Sunday Night Economic Assessment

The US Industrial economy turned and edged up last week (if pipeline scheduling is correct), amidst retreating consumer spending.

The Production Index (In terms of its 28-day moving average of gas-flow scheduling into US industrial facilities) broke its string of three weekly declines in a row, gaining to 117.9 (from last weeks 117.2). In its dailies (See the "Part 7" posts on the InvestorVillage site) the index had a very good week, starting firm and working higher midweek to a record high on Wednesday before the Thanksgiving-weekend shutdowns.

The Consumption Index (on the other hand) continued its sharp decline (5th off-week in a row), falling to 120.8 (from last weeks 127.3). In its dailies the measure started the week soft and ended very weak, to levels not seen since September 2009.

The Inventories measure (the cumulative weekly difference between the Production Index and the Consumption Index) on a positive note has slowed its decline marketdly on the narrowing of the gap between consumption and production, and may be looking to put in its first weekly advance in nearly two years next week.

Technically (and probably emotionally) the recovery (as last week) remains intact with the consumption index barely above the production index, although risk to the US economy appears very high for the moment, with the post-election loss of inertia (especially to consumption).

However, on the dailies the consumption index is now solidly below the production index, and unless consumption can turn quickly (like this week) we are going to get a crossing of the two indexes and whatever we have left of our economic inirtia will be lost.

Furthermore, as the consumption index dailies came off sharply right after the election, we are probably looking at a really ugly suprise once the "Official" Retail Sales numbers come out for November, which (if everything goes wrong) could bread a lot of negatism in the press (which in itself could hammer the recently-surging markets and further build that negativism)... causing consumers to stop in their tracks... and bringing the hole economy back down into recession. With unemployment at 9 1/2% plus, the last thing one wants to see is slowing consumption.

One hope is the optimism on the business/investment side. With the inventories measure so low, there is (if the inventories measure is correct) ample room for inventory-build. And if businesses get confident enough (they got a good push from the November elections) they could (in theory) get to the point where they decide to run up inventories and go out and compete for market-share, which could help to underpin the economy for a short time to give consumers a chance to regain their bravery.

Still, this whole thing looks scary to me, and I am very uncomfortable at the thought of an index crossing by means of plunging consumption. Risk remains to look extremely high to the economy and the markets right now. We really, really, do need to see those volatile consumption-dailies turn back up... and quickly.

Pending negatives that certainly bear on optimism also include the expiration of the "Bush" tax-cuts (Consumers spend less on consumption so they can spend more on tax payments), and potentially-expiring extended unemployment-compensation benefits(Consumers spend less on consumption because they have less income).

Now, if Democrats and Republicans can come together and make a trade (Bush-Tax-Cut-Extensions for Unemployment-extensions). And if we can get a good spin out of the press somehow on the dismal retail sales report to come (Retail sales were down only because of abnormally high sales in 2009, but were higher than other years?). And if Santa can give everybody cash this year (Instead of all those trinkets that end up thrown in the closit or tossed the day after). And if the Good-Tooth farry raises her rates to $500-per-tooth in 2011, And if...

Aw, forget it !!!




-Robry825

Sunday Night Economic Assessment

The US Industrial economy continued its post-election retreat last week (if pipeline scheduling is correct), as both industrial production and (especially) consumption backtracked.

The Production Index (In terms of its 28-day moving average of gas-flow scheduling into US industrial facilities) gave ground for its third straight week, dropping to 117.2 (from last weeks 118.1). In its dailies (See the "Part 7" posts on the InvestorVillage site) the index actually looked supportive, starting the week very soft but firming up mid-to-late week, though it had trouble keeping up with seasonals.

The Consumption Index continued its sharp descent (4rd off-week in a row), falling to 127.3 (from last weeks 133.2). In its dailies the measure started the week very depressed, firmed only modestly midweek, then softened again through the weeks close.

Technically (and probably emotionally) the recovery remains intact with the consumption index still above the production index, although risk to the US economy appears very high for the moment, with the post-election loss of inertia (especially to consumption). But we really, really, need to see those volatile consumption-dailies turn back up... and quickly.


-Robry825

Sunday Night Economic Assessment

The US Industrial economy again backtracked last week (if pipeline scheduling is correct), as industrial production softened late-week on the heels of a week-long plunge in consumption.

The Production Index (In terms of its 28-day moving average of gas-flow scheduling into US industrial facilities) declined for its second straight week, slipping slightly to 118.1 (from last weeks 118.5). In its dailies (See the "Part 7" posts on the InvestorVillage site) the index was actually moderately firm throughout much of the week but softened sharply as the week closed.

The Consumption Index gave back a lot of ground (3rd off-week in a row), falling to 133.2 (from last weeks 140.8). In its dailies the measure extended and sharpened its pullback from its election-day peak, starting the week soft and declining sharply as the week progressed.

Overall, last week appears to be an important one... marking the re-emergence of risk (at least temporarily) to the economy, especially considering the coupling of rising equities and declining consumption. A decline in the markets (which itself is of sharply growing risk) would be (from a historical standpoint) additionally detrimental, and with last weeks loss of economic-inertia the full burden appears to shift to the Federal reserve.

Technically (and probably emotionally) the recovery remains intact. But we really, really, need to see those volatile consumption-dailies turn back up... and soon.


-Robry825

Sunday Night Economic Assessment

The US Industrial economy eased off just a bit last week in the wake of US elections (if pipeline scheduling is correct), as both industrial production and recently-strong consumption gave a little bit back.

The Production Index (In terms of its 28-day moving average of gas-flow scheduling into US industrial facilities) broke its string of five consecutive weekly advances, slipping slightly to 118.5 (from last weeks 118.7). In its dailies (See the "Part 7" posts on the InvestorVillage site) the index started the week very soft, bottomed-out just before election-day, then rose with the markets as perhaps investors and business interests were satisfied by gains from their champions (the Republicans), who picked up control of the US House of Representatives as well as several senate seats and a host of governorships.

The recently red-hot paperboard-based Consumption Index also slipped (2nd off-week in a row) to 140.8 (from last weeks 142.5). Interestingly, the measure (opposite the Production Index) sharpened up quite nicely once the week began and actually peaked on election day, then weakened steadily into the close of the week and especially into the very-preliminary weekend data, as perhaps consumers looked to losses by their champions (the Democrats).

The Inventories measure (the cumulative weekly difference between the Production Index and the Consumption Index) is continuing its pattern steep decline.

Overall, its a big "nothing changed"... The US industrial economy continues to remain firmly supported by that ongoing excess of consumption over production.


With the US midterm elections giving Republicans a much larger say in what the Government does over the next two years, the Democrats chances to undermine and ruin the US economy alone are coming to an end, and the Republicans now get their chance to join them in keeping the ball bouncing downhill.

So, with tongue planted firmly in cheek, and a healthy warped sense of humor... Ten suggestions follow to help newly-elected Republicans join with Democrats to kill the economy...


1. MAKE LOTS OF TALK ABOUT SHUTTING DOWN GOVERNMENT! As millions of folks work for the government and therefore rely upon it for their salaries (and resultant spending for their families needs)... Scare the pants off of them by threatening to shut down government (and suspend their paychecks) in hopes that they cut their spending way back (just in case)... slowing their spending. It hopefully will produce a snow-ball effect as store-owners also cut back in reaction and anticipation. Better yet, start the negative talk right away so that you can scuttle the quickly-developing Christmas-rush. Time is of the essence!


2. MAKE LOTS OF TALK ABOUT ENDING EXTENDED UNEMPLOYMENT BENEFITS and add several million additional consumers into that pool from suggestion #1 above. The more folks you scare, the more folks will cut back spending, and the faster store and business owners will react, curtail hiring, and join in the layoff-party. You might even be able to ignite a downward spiral that could take unemployment to 15 or 20 percent!


3. GIVE EVERY CONGRESSMAN, SENATOR, AND THE PRESIDENT A 1-800 NUMBER, connected to a cell-phone that he/she must keep on his/her person at all times (switched on), but that may be only used by entities with "Corporation", "Association", "Mutual", "Pack", "Brotherhood", or "Union" in their names. All other folks should be connected by a $5.00 pay-per-minute phone service, connected by a voice-mail system that takes at a minimum 30 minutes to reach an active, working, answering machine, whose contents are to be sealed in the national archives (except by court order) for the next two years until the next election cycle (To prevent situations where conflicts of interests might arise).


4. ELIMINATE THE TERM "TORT REFORM" FROM YOUR VOCABULARY! A dirty little secret... open up your local "Yellow Pages" directory and count the number of pages listed in the "Physicians and MD's" section. Then count the number of pages in the "Attorneys" section. (If you are like me, you will probably find many more "attorneys" pages than doctors pages. Then consider the fact that attorneys earnings come from less than 50% of their take (the litigants get a larger portion). It is vital that litigation keep medical insurance costs in the $15,000+ range a year for consumers, and tort-reform threatens to free up thousands of that which consumers could potentially spend elsewhere, disastrously threatening to expand the economy via consumer spending.


5. MOVE IMMEDIATELY TO PROPOSE A "GOLD STANDARD"! Foreign central banks hold trillions of dollars worth of US debt, and allowing convertibility would quickly allow them to stock up on all the hard assets left in the US, relieving them of their burdens of risky US paper. And while you are at it, throw in silver, the SPR, the national parks, the US military, ANWR, and the like. With all their trillions, foreigners are going to need more stuff than just our gold stocks to convert into. If that is not enough, throw in farm-land, commercial property, and eventually US residences. You could call away peoples homes through some random means such as a negative lottery... Your number comes up, you loose your house! Folks could then protect themselves by buying "Lottery Insurance" (so they could purchase something and not be homeless), which would then add a revenue stream to the insurance companies to replace what is lost when you implement single-payer (oops, forgot that suggestion above) so thy wouldn't go out of business (remember Insurance companies are covered under suggestion #3 above)..


6. CONSIDER THE POSSIBILITY OF NEW CONSUMER TAXES including energy, gas, value-added, anything that could relieve consumers of income that would otherwise be spent by them in the general economy. The more spent by them on taxes, the more they will cut back on other purchases, slowing business and generating layoffs.


7. TALK UP THE NEED TO RAISE THE MINIMUM WAGE TO $10 AN HOUR... but absolutely, under all circumstances DO NOT ACTUALLY DO IT! The point here is to scare the business end of US society, so that they will do all they can to avoid new hiring to keep the economy depressed. But if you go through with it, it would actually stimulate consumer spending as low-income folk are much more likely to spend the extra income (as opposed to high-end business/investment folk, who would more likely just add it to their savings as they already would have more income than they know what to do with). Point here is to talk up the minimum wage hike on business shows and within business publications (Wall Street Journal, Investors Business Daily, etc) and not on the nightly news or other media outlets that consumers watch, lest they get excited and raise their spending in anticipation (stimulating the US economy).


8. PROSECUTE MICROSOFT AGAIN... Remember that Anti-Trust lawsuit against Microsoft years ago regarding Internet Explorer... it didn't go far enough. There's Defrag, Backup, Disk Cleanup, Wordpad, Notepad, Calculator, Windows Update, Outlook Express, all those freebie games, and hundreds of other Microsoft handouts that are bundled for free within Windows as well. Make consumers pay for 'em all. that way consumers will have less to spend elsewhere in support of the economy. And don't stop with Microsoft. Prosecute anyone that offers consumers anything for free.


9. IT IS HYDROCARBON JAWBONE TIME AGAIN... It's fall-time, when E&P's are drawing up their drilling plans & budgets for 2011. Always, always, demonize heavily anyone that drills for resources during the November/December time-frame when they are budgeting. The rest of the year you need not worry, but always demonize in November/December. Especially in oil. Everyone wants to play the hero, few the villain. You don't need to actually do anything, just use your rhetoric. Remember, less drilling means more imports, which means more foreign outflows of US capital, which means higher foreign holdings of US dollars. This suggestion goes hand-in-hand with suggestion #5 above.


10. ALWAYS REMEMBER, IT IS NOT THE OTHER PARTY THAT IS RUINING THE COUNTRY... IT IS THE PUBLIC THAT SUPPORTS THEM. Never criticize another in government, they are your partners. It is the public that is the problem. Isn't it?




-Robry825

Sunday Night Economic Assessment

The US Industrial economy pushed ahead again last week (if pipeline scheduling is correct), while consumers retreated.

The Production Index (In terms of its 28-day moving average of gas-flow scheduling into US industrial facilities) rose for its fifth week-in-a-row, rising to 118.7 (from last weeks 118.3). In its dailies (See the "Part 7" posts on the InvestorVillage site) the index started the week very strong and tailed off just a bit as the week progressed.

The paperboard-based Consumption conversely broke its string of two up-weeks in a row, easing to 142.5 (from last weeks 143.8). In its dailies the measure started slightly soft and weakened sharply by weeks end.

The Inventories measure (the cumulative weekly difference between the Production Index and the Consumption Index) is continuing its pattern steep decline.

For the time being, the US industrial economy looks to remain strongly supported by an excess of consumption over production, a recent surge in consumption, and the ever-declining Inventories measure. Unfortunately, the recovery retains its jobless look (given the large comparative weakness of the production index to the consumption index, and the implied inventory declines... and the negative sentiment all of that implies within the business and investment communities).

With the US midterm elections a mere day away, and the assumption (given the press and polls) of a Republican congressional landslide, the danger is on the side of a decline in consumption as consumers react to changes from a strongly pro-consumption anti-business government, to one more divided (and possibly gridlocked). The burden thus falls to the Federal Reserve to continue to stimulate, giving politicians a chance to regain sanity before we hit the inevitable wall that foolishness places before us.

Perhaps the best chance for the US economy is the defibrillator method... vote for anything that talks Republican, looks Republican, or smells Republican... in the hopes that it both re-stimulates investment and hiring by rekindling investment and expansion (and rehiring), while reminding Democrats that while consumers are important, so is the business community that serves the consumer.

Though when the vote is finished and done, rhetoric from both Democrats and Republicans will either make or break the fundamental possibilities of working together. If they tear each-others constituencies apart with their tongues, they will tear the economy apart as well.

But even then most of the burden stays with the Federal Reserve, on reversing the foolishness of the last 30 years. Eventually, the Feds are going to have to both raise interest rates and quantitatively ease (all at the same time), to bring down debt and reverse a money supply that is in reality negative to the tune of many trillions of dollars (except from the vantage point of foreign interests)... and restore sanity to dollar-denominated savings.

You can see what's coming in the gas flows... industrial production is on a tear throughout, likely running towards capacity even as business is frozen in its steps and employment suffers.

You can see what's coming in precious metals, as silver (the "poor-mans gold" of the metals markets) is surging on fears that the Federal Reserve does not know how to extract itself from the hole it dug itself into (lowering interest rates to zero, to preserve a run-up in debt, to replace monetary outflows generated by huge foreign trade deficits).

We are desperately out of balance. Changes have to be made.

Perhaps it will be like 1992, when Republicans swept Congress after President Clinton's first two years. The Republicans forced fiscal restraint, we eventually got a balanced budget, and the economy (and psychology) recovered.

Well, at least one can dream...




-Robry825

Sunday Night Economic Assessment

The US Industrial economy advanced again last week (if pipeline scheduling is correct), with solid gains implied in both US Industrial Production and Consumption.

The Production Index (In terms of its 28-day moving average of gas-flow scheduling into US industrial facilities) gained for its fourth week-in-a-row, rising to 118.3 (from last weeks 116.5). In its dailies (See the "Part 7" posts on the InvestorVillage site) the index started firm and remained robust through to the weeks close.

The paperboard-based Consumption Index added to its Fall-2010 surge, rising (for its second week in a row) to 143.8 (from last weeks 140.1). In its dailies the measure started firm though eased slightly through its close. The Consumption Index is nearing its Oct-2009 all-time high 146.5, suggesting perhaps we may be looking to a similarly-strong Christmas as we had in 2009.

The Inventories measure (the cumulative weekly difference between the Production Index and the Consumption Index) is continuing its pattern steep decline.

For the time being, the US industrial economy looks to remain strongly supported by an excess of consumption over production, a recent surge in consumption, and the ever-declining Inventories measure. And the recovery looks to remain a jobless recovery (given the large comparative weakness of the production index to the consumption index, and the implied inventory declines... and the negative sentiment all of that implies within the business and investment communities).

In fact (looking at the gas flows), it is very difficult to be able to tell that we are in a "recession" at all. If one were to ignore the abysmal employment data and focus solely on gas-flows, that hole-of-a-recession we dug ourselves into during 2008 has already been filled, and we look about to boom. So why the present-day dismal unemployment?

Within the gas flows, the large gap between implied consumption and industrial production, the duration of that gap (18 months), the seemingly never-ending decline in the inventories measure (especially against the slow build implied within Industrial Production), and the recent reluctance of the Production Index to "break out" to the upside as the Consumption Index has done, all suggest extreme negativism (and caution) within the business & investment end of the US economy.

With such negativism in business and investment, capitol formation (investment) and labor formation (hiring) is severely impaired. Contrast that with the robustness of consumer-spending implied by the Consumption Index, and a terribly unbalanced economy (crafted by a terribly unbalanced political "economy") is betrayed.

With Midterm US Elections now 8 days away (judging by the polls)... the US public is on to this at least to some extent. And given recent press, that unbalanced political "economy" is about to change.

One has to be thinking now of voter fallout after the elections pass. Polls and press seem to be suggesting the possibility of strong Republican gains come November, and allude to I think favor a slim Republican recapture of the House of Representatives with strong Republican gains and a chance of Senate control as well.

But what will that (potential) change of political balance bring about? Will investors & business leaders (seeing the political changes) take heart and invest & hire to chase new business, or sit back and wait to see what happens? Will consumers loose confidence on the political fallout? Will a rebalanced government work wisely, or fall into combative stalemate to the ruin of the economy? Or, will the polls be proved to be wrong? Time will tell.

One thing I know... we have a lot of very sharp business people in the US, very creative workers, very motivated consumers, and a whole lot of people that want to see is this economy work. Just give them the chance...




-Robry825

Sunday Night Economic Assessment

The US Industrial economy again gained ground last week (if pipeline scheduling is correct), while the ongoing recent surge in consumer-spending inched even further ahead.

The Production Index (In terms of its 28-day moving average of gas-flow scheduling into US industrial facilities) advanced for its third week-in-a-row, rising to 116.5 (from last weeks 115.7). In its dailies (See the "Part 7" posts on the InvestorVillage site) the index started the week softened early (following a strong end to the prior week) but sharply firmed as the week progressed.

The paperboard-based Consumption Index reversed its prior-week dip, rising to 140.1 (from last weeks 139.9). In its dailies the measure vacillated but overall was firm through Friday.

The Inventories measure (the cumulative weekly difference between the Production Index and the Consumption Index) is continuing its pattern steep decline.

For the time being, the US industrial economy looks to remain strongly supported by an excess of consumption over production, a recent surge in consumption, and the ever-declining Inventories measure. And the recovery looks to remain a jobless recovery (given the large comparative weakness of the production index to the consumption index, and the implied inventory declines... and the negative sentiment all of that implies within the business and investment communities).

With Midterm US Elections now 15 days away, one has to be thinking now of voter fallout after the elections pass. Polls and press seem to be suggesting the possibility of strong Republican gains come November, and allude to I think favor a slim Republican recapture of the House of Representatives with strong Republican gains and a chance of Senate control as well. Consumer spending appears robust the past few weeks, and equities are surging.

Now I can understand the equities rally (Republicans tend to champion the business & investment side of US society) but the strong consumption part is a mystery. As Democrats tend to champion consumers, and the press is so dismal for Democrats, are consumers somewhat unaware (with a big dip in consumption coming in late November/December once the surprise is out)?

Or... are consumers aware... and discouraged with their overall champions? These two possibilities both would have big implications.

If consumers are unaware, an economic reversal (and a big equities reversal within presently-rising stock markets) may be coming. If consumers are aware and discouraged... a Republican election rout throughout government... and whatever emotional shock waves follow that.

But beyond all that... what of the 2008 elections? Consumption fell off big time in the weeks proceeding the Democratic sweep of November 2008.

Consumption way down before the 2008 Democratic sweep... Consumption way up before a prospective 2010 Republican sweep. Are consumers Republicans? Am I misjudging something here? Or is the ever-emotional consumer voting out of emotion rather than conviction (or worse, out of emotion rather than knowledge)? Or... is the dog simply following it's tail!





-Robry825