Central Perk

sâmbătă, 4 aprilie 2015

Mish's Global Economic Trend Analysis

Peek Inside Caterpillar's Fully Autonomous Mine Site - Drivers Not Needed
Free Tuition at Stanford for Families Making Less than $125,000; Free Room and Board As Well for Under $65,000
Endless Supply of Rabbits? Greece to Make April 9 IMF Repayment; Bond Market Unimpressed; Tsipras Heads to Russia

Peek Inside Caterpillar's Fully Autonomous Mine Site - Drivers Not Needed

Posted: 04 Apr 2015 07:38 PM PDT

Mining automation has long been a dream for those in the industry.

In the following video, Caterpillar announces fully autonomous mining has arrived. Take a peek inside the people, technology and innovation that are making this dream a reality with a tour of an autonomous mine site in Australia.

Link if video does not play: Caterpillar's Mining Automation Journey

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Free Tuition at Stanford for Families Making Less than $125,000; Free Room and Board As Well for Under $65,000

Posted: 04 Apr 2015 12:00 PM PDT

Expect applications to Stanford university to soar with this announcement: Tuition free for Families Earning Less than $125,000 Per Year.

Stanford University will provide free tuition to parents of students who earn less than $125,000 per year — and if they make less than $65,000, they won't have to contribute to room and board costs, either.

Students are still expected to pay $5,000 toward college costs from summer earnings and working part-time while enrolled in college.

If a student's parents make less than $125,000 per year, and if they have assets of less than $300,000, excluding retirement accounts, the parents won't be expected to pay anything toward their children's Stanford tuition. Families with incomes lower than $65,000 won't have to contribute to room and board, either.

Students themselves will have to pay up to $5,000 each year from summer earnings, savings, and part-time work. There's no rule that parents can't cover their students' required contribution.

Why other colleges can't do this — but what they can learn

Stanford enrolls a high proportion of wealthy students, who pay higher tuition that helps subsidize lower-income peers. And Stanford is one of the world's richest universities, with an endowment of $21 billion.

On the other hand, there's something that every college could emulate about Stanford's policy: it's incredibly simple and straightforward.

Middle-class students know even before they apply to Stanford what they'll have to pay to attend, whether they'll be able to afford it, and how much they'll have to borrow. At most colleges, the amount a family is expected to pay doesn't show up until after students have applied, been accepted, and filled out financial aid paperwork. That's partly because many colleges are stretching their financial aid budgets and don't know what they're dealing with until students have been admitted.

Most colleges can't match Stanford's generous financial aid commitment. But they could at least try to duplicate its simplicity.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Endless Supply of Rabbits? Greece to Make April 9 IMF Repayment; Bond Market Unimpressed; Tsipras Heads to Russia

Posted: 04 Apr 2015 10:53 AM PDT

Greece to Make April 9 IMF Repayment

April 9th was one of the critical dates by which Greece was said to be out of cash. By now most expect these kinds of deadlines to come and go in belief the eurozone hat has an endless supply of rabbits.

Sure enough, Reuters reports Greece Says Ready to Make IMF Payment on April 9

Greece will repay a loan tranche to the IMF on time on April 9, its deputy finance minister said on Friday, seeking to quell fears of default after a flurry of contradictory statements on the issue in recent days.

Greece is fast running out of cash and its euro zone and International Monetary Fund lenders have frozen bailout aid until the new leftist-led government reaches agreement on a package of reforms.

That prompted the interior minister to suggest this week that Athens would prioritize wages and pensions over the roughly 450 million euro ($490 million) payment to the IMF, though the government denied that was its stance.

Euro zone officials then quoted Greece as saying it will run out of money on April 9, which the finance ministry denied.

"We strive to be able to pay our obligations on time," Dimitris Mardas told Greece's Skai TV. "We are ready to pay on April 9."

Adding to the confusion, German magazine Der Spiegel quoted a finance ministry general secretary, Nikos Theocharakis, as saying Greece would probably not pay next week's IMF tranche, prompting a further denial from the Greek finance ministry.

Bond Market Unimpressed

The bond market is unimpressed. Let's take a look at several durations.

Greece 10-Year Bond Yield

Greece 5-Year Bond Yield

Greece 2-Year Bond Yield

Notice the steep inversion in the yield curve. The 10-year yield is 11.91% while the 2-year yield is 23.57%.

This is a sign of default risk and the larger haircuts that shorter term durations will take vs. longer durations. Come in far enough and the bond prices are steep, but no longer inverted.

For example let's take a look at 3-month and six-month durations.

Greece 3-Month Bond Yield

Yield on the Greek 3-month bond is exceptionally high compared to the rest of the eurozone but at least it is not inverted compared to 10-year bonds.

However, the 3-month bond is inverted compared to the 6-month bond.

Greece 3-Month Bond Yield

Tsipras Heads To Moscow As IMF Withdraws Athens Staff

Zerohedge reports Tsipras Heads To Moscow As IMF Withdraws Athens Staff; Greek Default Risk Hits Post-Crisis High

Amid growing pressure from their 'Troika colleagues' with Eurogroup Chair Dijsselbloem noting there is "still a long way to go" on Greek proposals and The IMF withdrawing its staff in Athens; new prime minister Alexis Tsipras heads to Russia to meet with Putin early next week. As Kremlin spokesman, Dmitry Peskov noted - somewhat intriguingly - "Greece has not asked [Russia] for financial aid... yet," as Tsipras is expected to seek agreement for a 'road map' of initiatives on the political and economic levels. Greek default risk has resurged in the last few days to its highest since the last 'restructuring'...

Greek default risk hits post-crisis highs...

Odds of Default Surge

Back on January 28, Bloomberg stated Greece Credit Swaps Surge to Signal 70% Probability of Default. Odds have gone up since then.

Endless Supply of Rabbits?

Is there an endless supply of rabbits? I actually do not think so. Greece may not run out of money in April but it will run out of money by June in my estimation. That is less than three months away.

As I noted on February 11, Greece Needs Third Bailout to the tune of €53.8 Billion Needed.

I am convinced that Syriza will not agree to another bailout adding still more debt on top of the already unsustainable €323 billion pile. The extension granted to Greece runs out in June. In July a €3.5 billion payment is due the ECB, and in August another €3.2 billion payment is due the ECB.

Can Greece come up with €6.7 billion? I don't think so. All this extension did was give both sides more time to come up with an exit strategy.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Seth's Blog : Customer service and luxury

Customer service and luxury

If your Chanel bag wears out, don't expect the same response you might find if you have trouble with something from LL Bean or Lands End. Luxury brands have long assumed that if you can afford to buy it, you can afford to replace it.

That's changing.

The mass brand leaders in most markets have figured out how to deliver extraordinary promises at scale. Note the high end guys. The mass ones. They do this by realizing that the cost of making the customer happy is tiny compared to the cost of leaving her unhappy.

[Hint: if you think that there's any chance at all that people consider what you sell a luxury good, the answer is, they probably do.]

Go to a McDonalds. Buy a Big Mac and a chocolate milkshake. Drink half the milkshake. Eat half the Big Mac. Put the rest of the Big Mac into the milkshake, walk up to the counter and say, "I can't drink this milkshake, there's a Big Mac in it." You'll get a refund. (Please don't try this, but yes, it works).

It's cheaper to just say, "here's a refund," than it is to start a debate.

How is a luxury brand going to compete? Is part of the story of why you pay extra because of the service you'll get? Lexus did groundbreaking work on this (compare the Lexus service story/truth to the way Porsche or Jaguar owners used to be treated).

Luxury buyers who see that they're getting lesser service feel stupid, and stupid is the brand killer.

If you're going to sell luxury, you probably need to figure out how to use some of the premium you charge to deliver even better service than your lower-priced competition.

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vineri, 3 aprilie 2015

Mish's Global Economic Trend Analysis

Huge Miss on Jobs: Establishment +126K Jobs; Household +34K Employment, Labor Force -96K

Posted: 03 Apr 2015 08:22 AM PDT

Initial Reaction

For a huge change we see the existing pattern of a strong establishment survey but a poor household survey has been replaced by weakness all around.

Last month I stated "The household survey varies more widely, and the tendency is for one to catch up to the other, over time. The question, as always, is which way?"

It is still difficult to say if this is the start of a new trend, but it could be.

Last month the household survey showed a gain in employment of a meager 96,000 and much of that was teen employment. This month the household survey came in at an anemic 34,000.

The labor force declined in each of the last two months. Those "not in the labor force" rose by a whopping 631,000 in the last two months.

Huge Miss on Expectations

The Bloomberg Consensus jobs estimate was for 247,000 jobs, missing by a mile. In fact, the number came in lower than any estimate. The estimate range was 200,000 to 271,000.

Not only that, January and February were both revised lower. The net was 69,000 lower.

Economists blame the weather. Bad weather in March? And not in January and February?

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

BLS Jobs Statistics at a Glance

Nonfarm Payroll: +126,000 - Establishment Survey
Employment: +34,000 - Household Survey
Unemployment: -130,000 - Household Survey
Involuntary Part-Time Work: +70,000 - Household Survey
Voluntary Part-Time Work: -104,000 - Household Survey
Baseline Unemployment Rate: +0.0 at 5.5% - Household Survey
U-6 unemployment: -0.1 to 10.9% - Household Survey
Civilian Non-institutional Population: +181,000
Civilian Labor Force: -96,000 - Household Survey
Not in Labor Force: +277,000 - Household Survey
Participation Rate: -0.1 at 62.7 - Household Survey

March 2015 Employment Report

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

Total nonfarm payroll employment increased by 126,000 in March, and the unemployment rate was unchanged at 5.5 percent, the U.S. Bureau of Labor Statistics reported today. Employment continued to trend up in professional and business services, health care, and retail trade, while mining lost jobs.

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

Unemployment Rate - Seasonally Adjusted

Nonfarm Employment January 2012 - March 2015

Nonfarm Employment Change from Previous Month by Job Type

Hours and Wages

Average weekly hours of all private employees declined by 0.1 to 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 $0.04 at $20.86. Average hourly earnings of production and non-supervisory private service-providing employees rose $0.03 at $20.66.

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 10.9%. 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.

For further discussion of a more accurate measure of the unemployment rate, please see Gallup CEO Calls 5.6% Unemployment Rate "The Big Lie": What's a Realistic Unemployment Rate?

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com