vineri, 5 iunie 2015

Mish's Global Economic Trend Analysis

Mish's Global Economic Trend Analysis

Tsipras Talks With Putin; Energy Minister Rules Out Deal; Wordsmithing Extraordinaire; 16 Tons

Posted: 05 Jun 2015 12:38 PM PDT

Greek prime minister Alexis Tsipras keeps hinting that a "deal is close" while publicly trashing every deal offer.

One seriously has to wonder if this is purposeful gamesmanship to string the Troika along and encourage the ECB to keep liquidity in place so that Greek citizens can pull their money out of the banks.

The more simple possibility is everyone truly believes the other side is likely to cave in at any moment.

Tsipras Won't Agree to Irrational Proposals

Repeating similar rants of the past, Tsipras said today: Greece will Not Consent to Irrational Proposals.
Greece cannot accept the "irrational" proposal made this week by the institutions overseeing its bailout, Prime Minister Alexis Tsipras said during an emergency Parliament session Friday, adding that any deal must also include some form of debt relief.

His speech came the morning after a surprise announcement that Greece would defer an IMF payment due Friday, and would instead bundle all four installments due in June — a total of 1.6 billion euros — into one payment at the end of the month.

Addressing lawmakers for the first time on the course of his government's troubled four-month negotiations with Greece's international lenders, Tsipras said he was "unpleasantly surprised" by the proposal put forward by the International Monetary Fund, European Central Bank and European Commission during his visit to Brussels for talks with commission head Jean-Claude Juncker.

"I would like to believe that this proposal was an unfortunate moment for Europe, or at least a bad negotiating trick, and will very soon be withdrawn by the same people who thought it up," he said.

Still, he said, he believes a deal is now closer than ever.
Wordsmithing Extraordinaire

Is it remotely possible Tsipras actually believed a better deal was going to be handed to him?

I strongly doubt it.

Please note that Tsipras did not say "he believed the deal will soon be withdrawn". He said he would "like to believe it will soon be withdrawn", a completely different meaning altogether.

What about his statement a "deal is now closer than ever"?

Quite possibly, that's technically true. If the deal was a mile away before, and there was an inch of progress today, the deal could indeed be "closer than ever" but at the same time "not close at all".

I am still amused at yesterday's wordsmanship.

Thursday morning, when asked by reporters whether Friday's installment would be made, the Greek prime minister replied: "Don't worry about that."

Thursday afternoon, we learned Athens to Delay IMF Repayment.

Of course "Don't worry about that" is quite different than "yes".

A skillful politician frequently appears to say something significant without saying anything at all. These last two days prove that Tsipras is a wordsmith master.

There is technically not a single lie in any of the above statements. That's a remarkable achievement for any politician, especially one under the gun, both foreign and domestic.

Energy Minister Rules Out Deal

Lending credence to the theory that a deal is closer, yet not close at all, Greek Energy Minister Rules Out Deal with Creditors Who Want 'Pound of Flesh'.
The divisions within Greece's government were laid bare on Friday when a senior minister ruled out any agreement with the country's creditors, accusing them of demanding a "pound of flesh".

Panagiotis Lafazanis, the minister for energy and the environment, told the Telegraph that Russia might be an alternative source of "substantial financial" benefits to Greece, stressing there was no possible "convergence" between "our government and the institutions".

Promising to oppose a deal, Mr Lafazanis said: "I do not think that Syriza will accept for the country and its people to be exterminated inside the eurozone. A third consecutive austerity loan programme will be the most destructive option possible for Greece."

Mr Lafazanis, a former Communist, believes that enough is enough. Any possible agreement would, he argues, force Syriza to break its election promise to end austerity. He wants Mr Tsipras to end the negotiations and, if necessary, default on Greece's debts – or even leave the euro.

As for the chances of Mr Tsipras reaching a deal, Mr Lafazanis said: "It is obvious that given their demands, there can be no convergence between our government and the institutions."
Athens Looks to Moscow

Does the above rant sound like a deal is close? I think not. And what about Russia?

Please consider Putin holds phone call with Tsipras, agrees to meet in 2 weeks in Russia.
Russian President Vladimir Putin has held a telephone talk with Greek Prime Minister Alexis Tsipras on Friday. They have discussed Russian gas supplies via Turkish Stream and agreed to meet at the St. Petersburg International Economic Forum in mid-June.

"Practical steps were discussed to implement agreements reached during the recent working visit of Alexis Tsipras to Russia, particularly the planned construction of the gas transport infrastructure across the territory of Turkey and Greece," the press service said.

The talks with the Russian president came hours before the Greek prime minister is due to address the country's parliament about the EU proposal.
Another Day Older and Deeper in Debt

In spite of (or because of) the above wordsmithing, we still do not know whom, if anyone is bluffing.

All we know for sure is that if a deal is worked out, Greece will sell its soul to the "company store" better known as Troika.

I offer this musical tribute.



Link if video does not play: Tennessee Ernie Ford Sings 16 Tons

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.

Durable Goods Charts Seven Ways

Posted: 05 Jun 2015 10:25 AM PDT

Reader Tim Wallace sent a series of four charts on durable goods components. Each chart compares April of this year to April in prior years.

Durable Goods Shipments



click on any chart for sharper image

This is the first time since 2008 that April year-over-year shipments are down.

Durable Goods New Orders



This is the first time since 2008 that year-over-year new orders in April declined. New orders rose above the pre-recession high but are now slightly below the 2007 high.

Durable Goods Unfilled Orders



Unfilled orders keep climbing. They are at a record high.

Durable Goods Inventory



Durable goods inventory is near a record high.

The above charts show nominal prices, not adjusted for inflation. Adjusted for inflation, shipments and new orders are well below pre-recession levels.

Over time, shipments and orders should match unless there are cancellations.

Unfilled orders are a reflection on aircraft orders that have a very long lead time and are subject to cancellation. Here is a chart I created in Fred that explains unfilled orders.

Unfilled Orders Breakdown



Blue - Unfilled Orders Total
Green - Unfilled Transportation Orders
Red - Unfilled Orders Excluding Transportation

Unfilled orders except for transportation are meandering along.

New orders is the primary story.

To weed out the possibility that April of 2015 was some sort of outlier, let's look at some seasonally adjusted growth charts.

Durable Goods New Orders Percent Change From Year Ago



Durable Goods New Orders Excluding Transportation Percent Change From Year Ago




Durable goods orders are a volatile series, in large part due to huge transportation orders but conditions have been weak ever since November of 2014.

Durable Goods Growth From Year Ago

  • November 2014: -0.61%
  • December 2014: -0.77%
  • January 2015: +3.19%
  • February 2015: -3.24%
  • March 2015: -0.70%
  • April 2015: -2.80%

Durable Goods Growth From Year Ago Excluding Transportation

  • November 2014: +4.33%
  • December 2014: +5.63%
  • January 2015: +1.81%
  • February 2015: -0.44%
  • March 2015: -1.97%
  • April 2015: -1.63%

Excluding transportation, the numbers look better. Yet even excluding transportation, year-over-year new orders have been very weak all year.

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.

Solid Jobs Report: Labor Force +397K, Establishment +280K Jobs, Employment +272K, Unemployment +125K, Unemployment Rate +0.1%

Posted: 05 Jun 2015 09:07 AM PDT

Initial Reaction

Today's job report (for May) showed good numbers for the labor force, establishment jobs, and household employment. In contrast to April, this month's report was not marred by huge growth in part-time employment.

Household survey employment rose by 272,000 while unemployment rose by 125,000. That means more people actively seek jobs. They are back in the labor force. As a result, the unemployment rate rose by 0.1% to 5.5%.

Let's take a look at all the key numbers.

BLS Jobs Statistics at a Glance

  • Nonfarm Payroll: +280,000 - Establishment Survey
  • Employment: +272,000 - Household Survey
  • Unemployment: +125,000 - Household Survey
  • Involuntary Part-Time Work: +72,000 - Household Survey
  • Voluntary Part-Time Work: -95,000 - Household Survey
  • Baseline Unemployment Rate: +0.1 to 5.5% - Household Survey
  • U-6 unemployment: +0.0 to 10.8% - Household Survey
  • Civilian Non-institutional Population: +189,000
  • Civilian Labor Force: +397,000 - Household Survey
  • Not in Labor Force: -208,000 - Household Survey
  • Participation Rate: +0.1 to 62.9 - Household Survey

March 2015 Employment Report

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

Total nonfarm payroll employment increased by 280,000 in May, and the unemployment rate was essentially unchanged at 5.5 percent, the U.S. Bureau of Labor Statistics reported today. Job gains occurred in professional and business services, leisure and hospitality, and health care. Mining employment continued to decline.

Unemployment Rate - Seasonally Adjusted



Nonfarm Employment



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

Nonfarm Employment Change from Previous Month by Job Type



Hours and Wages

Average weekly hours of all private employees was flat at 34.5 hours. Average weekly hours of all private service-providing employees was flat at 33.4 hours.

Average hourly earnings of production and non-supervisory private workers rose $0.06 at $20.97. Average hourly earnings of production and non-supervisory private service-providing employees rose $0.06 at $20.77.

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

Birth Death Model

Starting January 2014, I dropped the Birth/Death Model charts from this report. For those who follow the numbers, I retain 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 5.5%. 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 10.8%. Both numbers would be way higher still, were it not for millions dropping out of the labor force over the past few years.

Some of those dropping out of the labor force retired because they wanted to retire. The rest is disability fraud, forced retirement, discouraged workers, and kids moving back home because they cannot find a job.

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.

Another Twist in Greece

Posted: 05 Jun 2015 12:24 AM PDT

Greek prime minister Alexis Tsipras was confident just yesterday of working out a deal with the Troika.

Thursday morning, when asked by reporters whether Friday's installment would be made, the Greek prime minister replied: "Don't worry about that."

Thursday afternoon, we learned Athens to Delay IMF Repayment.

Of course "Don't worry about that" is quite different than "yes".

Grounded by Dissent

Friday morning we learned Alexis Tsipras Grounded by Dissent from Within Syriza.
After four hours of discussions with EU leaders in Brussels on Wednesday night, Alexis Tsipras was planning to return on Friday in hopes of at last sealing a bailout deal with creditors.

But the Greek prime minister has been grounded by a torrent of anger and resistance from his Syriza party. Instead of flying to Brussels, he will on Friday be appealing to a restive parliament in Athens with his government — and the country's financial future — on the line.

"The overwhelming sentiment in the [Syriza] parliamentary group will be one of rejection," Antonis Kamaras, a Greek political commentator, said of the bailout terms being offered by creditors. "It's hard to see how the leadership can prevail."

Mr Tsipras had called Wednesday's talks "constructive and friendly." But a senior Greek official said the International Monetary Fund, which was not represented at the meeting, had imposed new conditions that had not been tackled in earlier negotiations in Brussels.

Sitting in a cramped office at party headquarters, Alecos Kalyvas, Syriza's economic strategy chief, captured the mood of the party's mainstream. Greece faced big problems and "time was running out", he said, but he "cannot accept" more pensions reductions, energy price rises and public sector job cuts.

Asked if a deal would be reached before the current bailout extension runs out at the end of June, Mr Kalyvas responded: "I'm optimistic but only moderately."

Before Mr Tsipras flew back from Brussels, members of Syriza's extreme left faction urged him to call an immediate general election if the talks resulted in an ultimatum from bailout monitors.

John Milios, the party's previous economic strategy chief and leader of a new far-left faction, the Red Network, called for Greece to halt payments to the IMF and impose capital controls.

Panayotis Lafazanis, the hardline energy minister and official leader of the Left Platform, insisted that electricity prices would remain unchanged and that impoverished households would continue to be supplied with free electricity.

"This agreement isn't in compliance with Syriza's progressive platform and it's not going to happen," Mr Lafazanis said. "We're a government of principle and we won't be responsible for doing such great damage to the country."
What's the Game?

Ever since Alexis Tsipras won the Greek election and appointed finance minister Yanis Varoufakis, an expert who wrote a book on game theory, it's been extremely difficult to determine who is bluffing and who isn't.

Heck, it's very difficult to determine what most of the players really want. German chancellor Angela Merkel is one notable exception. She wants Greece in the eurozone, but not if it costs her too many political points. How many points is too many? Ask Merkel, but she won't tell you. 

Does Alexis Tsipras want Greece out of the eurozone?

The possible answers are yes, no, yes provided he can blame the Troika, yes provided his party goes along, yes provided he can stay in power, etc.

The only way to know if anyone wants a deal is if there is a deal. 

If Tsipras' goal all along was to default and place the blame elsewhere, he played his hand masterfully well. He can blame the Troika, Germany, his own party, or coalition partners. And months of delays gave everyone a chance to pull deposits from Greek banks.

On that note I have a strong recommendation: If you have money in Greek banks, you are begging for a haircut. Get your money out of Greek banks immediately, and keep it out even if a deal is announced.

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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