joi, 27 august 2015

Mish's Global Economic Trend Analysis

Mish's Global Economic Trend Analysis


Steve Keen on Economic Forecasts, Ponzi Schemes, GDP, China; One Way Streets and Poison

Posted: 27 Aug 2015 10:47 PM PDT

Economic Forecasts

Economist Steve Keen pinged me in response to my post Regional Manufacturing Expectations From Mars.

In that post, I compared Richmond Fed manufacturing survey expectations (six month look ahead projections made in February for August), to what actually happened in August.

In response, Steve Keen Tweeted

@MishGEA gets it wrong! Says "Regional Manufacturing Expectations From Mars" when they're really from Uranus.

I duly stand corrected. I am now planetarily aligned with Keen on the distinction between Mars and Uranus.

China Implosion

On a more serious note, please consider the Financial Times article Why China's stock market implosion might not be very meaningful, by Izabella Kaminska.

Kaminska quotes Steve Keen as follows ...
One key peculiarity about China's economy—and there are many—is that much of its growth has come from the expansion of industries established by local governments ("State Owned Enterprises" or SOEs). Those factories have been funded partly by local governments selling property to developers (who then on-sold it to property speculators for a profit while house prices were rising), and partly by SOE borrowing. The income from those factories in turn underwrote the capacity of those speculators to finance their "investments", and it contributed to China's recent illusory 7% real growth rate.

With property price appreciation now over, those over-levered property developers aren't buying local government land any more, and one of the two sources of finance for SOEs is now gone. Borrowing is still there of course, and the Central Government will probably require local councils to continue borrowing to try to keep the growth figures up. But the SOEs are already losing money, and this will just add to the Ponzi scheme. The collapse of China's asset bubbles will therefore hit Chinese GDP growth much more directly than the crashes in the more fully capitalist nations of Japan and the USA.
Heart of the Matter

Keen indeed gets to the heart of the matter about SOEs, borrowing, and illusory growth rates.

I have commented time and time again, no one in their right mind believe Chinese growth rates. Not only are the numbers straight up fabrications, many of the projects have no economic benefit.

Moreover, Chinese growth estimates fail to take into account damaging pollution and cleanup costs that ought to subtract from GDP.

GDP itself is a useless statistic actually. The reason is government spending, no matter how counterproductive, adds to GDP.

It sounds convoluted, but if government paid someone to poison wells, that poisoning would, by definition, add to GDP.

Many connected politicians got extremely wealthy off SOEs. But most of the SOE projects had little if any economic benefit, and some undoubtedly had negative benefit because environmental damage was not properly accounted for.

In short, Chinese GDP does not properly reflect economically nonviable projects nor the outright poisoning of the Chinese population to hit preposterous targets.

Rather than admit past GDP was grossly overstated, revisions will likely be hidden in future GDP reports for years or decades to come.

Kaminska Concludes ...

"In short, don't worry so much about the stock market, worry more about the potential collapse of other major Chinese asset classes like property, ghost towns and factories. That's how the credit links back to the real economy."

Those were her words, not Keen's. I pinged Pater Tenebrarum at the Acting Man blog the above article and he replied ...

"Something has clearly changed now. Right now, it seems it actually does matter. China is seen as an economically important (for the world) since about 2005 or so, but I have a feeling that something more profound may actually be afoot now - due to the follow-on domino effects. I would estimate that global malinvestment in commodity projects along amounts to something like $2 to $3 trillion cumulatively, perhaps more. This one sector alone may leave behind $1 trillion in unpayable debt.

OK.
What's Changed?

China's Capital Accounts

Historically, China's stock market has moved independently of the country's economy because of China's closed capital account.

What if the Shanghai market has started to reflect the real fundamentals thanks to liberalization of China's capital account?

One Way Streets

Typically, money flowed into China in a one way street. This year, China took steps to open up the flows.

Forbes noted China Pledges 'Radical' Moves To Open Capital Account In 2015.

FTAlphaville notes This isn't the Chinese capital account liberalisation you're looking for.
Today every Chinese individual is allowed to buy no more than US$50,000 worth of foreign currency from banks each year. But that limit was lifted from US$20,000 in 2007, and it is also not that hard for the more savvy to get around it.

So we're in a situation where China's capital account is more open than it has been before and recent relaxations of control have increased the size and volatility of flows. Including, obviously but crucially, outflows.

This is a system that needs external capital very badly. It is happy to welcome it in, vastly less happy to see it leave. More so, it doesn't take much to draw a lesson about attitudes to control and stability from China's reaction to the recent stock market puke.
Needs vs. Reality

China needs external capital. Instead, China sees capital flight. Resultant stress is everywhere one looks because debt exceeds carrying capacity.

Symptoms of Too Much Debt

  1. Yuan devaluation
  2. Stock market prop jobs by Chinese regulators
  3. Emerging market currency crashes
  4. Global equity bubbles
  5. Commodity price crashes
  6. Junk bond bubbles
  7. Slower global growth
  8. Still raging property bubbles in Australia, Canada, and the US West Coast (thanks to influx of money from China)

Debt the Problem

Numerous bubbles have started to implode, even as property bubbles in some places expand. Central banks are hard pressed to keep all the Ponzi schemes going.

Although we do not see eye-to-eye on the solution, Keen and I agree that debt is a primary problem. Many prominent economists still have not figured that out.

For example: Larry Summers and Ray Dalio Seek Return of Quantitative Easing.

Paul Krugman says "Debt is Good".

Krugman: "There's a reasonable argument to be made that part of what ails the world economy right now is that governments aren't deep enough in debt."

Debt Bubbles

Debt and bubbles go hand in hand.

No matter how big the bubble, no matter how much the resultant income inequality, no matter how ridiculous or nonviable the project, no matter how little the economic benefit, no matter how much government overpays (thanks to inane union work rules and prevailing wage laws), you can always count on Krugman to want more and more and more debt, even though Japan is living proof such policies do not work.

In the US, the Fed used a housing bubble to bailout a dotcom bubble. And now we have QE-driven stock market and junk bond bubbles to smooth over the housing bubble. Corporations have gone into debt to buy back their own shares at absurd valuations.

Debt has been used to cure debt problems and over again. Apparently the cure is the same as the disease.

Mike "Mish" Shedlock

Yet Another Dispute Over GDP; What's Really on the Fed's Mind?

Posted: 27 Aug 2015 05:43 PM PDT

Disputes over GDP go on and on and on. MarketWatch reports By another measure, the U.S. economy was ho-hum in second quarter.
There are two ways to compute how well the economy is doing.

One is to tally all the goods and services produced during a given time period — that's called gross domestic product.

Another is to measure all the incomes earned in the production of those goods and services — that's called gross domestic income.

Over time, they should be exactly the same. But measurement isn't easy, and so the Commerce Department not only reports both figures, but also for the first time on Thursday averaged the two together.

The result wasn't great: It's showed a 2.1% average for the second quarter, since GDP growth was a sterling 3.7% and GDI was a meager 0.6%.

According to Josh Shapiro, chief U.S. economist at MFR, that's the largest gap between the two measures of the economy since the third quarter of 2007.

"Some research has shown the GDI figures to be a more accurate representation of economic activity, but the evidence is mixed and the debate continues. Nonetheless, the disparity reported in Q2 does lend credence to the notion that the GDP growth reported in the quarter likely overstates the underlying vitality of the economy in the span," he said in a note to clients.
Two Measures



That may look significant, but let's investigate further.

DGI vs. GDP Percent Change from Year Ago



DGI vs. GDP Percent Change from Year Ago Detail



Large Gap?

On a year-over-year basis it's hard to discern any gap. The dispute of Josh Shapiro, chief U.S. economist at MFR, is easily seen as total nonsense.

I don't believe the economy is as strong as most claim, but I certainly won't post easily disproved charts to make my point.

What's Really on the Fed's Mind

Still, one has to wonder "What's really on the Fed's mind?"

I surely doubt it is fear of inflation, at least as they claim to measure it. It's possible they fear bubbles, but I doubt that too. The Fed historically has been blind to bubbles.

Rather, I suspect they have come to the conclusion this recovery is as good as it gets, and if they cannot hike now, they will not be able to.

That may sound lame, but it is exactly how economic clowns think.

Let me phrase it this way: "We need to hike now so we have ammunition to cut when we need to."

Meanwhile, nothing the Fed says at all is believable if for no other reason than historical precedent that proves without a doubt, they clearly have no idea what's really going on, especially at turning points.

They cannot really come out and say "We are clueless bubble blowers", can they?

Mike "Mish" Shedlock

GDP by Other Measures; Will the "Real" GDP Please Stand Up?

Posted: 27 Aug 2015 12:30 PM PDT

In the wake of a stronger than expected GDP report (see Second Quarter GDP Revised Up, as Expected, Led by Autos, Housing), some are questioning the stated growth.

For example, the Consumer Metrics Institute says "On the surface this report shows solid economic growth for the US economy during the second quarter of 2015. Unfortunately, all of the usual caveats merit restatement".

Consumer Metrics Caveats

  1. A significant portion of the "solid growth" in this headline number could be the result of understated BEA inflation data. Using deflators from the BLS results in a more modest 2.33% growth rate. And using deflators from the Billion Prices Project puts the growth rate even lower, at 1.28%.
  2. Per capita real GDP (the number we generally use to evaluate other economies) comes in at about 1.6% using BLS deflators and about 0.6% using the BPP deflators. Keep in mind that population growth alone (not brilliant central bank maneuvers) contributes a 0.72% positive bias to the headline number.
  3. Once again we wonder how much we should trust numbers that bounce all over the place from revision to revision. One might expect better from a huge (and expensive) bureaucracy operating in the 21st century.
  4. All that said, we have -- on the official record -- solid economic growth and 5.3% unemployment. What more could Ms. Yellen want?
Revisions

I certainly agree with point number three. Significant GDP revisions are the norm, even years after the fact. The numbers are of subjective use at best because GDP is an inherently flawed statistic in the first place.

As I have commented before, government spending, no matter how useless or wasteful, adds to GDP by definition.

Moreover, inflation statistics are questionable to say the least, as are hedonic price measurements and imputations.

Imputations

Imputations are a measure of assumed activity that does not really exist. For example, the BEA "imputes" the value of "free checking accounts" and ads that number to GDP.

The BEA also makes the assumption that people who own their houses would otherwise rent them. To make up for the alleged lost income, the BEA actually assumes people rent their own houses from themselves, at some presumed lease rate. Imputed rent is an addition to GDP.

Why stop there? On the same basis people who cut their own grass would have to pay someone else to do it for them. And married men might go to prostitutes if they were not married.

And what about back scratching? You scratch mine and I scratch yours. Clearly there is unreported economic activity here.

There are limitless imputations the government can concoct if GDP needs a future boost.

By the way, Europe did recently revise up GDP on the grounds of unreported prostitution and illegal drug profits.

GDP by Other Deflators

Every month there are questions in regards to GDP deflators.

This month, Consumer Metrics notes that the CPI as a deflator would result in a more modest 2.33% growth rate. Computing GDP using the Billion Prices Project would put the growth
rate even lower, at 1.28%.

That's interesting, but is it valid?

Deflator Differences

EconPort compares the Differences Between the GDP Deflator and CPI
Although at first glance it may seem that CPI and GDP Deflator measure the same thing, there are a few key differences. The first is that GDP Deflator includes only domestic goods and not anything that is imported. This is different because the CPI includes anything bought by consumers including foreign goods. The second difference is that the GDP Deflator is a measure of the prices of all goods and services while the CPI is a measure of only goods bought by consumers.
Difference Between further adds to the explanation.
CPI and GDP deflator generally seem to be the same thing but they have some few key differences. Both are used to determine price inflation and reflect the current economic state of a particular nation.

GDP Deflator takes into account goods that are produced domestically. It does not bother with imported goods and it reflects the prices of all the commodities, services included. The GDP deflator is calculated quarterly and it weights may change per calculation.

There are so many price indices out there and GDP is unlike some of them that are based on a predetermined basket of goods and services. In the GDP deflator, the so-called basket in a year is weighted by the market value of all the consumption of each good therefore it is allowed to change with people's investment and expenditure patterns since people do respond to varying prices.

CPI tends to consider insignificant goods, even the outdated ones that are not really purchased by the consumers anymore. Nevertheless, they are still considered for pricing in the fixed basket. Consumption goods are the main priority of the CPI measure. The prices of other items used in production are not considered as well as the prices of investment goods. Only consumer items are taken into account. The machines and the industrial equipment that are used to make them are not considered.
I am not going to suggest the GDP deflator is by any means correct.

Indeed, I believe some prices are inherently difficult if not impossible to measure. But substituting the CPI as a more valid measure is as likely as not to be even more inaccurate.

Solid Growth?

In regards to point number four, average growth through three quarters is certainly not solid. Q1
is 0.6%, Q2 is 3.7%, and the GDPNow estimate for Q3 is 1.4%.

For 2015, through three quarters, we are talking about growth of about 1.6% or so. This is not rate hike material.

Since point four above was obvious sarcasm targeted at Fed Chair Janet Yellen, I am in agreement with Consumer Metrics on this point.

Per Capita GDP

Finally, and in reference to point number two, real per capita GDP remains quite anemic.



The above chart from Advisor Perspectives.

Per capita GDP reflects aging boomers, student debt, government debt, slow household formation, untenable pension promises, and extremely poor central bank and governmental policies that have effectively wiped out the middle class.

Mike "Mish" Shedlock

Kansas City Region Activity Remains in Deep Contraction

Posted: 27 Aug 2015 10:07 AM PDT

Unlike housing and auto sectors, economic regions dependent on oil activity remain severely stressed.

For example, the Kansas City Fed regional factory report came in today at -9, compared to an Economic Consensus of -4.
Factory activity in the Kansas City Fed's region remains in deep contraction, at minus 9 in August vs minus 7 in July and deeper than the Econoday consensus for minus 4. New orders are also at minus 9 with backlog orders at minus 21. These are deeply depressed readings that point to a long run of weak activity in the months ahead. Production is already far into the negative column at minus 16 with hiring at minus 10. Price readings in the August report are in contraction.

This report speaks to significant distress for the region which is getting hit by the oil-led fall in commodity prices. Taken together, regional reports have been mixed to soft so far this month, pointing to slowing for a factory sector that got a bit boost from the auto sector in June and July.
Mike "Mish" Shedlock

Second Quarter GDP Revised Up, as Expected, Led by Autos, Housing

Posted: 27 Aug 2015 09:46 AM PDT

Economists had been expecting today's second quarter GDP estimate to rise from initial readings, based largely on auto sales and housing, and they were correct.

"The GDP estimate released today is based on more complete source data than were available for the 'advance' estimate issued last month. In the advance estimate, the increase in real GDP was 2.3 percent. With the second estimate for the second quarter, nonresidential fixed investment and private inventory investment increased. With the advance estimate, both of these components were estimated to have slightly decreased."

Advance Estimate vs. Second Revision



Economic Consensus

GDP was a bit higher than the Bloomberg Economic Consensus.
The second-quarter did show a big bounce after all, up at a revised annualized growth rate of 3.7 percent which is 5 tenths over the Econoday consensus and just ahead of the high estimate. The initial estimate for second-quarter GDP was 2.3 percent. This report points to better-than-expected momentum going into the current quarter.

Consumer demand was strong with personal consumption expenditures at a 3.1 percent rate led by an 8.2 percent rate for durables, a gain that was tied to vehicle spending. Residential investment was very strong, at plus 7.8 percent, as was nonresidential fixed investment which, boosted by an upward revision to structures, came in at plus 3.2 percent. Inventories contributed to second-quarter growth as did improvement in net exports. Final demand proved very solid, at plus 3.5 percent. The GDP price index, unlike many other price readings, is showing some pressure, at 2.1 percent and just above the Fed's general policy goal.

The economy's acceleration is now much more respectable from the first quarter when growth, at only 0.6 percent, was depressed by heavy weather and special factors. Splitting the difference, first-half growth came in a bit over 2 percent which, as it turns out, is right in line with the similar performance of 2014 when first-quarter growth, again depressed by severe weather, fell 2.1 percent followed by a 4.6 percent surge in the second quarter. Growth in the third quarter last year was 4.3 percent which would be a very good performance for this third quarter.

The impact of today's report on Fed policy for September's FOMC is likely to be minimal. Focus at the upcoming meeting will be on the state of the global financial markets and, very importantly, the strength of next week's employment report for August.
GDPNow Third Quarter

I do not believe today's report will impact estimates for third quarter for the Atlanta Fed GDPNow Model by much if any. We will find out on the next update, tomorrow.



GDP Average

The GDPNow forecast for third quarter is 1.4%. Through three quarters, annualized growth is about 1.57%, not exactly rate hike material.

Growth is fueled by autos and housing, the only two strong aspects of this economy. Last year, the third quarter was strong, this year will not repeat.

Mike "Mish" Shedlock

Hall of Mirrors: Jim Grant on the "Paper Moon", No Price Discovery Economy; Psychology of Bubbles

Posted: 26 Aug 2015 11:23 PM PDT

Reason TV had an excellent interview with Jim Grant, editor of Grant's Interest Rate Observer on the recent stock market turmoil. Grant says The Fed Turned the Stock Market Into a 'Hall of Mirrors'.

"Confoundingly to me, people have come to be quite accepting of the value attached by fiat to these pieces of paper we call currency," says Jim Grant, who's the editor of Grant's Interest Rate Observer and the author of The Forgotten Depression: The Crash That Cured Itself.

"Are prices meant to be imposed from on high, or discovered by individuals acting spontaneously in markets? The readers and viewers of Reason known the answer to that but they're regrettably in the minority."

Grant sat down with Reason magazine editor-in-chief Matt Welch on Tuesday to discuss the underlying causes of the recent market turbulence, why we don't really "have interest rates anymore," and how the classic jazz song "It's Only a Paper Moon" provides a fitting metaphor for the equities market.

Grant Interview



Psychology of Bubbles

Central banks have blown another massive set of bubbles by removing every aspect of price discovery for the sole benefit of banks and the already wealthy. That's the bottom line, and it's remarkably easy to see.

Yet, very few see it that way.

Why?

Wall Street, academia, and the media, all have a vested interest in denial. Bad news does not sell. And people believe what they want to hear: Stocks are cheap and the economy is getting better.

Expect another "no one could possibly have seen this coming" set of excuses.

Mike "Mish" Shedlock

Moz's Acquisition of SERPscape, Russ Jones Joining Our Team, and a Sneak Peek at a New Tool - Moz Blog

Moz's Acquisition of SERPscape, Russ Jones Joining Our Team, and a Sneak Peek at a New Tool

Posted by randfish

Today, it's my pleasure to announce some exciting news. First, if you haven't already seen it via his blog post, I'm thrilled to welcome Russ Jones, a longtime community member and great contributor to the SEO world, to Moz. He'll be joining our team as a Principal Search Scientist, joining the likes of Dr. Pete, Jay Leary, and myself as a high-level individual contributor on research and development projects.

If you're not familiar with Mr. Jones' work, let me embarrass my new coworker for a minute. Russ:

  • Was Angular's CTO after having held a number of roles with the company (previously known as Virante)
  • Is the creator of not just SERPscape, but the keyword data API, Grepwords, too (which Moz isn't acquiring—Russ will continue operating that service independently)
  • Runs a great Twitter profile sharing observations & posts about some of the most interesting, hardcore-nerdy stuff in SEO
  • Operates The Google Cache, a superb blog about SEO that's long been on my personal must-read list
  • Contributes regularly to the Moz blog through excellent posts and comments
  • Was, most recently, the author of this superb post on Moz comparing link indices (you can bet we're going to ask for his help to improve Mozscape)
  • And, perhaps most impressively, replies to emails almost as fast as I do :-)

Russ joins the team in concert with Moz's acquisition of a dataset and tool he built called SERPscape. SERPscape contains data on 40,000,000 US search results and includes an API capable of querying loads of interesting data about what appears in those results (e.g. the relative presence of a given domain, keywords that particular pages rank for, search rankings by industry, and more). For now, SERPscape is remaining separate from the Moz toolset, but over time, we'll be integrating it with some cool new projects currently underway (more on that below).

I'm also excited to share a little bit of a sneak preview of a project that I've been working on at Moz that we've taken to calling "Keyword Explorer." Russ, in his new role, will be helping out with that, and SERPscape's data and APIs will be part of that work, too.

In Q1 of this year, I pitched our executive team and product strategy folks for permission to work on Keyword Explorer and, after some struggles (welcome to bigger company life and not being CEO, Rand!), got approval to tackle what I think remains one of the most frustrating parts of SEO: effective, scalable, strategically-informed keyword research. Some of the problems Russ, I, and the entire Keyword Explorer team hope to solve include:

  • Getting more accurate estimates around relative keyword volumes when doing research outside AdWords
  • Having critical metrics like Difficulty, Volume, Opportunity, and Business Value included alongside our keywords as we're selecting and prioritizing them
  • A tool that lets us build lists of keywords, compare lists against one another, and upload sets of keywords for data and metrics collections
  • A single place to research keyword suggestions, uncover keyword metrics (like Difficulty, Opportunity, and Volume), and select keywords for lists that can be directly used for prioritization and tactical targeting

You can see some of this early work in Dr. Pete's KW Opportunity model, which debuted at Mozcon, in our existing Keyword Difficulty & SERP Analysis tool (an early inspiration for this next step), and in a few visuals below:

BTW: Please don't hold the final product to any of these; they're not actual shots of the tool, but rather design comps. What's eventually released almost certainly won't match these exactly, and we're still working on features, functionality, and data. We're also not announcing a release date yet. That said, if you're especially passionate about Keyword Explorer, want to see more, and don't mind giving us some feedback, feel free to email me (rand at moz dot com), and I'll have more to share privately in the near future.

But, new tools aren't the only place Russ will be contributing. As he noted in his post, he's especially passionate about research that helps the entire SEO field advance. His passion is contagious, and I hope it infects our entire team and community. After all, a huge part of Moz's mission is to help make SEO more transparent and accessible to everyone. With Russ' addition to the team, I'm confident we'll be able to make even greater strides in that direction.

Please join me in welcoming him and SERPscape to Moz!


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Seth's Blog : The strawberry conundrum

The strawberry conundrum

Every grocer has to decide: when packing a quart of strawberries, should your people put the best ones on top?

If you do, you'll sell more and disappoint people when they get to the moldy ones on the bottom.

Or, perhaps you could put the moldy ones on top, and pleasantly surprise the few that buy.

Or, you could rationalize that everyone expects a little hype, and they'll get over it.

A local grocer turned the problem upside down: He got rid of the boxes and just put out a pile of strawberries. People picked their own. He charged more, sold more and made everyone happier.

Hype might not be your best option.

       

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miercuri, 26 august 2015

Mish's Global Economic Trend Analysis

Mish's Global Economic Trend Analysis


Durable Goods Boost Third Quarter GDP Estimate to 1.4% Annualized

Posted: 26 Aug 2015 02:53 PM PDT

Durable goods orders this morning leapfrogged all economic estimates (see Durable Goods Orders Surprise to Upside, Led by Autos).

Yet the GDPNow Forecast only rose by .01%.
The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the third quarter of 2015 was 1.4 percent on August 26, up from 1.3 percent on August 18. The forecast for real GDP growth increased 0.1 percentage point to 1.4 percent after this morning's advance report on durable goods from the Census Bureau. The report boosted the model's forecast for equipment spending in the third quarter from 7.7 percent to 8.9 percent, and led to a slight improvement in the contribution of real inventory investment to third-quarter GDP growth.
GDPNow August 26, 2015



It's been entertaining and informative watching the evolution of these forecasts. Really big swings in some economic numbers often barely budge the expected result.

GDP growth of 1.4% is hardly the material on which rate hikes have historically been based.

Mike "Mish" Shedlock

Unidentified Investors Lend Belgium €50 Million, for 100 Years, With Flexible Conditions, at 2.5% Interest

Posted: 26 Aug 2015 11:10 AM PDT

In yet another sign of economic madness, investors have concluded that rates in Belgium are likely to stay low for decades to come.

Via translation, please consider Unidentified Investors Lent Belgium €50 Million for 100 Years at 2.5% Interest.
The director of the Belgium debt agency, Jean Deboutte, announced Belgium borrowed 50 million euros, for a hundred years at an interest rate 2.5 percent.

The borrowing for a hundred years is via EMTN loans. These are loans with more flexible conditions than the traditional OLO government bonds.

Who granted Belgium the loan is unknown.

"These are professional investors. Goldman Sachs International contacted us stating that it had investors who were interested in such a long term investment," said Deboutte.

According Deboutte, hundred year life of this debt shows that investors have great confidence in the reliability of Belgium as a good payer.
EMTN Defined

I looked up the term "EMTN". It stands for Euro Medium Term Note.  If 100 years is "medium term", dare I ask the definition of "long term"?

100 years at 2.5% and flexible conditions. What can possibly go wrong with that?

In the grand scheme of things €50 Million is a trivial amount to the global economy. Nonetheless,  the transaction does reflect how one-sided sentiment is in belief of perpetually low rates.

Mike "Mish" Shedlock

Durable Goods Orders Surprise to Upside, Led by Autos

Posted: 26 Aug 2015 10:08 AM PDT

Durable goods orders surged in July, beating the top-end of Bloomberg Consensus Estimates. Despite the surge, year-over-year orders are still in the red.


Exports have been weak but they didn't hold down July's durable orders which, for a second straight month, are strong, and strong nearly across the board. New orders rose 2.0 percent in the month which easily beat out top-end Econoday expectations for 1.2 percent. Excluding transportation, orders rose 0.6 percent which is near the top-end forecast for 0.7 percent. Capital goods data show special strength with nondefense ex-aircraft orders up 2.2 percent following June's 1.2 percent gain and with related shipments up 0.6 percent following a gain of 0.9 percent.

Motor vehicles led the industrial production report for July and they're a standout in this report also. Orders for vehicles surged 4.0 percent in the month on top of June's 0.8 percent gain. Vehicle shipments are right behind, up 3.9 percent following a 0.9 percent gain. Commercial aircraft, a center of strength for the nation's factory sector, fell back with orders down 6.0 percent following June's 70 percent surge.

The good news continues with total shipments up 1.0 percent vs June's 0.9 percent gain which are very strong readings. Unfilled orders rose 0.2 percent while inventories, reflecting strength in shipments, were unchanged.

The factory sector has had a tough year, that is up until June when demand for vehicles began to take hold. This report speaks to domestic strength and should help offset ongoing concerns over global volatility.

In a special note on year-on-year change, total new orders are down 19.6 percent which reflects an aircraft comparison with the Farnborough airshow in July last year. Excluding transportation, orders are down 2.5 percent which is an improvement vs declines of 4.5 and 2.7 percent in the prior two months.
Monthly vs. Yearly



The skew in aircraft orders made the year-over-year comparisons this month (yellow highlight) especially tough. Next month, the year-over-year comparison (pink highlight) will be especially easy.

Discounting the huge swings, this is the first time durable goods have had consecutive month-to-month gains in a year.

Once again autos lead the way. I keep wondering how long that can possibly last.

Mike "Mish" Shedlock

Damn Cool Pics

Damn Cool Pics


See The Cast Of Men In Black Back In The Day And Today

Posted: 26 Aug 2015 12:10 PM PDT

It's been 18 years since the release of the original "Men in Black." See what the cast looks like now.



Will Smith



Tommy Lee Jones



Linda Fiorentino



Vincent D'Onofrio



Tony Shalhoub



David Cross



Rip Torn



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