vineri, 6 iunie 2014

Mish's Global Economic Trend Analysis

Mish's Global Economic Trend Analysis

Unvarnished Ukraine Update; Steen Jakobsen on Impact of Ukraine on Germany

Posted: 06 Jun 2014 12:43 PM PDT

I have a several reader emails on Ukraine today, including one from Steen Jakobsen, chief economist of Saxo Bank on the impact of Ukraine on Germany.

Impact of Ukraine on Germany

A couple days ago, Steen pinged me with a few comments on Ukraine worthy of your consideration. Steen writes ...
The Ukraine crisis will go on for much longer than anyone wants, everyone will lose and world growth will disappoint again, but the real issue behind the scenes is Europe's lack of a coherent energy policy. The present green energy policy is a mess. Green energy is inefficient, tax burdening and nowhere near close to meeting rising energy demand from Europe.

Europe is energy deficient. EU dependency on imports is increasing for all fossil fuels. Oil imports reached 83.5 per cent in 2009 and 64.2 per cent for gas, according to the EU Commission.

The biggest loser will be Germany. There are more than 6,200 German companies engaged in business with Russia. The Economist states that 300,000 German jobs are at risk, German business investment into Russia exceeds €30bn, excluding financing from German banks, but more importantly Germany imports 70 per cent of its energy of which 25 per cent comes from Russia.

Angela Merkel and her government have been caught out by a failed energy policy, which has made electricity a luxury good for many German households. But even worse, she decided that she would rather be dependent on Mr Putin than on nuclear power.

The biggest consequence of the Ukraine conflict could be a revisiting of the 1970s energy crisis, including energy rationing. After close to 30 years of doing this job I am realizing that energy is everything in explaining growth, investment, sentiment and market returns.

Understand energy and its marginal price of production and its delivery and you have the keys to predicting the world. Sadly Europe and the US is stuck in using Sir David Frost's definition of diplomacy: "Diplomacy is the art of letting somebody else have your way."
Unvarnished Ukraine Update

Reader David writes ...
Good Morning Mish

I just returned from a two-week tourist trip to Turkey, four days in Istanbul, and nine days along the Mediterranean coast.

The hotel/resort where I stayed on the coast was a favorite for Russian tourists, and the hotel TV had several stations delivering Russian channels, German and French stations too. Russian TV news was loaded with pictures and stories on Ukraine, essentially civil war and revolution. 

Small unorganized groups in eastern Ukraine are committed to doing whatever they can to resist the formal Ukrainian government. Here's a picture: Three guys at a makeshift 'roadblock' on a country road, standing next to a stack of old tires and concrete blocks, saying they would do whatever they could to fight if the Ukrainian army came their way.

When a resistance fighter dies, thousands of people attend memorial services and political demonstrations.

In a French documentary on the coal mining industry in eastern Ukraine, a major industry there, I learned a) People in eastern Ukraine complain that their lives have become worse every year since breakup of USSR over 20 years ago. They viewed their lives as happy and stable before; b) Coal mining has almost no safety standards so hundreds of miners die every year; c) With no work alternatives, mining jobs are viewed as good jobs; d) With no real safety standards or oversight or clear authorities, people desperate for money illegally mine coal in abandoned shafts and sell (at a discount) for cash to larger mine owners. 

Good income in this region is viewed as 300 euros ($420) / month.  Given such economic prospects, why not stand at a makeshift roadblock and fight to die? 

These people also see what has happened in other former Soviet states, where Russian language speakers have been treated as outlaws. A 'western friendly' government in Ukraine only means things will get worse for 'Russian friendly' Ukrainians. French, German, and Russian TV news all had lots of stories and images that you do not see in the US.

Regarding Turkey, I was very impressed by the growth. Suburbs in Istanbul, already a city bigger than New York, have hundreds of new and under construction apartment blocks. I sensed a strong nationalist mood. 

One taxi driver complained about Syrian refugees, saying they were a big problem, especially along the coast. Refugees walk or drive across the border, find their way to some friend or relative, and with no money or income, street crime and car crime are rising.

Thanks again for your great work.
David
Comments from Jacob Dreizin

I forwarded David's email to Jacob Dreizin, a US citizen who speaks Russian and reads Ukrainian. Jacob replied: "Thanks for that, Mish.  I'm not surprised that French TV is showing footage from the scene. A French reporter was wounded recently near Slaviasnk. On the same day, an Italian reporter lost his head to a mortar round in the same area. In contrast, U.S. media mostly reports out of their hotels in Kiev, relying on heavy doses of 'Ministry of Truth' press releases. It's pathetic."

House-to-House Searches

Earlier today Jacob reported ...
Eyewitness reports in Krasnyi Liman continue to pour in, and they are not good. The Ukrainian National Guard and militias are going house-to-house, searching, interrogating, rounding people up and taking them away.



Some people are said to have been shot in their homes. For the most part, it's hard to say what is rumor/hysteria, and what is fact.

One thing is certain: Kiev is responsible for the loss of lives in Lugansk, not errant rebel anti-aircraft missiles fired from the ground, as claimed by Kiev. Two hospital workers were killed in that attack, many more on the ground.

The Organization for Security and Cooperation (OSCE) in Europe made that claim in a press release.

Translating from my iPad: "In Luhansk the situation remained volatile. On 2 June, shortly after 15:00 hours, rockets hit the occupied regional administration building. Based on the SMM's limited observation, these strikes were the result of non-guided rockets shot from an aircraft."

"SMM" is the OSCE's Special Monitoring Mission to Ukraine.
I received several nasty emails a few days ago in response to Ukrainian Warplanes Miss Targets, Hit Civilians.

Some people believed Kiev's report that rebels caused the carnage.

Nope: Kiev did.

Surveillance Plane Shot Down



Jacob explains: "An An-30 surveillance plane, used as an artillery spotter, was shot down over Slaviansk today. It appears that at least some of the crew was able to parachute out."

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

Nonfarm Payrolls +217,000, Unemployment Rate Steady at 6.3%; Household Survey Employment +145,000

Posted: 06 Jun 2014 09:07 AM PDT

Initial Reaction

Once again the headline job number exceeded the household survey report, but unlike last month, the difference this month was insignificant.

May BLS Jobs Statistics at a Glance

  • Nonfarm Payroll: +217,000 - Establishment Survey
  • Employment: +145,000 - Household Survey
  • Unemployment: +46,000 - Household Survey
  • Involuntary Part-Time Work: -196,000 - Household Survey
  • Voluntary Part-Time Work: +154,000 - Household Survey
  • Baseline Unemployment Rate: +0.0 at 6.3% - Household Survey
  • U-6 unemployment: -0.1 to 12.2% - Household Survey
  • Civilian Non-institutional Population: +183,000
  • Civilian Labor Force: +192,000 - Household Survey
  • Not in Labor Force: -9,000 - Household Survey
  • Participation Rate: +0.0 at 62.8 - Household Survey

Additional Notes About the Unemployment Rate

  • The unemployment rate varies in accordance with the Household Survey, not the reported headline jobs number, and not in accordance with the weekly claims data.
  • In the past year the population rose by 2,259,000.
  • In the last year the labor force rose by 4,000.
  • In the last year, those "not" in the labor force rose by 2,215,000
  • Over the course of the last year, the number of people employed rose by 1,895,000 (an average of 158,000 a month)

The population rose by over 2 million, but the labor force was essentially flat. People dropping out of the work force accounts for nearly all of the declining unemployment rate.

May 2014 Employment Report

Please consider the Bureau of Labor Statistics (BLS) May 2014 Employment Report.

Total nonfarm payroll employment rose by 217,000 in May, and the unemployment rate held at 6.3 percent. Employment increased in professional and business services, health care and social assistance, food services, and transportation and warehousing.

Click on Any Chart in this Report to See a Sharper Image

Unemployment Rate - Seasonally Adjusted



Nonfarm Employment January 2003 - May 2014



click on chart for sharper image

Nonfarm Employment Change from Previous Month by Job Type



Hours and Wages

Average weekly hours of all private employees has been flat for three months at 34.5 hours. Average weekly hours of all private service-providing employees rose 0.1 hours to at 33.4 hours.

Average hourly earnings of private workers rose $0.03 to $20.54. Average hourly earnings of private service-providing employees rose $0.03 to $20.33.

For discussion of income distribution, please see What's "Really" Behind Gross Inequalities In Income Distribution?

Birth Death Model

Starting January, I dropped the Birth/Death Model charts from this report. For those who follow the numbers, I keep this caution: Do not subtract the reported Birth-Death number from the reported headline number. That approach is statistically invalid. Should anything interesting arise in the Birth/Death numbers, I will add the charts back.

Table 15 BLS Alternate Measures of Unemployment



click on chart for sharper image

Table A-15 is where one can find a better approximation of what the unemployment rate really is.

Notice I said "better" approximation not to be confused with "good" approximation.

The official unemployment rate is 6.3%. However, if you start counting all the people who want a job but gave up, all the people with part-time jobs that want a full-time job, all the people who dropped off the unemployment rolls because their unemployment benefits ran out, etc., you get a closer picture of what the unemployment rate is. That number is in the last row labeled U-6.

U-6 is much higher at 12.2%. Both numbers would be way higher still, were it not for millions dropping out of the labor force over the past few years.

Labor Force Factors

  1. Discouraged workers stop looking for jobs
  2. People retire because they cannot find jobs
  3. People go back to school hoping it will improve their chances of getting a job
  4. People stay in school longer because they cannot find a job
  5. Disability and disability fraud

Were it not for people dropping out of the labor force over the past several years, the unemployment rate would be well over 9%.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

Wine Country Conference II Videos: Steen Jakobsen , Chris Martenson, Mish

Posted: 06 Jun 2014 01:51 AM PDT

The final second set of Wine Country Conference Speaker Presentation videos is now available.

This set features Steen Jakobsen on the "State of Flux", Chris Martenson on "The Coming Wealth Transfer", and Mish on "Misconceptions, Misperceptions, and Blind Spots".

This Year's Charity

As with last year, Wine Country Conference II was for charity. This year's cause was Autism. Many of the speakers donated all or part of their expense honorarium to the cause. I did as well, losing money, to put this event on.

Once again, John Hussman and the Hussman Foundation was amazingly generous. The foundation will match donations dollar for dollar, up to $50,000!

Steen Jakobsen: "State of Flux"



Chris Martenson: "The Coming Wealth Transfer"



Mish: "Misconceptions, Misperceptions, and Blind Spots



Mish, Steen Jakobsen, and Chris Martenson Panel Discussion



If you enjoy the videos (or even if you don't) please Make a Donation to the Autism Society.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.
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