Good News in the CPI

The Big Picture: "There are several different ways to calculate annual consumer inflation.
The two most common ways BLS officials do this is to compare a) December to December, calendar year data; b) annual average CPI for 2008 versus average for 2007.
Most years, the variations between these approaches is quite minor. However, given the volatility we have seen in inflation data — most especially food, energy and commodity prices — this year, the two approaches produce very different results:
A mathematical oddity in Friday’s consumer price index means you can claim with some statistical backing that inflation last year was either 0.1% or 3.8%."
Good News in the CPI

US Employment Slump Chart - a GOOD LEADING ECON INDICATOR

US Employment Slump Chart - How To | PTS Blog: "In US Employment Slump Chart I used a panel column chart to display the size of nonfarm sectors of the US workforce and the change in number of jobs in each sector. It is a panel chart even though the percent of workforce and job change panels are not separated by a line. The white space separates the panels sufficiently."
BY PERCENT OF US WORK FORCE BY JOB NUMBERS

Norton's comment: When these numbers turn around, so will the economy. These are better indicators than unemployment since the govt plays with those #s, for example, people that have given up trying to look for work.

Bear Market Bottoms & P/E Ratios- 100 yr perspective

Bob Bronson (BRONSON CAPITAL MARKETS RESEARCH) looks at the long term P/E cycle:

Bob Bronson notes Supercycle Bear Market bottoms have little to do with current P/E ratios. Financial theory and 138 years of history covered in our P/E Predictor Study I demonstrates their only predictive value is if earnings in the denominator are properly averaged over a multi-year period and the results are used to predict stock market prices over the next 10 to 20 years.

It makes no difference if operating earnings or income tax-based NIPA earnings are used instead of “as reported” GAAP earnings, and it makes no difference if exact future earnings are used instead of trailing earnings. Of course, the coming stock market low can be divided by some form of earnings measured over the past or even future four quarters to get a P/E ratio, but it will have no meaningful predictive value for the stock market over the following quarter, year or even over many years. Both history and financial theory support this assertion. The stock market has had a large range of both positive and negative performances for the same such calculated P/E ratio

Norton's comment: Let's not forget we are part of a long term statistical market behavior. Set your portfolio to minimize the volatility yet still benefit from either a big upturn or downturn. That is the task at hand. For me, the former investment instruments amount to less than 15% of my portfolio. The rest is on the sidelines for now. I am watching for any leading indicators to show a turn around; such as, blatic dry index

Storm With Force 10 By Beaufort Scale In Atlantic Ocean - Video

Storm With Force 10 By Beaufort Scale In Atlantic Ocean - Video: "
Storm With Force 10 By Beaufort Scale In Atlantic Ocean
Storm With Force 10 By Beaufort Scale In Atlantic Ocean - The most amazing home videos are here

This seems appropriate for the current economic reality. Buckle up and hold on.

US Banks and Derivatives - Still HUGE relative to GDP

More deleveraging to come!

Crosscurrents December 2008 by Alan M Newman December 9, 2008 "... The most striking aspect of the Office of the Comptrollerof the Currency's (OCC) first quarter report on derivatives (see below)is the first decline in notional values since the stats were first reportedin 1991, more evidence that the era of paper is undergoing a radical transformation. Through last year, annualized growth in notional values came to over 21%. Since it is very difficult to imagine what 21% for 16 years means, if theDow Industrial averages had risen by a like amount, the index would haveended last year at nearly 68,300.

Below, check out this chart versus the one presented
in our April 21st issue.  Bank America's credit exposure as a percentage
of risk based capital has nearly doubled and has risen over 65% for HSBC. Although we are not especially negative on either company, we can only stress that today's exposures for all those pictured are ludicrous. No matter how you package and re-package bonds, securities or other entities, risk cannot be removed from the system and remains constant throughout the system.  Typically, constructed financial products perform as forecast.  And because they do, reliance on the formulae or models increases to infinite.

Missing the Point: Energy delivery efficiency as low as 13 percent

Getting the most from Energy

American Scientisit January 2009
"...In a typical fossil-fuel-fired power plant, only one-third of all the energy present in the fuel is turned into usable electricity, whereas two-thirds ends up as cast-off heat. (Even more waste occurs during the use of electricity. For example, an incandescent bulb turns less than 5 percent of power input into light. This is amongh the reasons whey country's overall evergy efficiency is as low as 13 percent.)..."

Norton's comment: If only 33% of the generated electricity reaches the incandescent light bulb, and the bulb only converts 5% of that to light; then the light output is only 5% of 33% or 1.5% of the generated electricity. Another way to put this is to light that bulb we need to generate 65 times the required electricity because of inefficiencies in transmission of it to our house and inefficiencies in our appliances (in this case the incandescent bulb)!

Missing the Point: Energy delivery efficiency as low as 13 percent

"...In a typical fossil-fuel-fired power plant, only one-third of all the energy present in the fuel is turned into usable electricity, whereas two-thirds ends up as cast-off heat. (Even more waste occurs during the use of electricity. For example, an incandescent bulb turns less than 5 percent of power input into light. This is amongh the reasons whey country's overall evergy efficiency is as low as 13 percent.)..."

Norton's comment: If only 33% of the generated electricity reaches the incandescent light bulb, and the bulb only converts 5% of that to light; then the light output is only 5% of 33% or 1.5% of the generated electricity. Another way to put this is to light that bulb we need to generate 65 times the required electricity because of inefficiencies in transmission of it to our house and inefficiencies in our appliances (in this case the incandescent bulb)!

Money Supply: first deflation then inflation

Shows accumulation of M1, M2, and M3

Long-term trend is increasing = inflation

Short term it decreased recently, then just turned up again as result of FED effort to inject liquidity into the banking system.

Here is our article on M3b, which details our work and notes the sources for the data. Note that as of Nov. 10, 2006 the Eurodollar estimation formula has changed - see the article for details.John Williams monthly reconstruction of M3 is here. Ours tends to be more volatile and averages slightly higher than his, partly because it's weekly and partly because of our minor differences in calculating the Eurodollar component of M3 and repos.Finally and to put M3 into proper perspective with inflation (as measured by CPI without lies), the M3 and M2 strong inflation link is virtually unquestionable. The longer term inflation picture is clear, although M2 shows a pause and likely temporary disinflation as of 2008. Certain bloggers are incorrect and have continually avoided these facts and the linked chart.

Money Supply starting to grow - Good.

Shadow Statistics

Profile of Credit Quakes and the 3 Month Libor

http://mail.google.com/mail/?source=navclient-ff#inbox/11e9696ae3eab6be
The LIBOR rate is critical to the health of the financial system and to that end the central banks of the world, UK included have pulled out all the stops to unfreeze the credit markets, unfortunately the LIBOR rate as reported by the British bankers association has long since stopped proving a reliable indicator of the credit freeze as the banks are NOT REPORTING THEIR REAL RATES CHARGED to the other banks to the BBA! BECASUE THEY ARE NOT LENDING TO OTHER BANKS. Thus the LIBOR is not as relevant to the state of the credit markets as it once was as I warned of as long ago as April 2008. However it is the only true measure of the interbank markets that we have. Even though effectively the central banks have taken over the roll of providing a market for interbank lending, which includes guarantees that extend to £250 billion. When the Bank of England first announced the £50 billion packages of loans to the banks in April 2008, I speculated that this would mushroom this year to £200 billion, an unheard of figure!, well scrap £200 billion, scrap£300 billion, even £400 billion the tax payer is now funding bank loans and capital on the unheard of scale of more than £600 billion, with more to flow during 2009.