Oppenheimer & Co. folks who raised more than $10,000 for the families of 8 soldiers who paid the ultimate price from the 1/5 Cavalry.  120 people attended the event in NYC last night - this is one of those headlines that should take precedence over the Jackson trial, in our book, but sadly won't.

Jackson Trial - At Last!

Michael Jackson is described on this day of closing arguments as being "nervous."  Me?  I expect that he'll be convicted on a misdemeanor charge of giving alcohol to under aged kids and that will be that.  Before I get too thankful, though, I need to have a discussion with myself about how the appeals in this will wipe out the next three years of news media coverage of more pertinent issues.

The Late Arnold

We noticed in the headlines this morning that Kaliforniah Gubernator Arnold has a plan to reduce greenhouse gas emissions.  What Arnold and apparently lots of other political commissars haven't read is the classified Rand Report on climate change.  When you read that, what comes through is that reducing greenhouse gasses in 2050 will not mean anything because there may not be humans around.  Remember what happens to the methane hydrates in the world's oceans once they bubble up to the surface.  Then read up on carbonosis - the paralysis of mammals by excessive levels of carbon dioxide which may explain why wooly mammoths and the like were frozen in place - their muscles stiffened to where they couldn't move.  Regrettably, I won't likely be around in 2050 to say "I told you so," because the odds of making it to 106 and living in LA (at least for a while longer) doesn't seem like a very good bet.

Expensive Hard Drive

Yeah, if it was a hared drive, Sun's purchase of Storage Tech for $4.1 billion would be a bit steep, but there's more to it than that.

Sun today offers a line of innovative storage and networking products, including the Sun StorEdge(TM) 6920 storage system, a platform for virtualization and data services on almost any vendor's storage system. Coupled with StorageTek's new line of data protection and intelligent archive products, including its Storage Resource Management software and virtual tape solutions, Sun customers will have the ability to implement comprehensive ILM storage infrastructures with intelligence to maximize storage utilization and ensure compliance in enterprise, midrange and workgroup environments.

Also in M&A's today, eBay is buying Shopping.com.  eBay is showing $2.2 billion in cash in recent reports.  So, spending $620 million or so doesn't exactly leave eBay broke, or anything. $1.6+ billion in cash at eBay (they will actually have a lot more) will still buy a hamburger or two.

Letter of the Day

From a reader with good brainpower:

Dear Mr. Ure:

 

I have found some interesting information concerning the foreign buyers of U.S. Treasury Debt. The two following charts are indeed from the U.S. Treasury Website. This first chart was posted on March 15, 2005:

http://www.financialsense.com/fsu/editorials/kirby/2005/0518.html

 

Now, please observe the second chart (an official revision of Chart #1) which was posted on May 16, 2005:

Yep, the revised second chart clearly shows that the two biggest holders of U.S. Treasury debt, Japan and China, ARE NOT buying additional bonds.  Also, the debt purchasers from the United Kingdom appear to have not bought as many bonds as previously thought.In other words, the formerly "big" treasury bond buyers are either not buying anymore U.S. Debt, and/or the amount they purchased has been revised "downward" from previous estimates.

 

There is one exception, however. It appears that offshore banks in the Caribbean are buying ever increasing amounts of this debt, and in fact, the numbers have been revised significantly upward over the last year or so.

 

My question is this: Who are the parties in the Caribbean who are taking up a large part of the purchasing slack? Are they the Hedge Funds, or maybe even the Government itself? What is your take on this data shown above? Could we be seeing the beginning of the end of the Asian financing of American Debt, and the start of a credit crunch that is sure to follow?

 

I would like to hear or read what you think about all of this.

There's not really much to say.  The odds seem pretty good that either a) the drug money is buying US debt like crazy through local Caribbean banks (haven't heard about many drug busts lately, have you?) or b) the US is buying its own debt and that's what the trillion dollar bust in the Philippines a few weeks ago was about. The possibility c) about hedge funds is unlikely because so many of them have had their butts handed to them recently, they may not have money for a cup of coffee at Starbucks.

Either way it reeks, but so what else is new?  We are a desperate nation that can't pay its bills and we're running out of 1) debt buyers, 2) natural resources, 3) potential home buyers, 4) oil, and 5) time.  What do you expect?

Speaking of oil, I put my order in for Matt Simmons new book "Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy."  Should overnight ship around June 7 says Amazon. When Simmons, an ex advisor on Dick Cheney's energy task force talks, I listen.

Back to Our Roots

This weekend's Inside Report / Peoplenomics paper is extremely short...a mere four pages, but if I don't say so myself, it's pretty good. It's back to what got this site started - a capstone project for my MBA and the topic is still long wave economics.  Essentially I argue that there is a longer cycle than Kondratieff's 40-60 year cycle. I've labeled it the debt cycle and it's run regular as clockwork since the Republic was founded.  This fills in some of the gaps in the original work done with a colleague in early 2001.  Reader reaction?

"George. Is it possible that the economic waves have anything to do with the fact that man seems to have to relearn everything over and over again….the timing of the waves looks a little generational. Just a thought. I enjoy your reads so much….thanks a million for the time and effort that goes into it. Best ever, (name withheld) "

The first paper on it is here. 

Wednesday

Not Live from Las Vegas

I just received a press release this morning from the fellow up in Las Vegas who has been promising to summon UFO's live on TV.  Seems there may be some pressure not to air the summoning, if I read this right...

"Backs Out Of Live Summoning Deal!

Dear Lists,

As you know, a couple of days ago, I sent you a release stating that ABC TV-13, after filming a UFO appearing on my signal, contacted me telling me that they wanted to do "LIVE" coverage of me calling down UFOs and Spaceships.

I was so very happy! Words can not express how I felt.

They even posted the footage of the sighting to their website, located at:

http://www.ktnv.com 

When you get to their home page, you will see where it says:

"Summoning UFOs"

Click it and then click on "UFO Video"

Well, this morning, I got a call from ABC TV-13 saying that they were not going to grant me an opportunity to go live with my summonings!

I asked them why, and they said something about how the whole thing is being blown out of proportion and they needed to be able to focus on local news.  [emphasis added - GU]

I said, local news! Local news! What better local news is there going on in Las Vegas greater than this?

I listened to them and lost my cool and told the man that he was a journalistic coward!

He said that he was going to continue to stand by his decision.

I told him that his decision was going to prove that he is a journalistic coward!

It seems like the station is coming under great pressure to not cover any more of my summonings.

Regardless, the Las Vegas Review Journal, and the Las Vegas Tribune, the local newspapers, contacted me to meet as soon as possible.

Also, another television crew in Los Angeles said that they would be here in a days notice.

And there are others.

I am going to put ABC TV-13 behind me and focus on the others.

I will not be ignored!

All local Las Vegas media will be forced to give in when they see the power that YAHWEH is going to reveal Himself through me.

Starting tomorrow, you will see my communications with you increase and the new UFO videos I am uploading to the site for you to see.

Sincerely,

Prophet Yahweh Seer of Yahweh"

Well now, how about that?  Summoning a UFO in your back yard is not local news?  Help me here! Has some pressure been applied to keep the guy from trying?  You know what the ris is, right?  he might actually do it - then where would that leave things? If I were a programming type and someone came along with a ratings builder like this, I sure as hell wouldn't cancel at the last minute unless there was pressure from....

Return of the Crisis

It only took a few minutes on Tuesday for the true believers in the market to head for the exits - with the Dow down more than 75 points, we ask "What will happen today?"  The answer at the pre-open seems to be that a small rally will occur, but off in the background we have some very ominous news that sounds suspiciously like the return of the oil crisis.  Specifically, $52 a barrel is here again because of uncertainty in Saudi Arabia.  For how long?  Anyone's guess.  But even though the dollar is enjoying about 3-weeks in the sun, it's a rally in a continuing downtrend based on the realities of a declining export picture and soaring debt costs to support the American economy.

The situation has so much of a crisis flavor to it that www.halfpasthuman.com which is running data analysis for part two of the 905 asymmetric language analysis project was driven to issue a warning to its subscribers yesterday citing a 7-day period which begins today.  Speaking of which...

Rage Not Clinton

Another thing the web bot project has been expecting it rage in the Bush White House over events being unveiled and spinning out of spin control.  A few readers were wondering (including me) about the possibility that all the "news" about Bill Clinton might have been the events foretold by the data gobblers.  "No, because when we run the analysis, one of the first things we do is strip out backward looking statements," explained Cliff who runs the project.  "You'll usually see a telltale backward looking verb...like "had" or "went" - action words that are of a distinctly backward looking nature.  so we strip all that out," he explained.

So what's left of the plate for George Bush to be enraged about?  Perhaps the latest about the Israeli spy case which may involve revelations about how the US was "tricked" into the Iraq invasion.  Or, perhaps it's about Amnesty International's claim that the US has opened a set of gulags around the world.  Then too, W is none too happy with the nine year prison term handed down against Mikhail Khodorkovsky, the one-time Yukos oil boss.

So if you are playing the "What are the web bots pointing to?" game, throw out the Bill Clinton and Deep Throat stories.  The nature of the events is backward looking - and foreword looking reports are the stock and trade around here and at HPH.

Australian Biologicals

There's an odd story coming out of Australia today about the possible use of a biological weapon against Oz's Indonesia offices in Canberra.  Read on...  Real or not, the idea is sure to spur more interest in stopping biological means of attacks.  Could it be that over the longer term, we might see the end of the postal service on a global scale because of the "threat to security" of having actual things moved around instead of the more "pure" information delivery afforded by the internet?

Trade War

The Boeing versus Air Bus battle continues to percolate as a full-scale trade war is now a looming possibility between the EU and US.

Standard of Living Attacks

We have long argued that with the country now in the first phases of a 10-year long Second Depression that the first leg down which started with the dotcom implosion would be well masked by wars (happen to notice any?) but that the real truth of matters would be apparent in the gradual and sometimes not-too-gradual declines suffered by American workers.  Today, a few more things to boost our case.

• United Airlines Machinists are giving the company huge pay cuts as recommended by union leadership.  There's no doubt about it - if an airline can welch on its pension plan, they have tremendous leverage with remaining employees, but it's all part of the pattern of declining standards of living.

• In bankruptcy leaning San Diego, city workers are looking at major pay cuts in order to help deliver city services and keep things from collapsing. Not to pick on San Diego as the problem is definitely global in nature...

• War in Iraq has not improved the average worker's situation. 

• To put numbers to it, if you head over to http://news.google.com and put in the words [ pay cut ] you will find 21,900 references.  [pay raise ] returns 15,900 but a good portion of the stories are about how a pay raise was killed, deferred, postponed and the like.

What confounds me is that people don't have much focus on things like the standard of living because if they did, we wouldn't see the amazing attention paid to things like the Michael Jackson trial that we do. 

Greenspan Fraud

I received an interesting article from Steve Quayle this morning - a piece from the India Post titled "Greenspan Fraud". Turns out it is another book from Ravi Batra, the well known economist at SMU who this time takes aim at Sir Allan for diverting payroll taxes from Social Security to general government spending...

“I call this fraud because it has been knowingly done in an effort to promote what the tax payers would not have approved,” said Batra who also showed breakdowns of 1980 Social Security deficits of 23 billion next to government spending deficits of 490 billion dollars. “Clearly government spending was the problem, not Social Security,” emphasized Batra who pointed out that the payroll taxes that should have gone to make social security solvent were instead diverted to finance the government’s deficits during the Reagan Administration, a policy that continued through the Bush, Clinton and currently Bush Jr. administrations. "

Can't argue with Batra's logic - so another book goes on the reading list.

Tuesday

Soft Start

We'll start this morning by assessing some of the forces that are driving the market - I mean in addition to some of the confidence numbers due out today.  For example, one driver may be AIG which has restated earnings down nearly 12%.  Interestingly, we seem to see some decoupling between gold and silver with gold down nearly $6 as we write while silver is down only 7-cents.

Not surprisingly, the Euro hit a seven month low against the dollar in pre-New York trading today in the aftermath of the constitutional vote in France this weekend that turned thumbs down to the European Union's idea of a Constitution. 

Presidential Rage

Remember all those remarks about "presidential rage" and anger barely held in check that came out in the web bot runs?  Well, it looks to me like an outside possibility that the future forecast from the bots may well have been right but the interpretation about George Bush wide of the mark.  It could be the "president" reference was to Bill Clinton who is being slammed mightily in a couple of new books that are out.  One of them is Survivor,

Camera Craze

New York City is trying to come up with money to install 400 security cameras around Gotham.  I'm not sure about the script here, but wasn't that another one of those Orwellian ideas that seems to have taken root and blossomed since 9/11?

Boeing vs. Air Bus

If there's one sore spot between Euro and the US it is the approach to subsidies of the national aircraft manufacturers.  Air Bus versus Boeing, in a very real sense.  The latest round has been launched by the Europeans who are trying to make sure they get as many sales as possible from the new A-380 super plane. Coincidentally, I received an invite to a conference on the difficulties of operating such a huge aircraft today.  The focus was on the practical realities...

The impact of the A380 on the Middle East

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Mountain Blows

Not the big one by Mexico City, but a volcano has gone off in Mexico today.

Memorial Day

Bye Bye EU?

No, not hardly.  Despite the fact that French voters have turned down the chance to ratify the new EU Constitution, there's little doubt that currency markets will make a far bigger deal of the vote than the facts warrant. 

The more thoughtful observers of the situation, like Jim Sinclair, note that because the French have voted non, the EU slowdown will accelerate and that in turn will be bad for US exports.

To illustrate the point, consider the rivalry between Boeing and Air Bus Industrie. As the US dollar advances on news of the vote, Boeing aircraft get more expensive while Air Bus product gets cheaper.  And, with a recession looming for Europe, we would expect to see definite global softening of what has been a nice rally as shown by our Global Index, something we normally publish only for subscribers to our premium service:

I made a note in the yellow box that illustrates how the WTC 9/11 event, while serious, did not have a material impact on what was already a major market decline.  Yet I suspect if you ask most people they will argue that at least some portion of the mass layoffs and such which have beset the US economy is still attributable to 9/11.  I would propose that it the event did little more than paper over the real cause of the current economic situation, the dotcom bust.

Now, about that housing bubble...

Agent Bubble

You know that a bubble is near its top or already bursting when Joe Sixpack decides to become a real estate agent to cash in on the boom in housing.  Story.  A sure sign that trouble lies ahead in our book.

Mass Layoffs Climbing

Wouldn't you know they would sneak out the press release on mass layoffs on Friday before the long holiday weekend? If you are keeping track, more than 8-million Americans have been felled by mass layoffs since May 2001 according to government figures and more than 3.3 million of these have been in manufacturing.

In April 2005, employers took 1,274 mass layoff actions, seasonally adjusted, as measured by new filings for unemployment insurance benefits during the month, the Bureau of Labor Statistics of the U.S. Department of Labor reported today. Each action involved at least 50 persons from a single establishment, and the number of workers involved totaled 136,837, on a seasonally adjusted basis.  The number of layoff events rose by 80, and the number of associated initial claims increased by 5,989 from March. In the manufacturing sector, 395 mass layoff events were reported during April 2005, seasonally adjusted, resulting in 63,121 initial claims; both figures were higher than a month earlier. 

From January through April 2005, the total number of events (seasonally adjusted), at 5,053, and initial claims (seasonally adjusted), at 536,359, were lower than in January-April 2004 (5,465 and 564,097, respectively).

Industry Distribution (Not Seasonally Adjusted)

The 10 industries reporting the highest number of mass-layoff initial claims, not seasonally adjusted, accounted for 55,332 initial claims in April, 35 percent of the total.  Temporary help services, with 12,663 initial claims, and school and employee bus transportation, with 9,046, together accounted for 14 percent of all initial claims in April.

The manufacturing sector accounted for 29 percent of all mass layoff events and 37 percent of all initial claims filed in April 2005. A year earlier, manufacturing comprised 24 percent of events and 23 percent of initial claims. Within manufacturing, the number of claimants in April 2005 was highest in transportation equipment (20,879, mostly automotive- related), followed by food processing (9,653).

Administrative and waste services accounted for 15 percent of events and 13 percent of initial claims filed in April, with layoffs mainly from temporary help services. Eight percent of all layoff events and initial claims filed during the month were from the retail trade sector, primarily from general merchandise stores. Transportation and warehousing accounted for 7 percent of events and initial claims in April, mostly from school and employee bus transportation. Construction accounted for 9 percent of events and 6 percent of initial claims during the month, largely among specialty trade contractors. An additional 3 percent of events and 5 percent of initial claims were from the information sector, mainly from motion picture and video production.

Minutemen Picketed

The meeting this weekend of the Minutemen, who are protecting our borders because the Federal government isn't willing to devote adequate resources to the job, was picketed this weekend as they met in Las Vegas to discuss things like the upcoming June project along the California border.

According to the Washington post report "More than 150 demonstrators used placards and bullhorns and waved Mexican flags to get their message out: "Racists, go home!" they screamed."

Sounds to us like they got that a little backwards.  I seem to recall Mexico only occupied the Southwest U.S.A. for only about 20-22 years...  We'll pass on the racist label, thanks, as we enjoy our friends of all races who came to America legally.

Iraq Violence

21 dead and 100 wounded doesn't sound like the "victory" 'ol Fearless leader proclaimed.

Calendar

Here's what's ahead this week once you get done partying...story.

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Write when you get rich,

George Ure, The People's Economist

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