Posted by: Tom Keene on September 6, 2010
The Cauldron of the Home Front
How to capture the spirit of Labor Day?
Look back to David Kennedy's Freedom from Fear which rewards on every page. Every time someone compares now to the Great Depression, I want to hit them over the head with Kennedy's life-work.
Look forward to the great research that I'm privileged to have come across my desk (see below, and don't ask me for so-and-so's research as we religiously protect their copyright and value added).
Look now, and it is not a pretty picture. Yes, there is marginal green-shootedness but it is a struggle. The distinction between the 10% crew and the slowly to 8% "optimists" centers on a belief in investment. The have's cash will be put to good, domestic, use. Here's a few 35,000 feet snapshots.
60 Years of Employment from 60 million to 139 million
The above chart is semi-log, or logarithmic on the y-axis. What that means is a) slope-matters, and b) it shows equal percentage change. Notice how the recent falloff is way, way bigger than ANY OTHER back to the end of David Kennedy's Freedom From Fear.
The Same Semi-Log Chart: 1979 - 2010
Note how much bigger the fall-off is compared to the three previous slowdowns. Also note, the thickness of the pain, indicated by the amount of space underneath the line in the red box. This is getting old.
Here's Your Blue-Collar Pain: This is average hourly earnings less inflation as measured by the Cleveland Fed Series. It's ugly. It looks better on the rightside of the chart (2009 and 2010) but that's only because inflation has evaporated (or so they say). The decade average in this series is...under 1 percent. Note how it has rolled over in recent quarters.
Research (If It's Labor Day It Must Be Belgium)
Ethan Harris and Team BoA Merrill go grim and lower their 2011 view to sub-2% GDP and above 10% unemployment. "The downward revision comes from weaker anticipated spending from both consumers and businesses."
John Tumazos, he of the independent shop, writes of the BHP-Potash mating, "One benefit of a BHP Billiton purchase of Potash Corp would be a consolidation of two potential over-expanders to reduce potash expansion projects."
Dennis Gartman of The Gartman Letter writes from the 12th hole of some golf course I cannot afford on lessons from Belgium, "If Belgium cannot get its French and Dutch speakers to agree upon government, how can Brussels/Strasbourg 'get' German speakers, and Spanish speakers, and French speakers and Dutch speakers and English speakers and Croat speakers and Polish speakers et al to do so?" He is correct. September is Watch Europe Month.
Spread the Word: Thanks Barry and Mark
Thanks to The Big Picture and Economist's View for attaining first-mover status. Any help in driving EconoChat forward is appreciated.
Paul & Amity
Paul Krugman writes clearly. His Delusions of Recovery is beyond important. Its short, sharp and truly must-read in a Newtonian way. Even if you don't agree with him, wrap your head around his calculus. Summary: The way to move the needle is initiative and innovation and Paul would suggest, more stimulus.
Amity Shlaes provides a primer on the path to the modern-day public union. What's that? No Stan, not french horns. Is it thunder in the distance?
Discuss.
Posted by: Tom Keene on September 2, 2010
Homer & Leibowitz Suggest Toxic Combination
Is there a bond bubble? Chris Whalen, of Institutional Risk Analytics, reaches back-to-the-past at zerohedge.com and drags out the classic Inside the Yield Book. Go here to see an important paragraph on Macaulay Duration. Summary: we are reflating to avoid deflation and there is a price.
This Time Beware Pied Pipers
Ken Rogoff creates a must-read essay on jobs. Note, the comments on tax cuts. I'm shocked. Inflation is preferable to deflation. The dollar is feeling very Feldsteinian.
Here Begineth Job Chartapalooza
400,000 Where Are You?
Weekly Jobless Claims Out 1-Deviation+, Centered About 380K
A Modest Bright Spot
Avg. Weekly Hours Needs to Get From 34.2 to 34.5
We Feel Broke
This is a bit hard to see, but a killer chart. Here is Per Capita Personal Disposable Income and the 12-month Rate of Change. It's simple. Income has leveled out (the upper white line goes flat); and the year-over-year dipped negative and is still way low (the yellow line below zero then to a snappy 2 percent. Translation: No wonder they're mad at the incumbents.
Two? Americas
Here is the number I look at at 08:30:24, Ken Prewitt goes over the headlines as I print out the reports and I reach first for Median Duration. We are out about nine standard deviations, way above 20 weeks where say, 12 weeks has been ugly previously. I'm Sorry Carmen and Ken, This time is Different.
Discuss.
Posted by: Tom Keene on September 1, 2010
Mission Graduated
A new name. Rong Qian, of the University of Maryland, launches a must-read essay with Reinhart & Rogoff. She suggests that mission accomplished is as silly in economics as it is in war. Short, sharp and with a way cool chart. Go Terrapins.
It's Radio's Fault
We need to lose some collective weight. What are you doing? I'm trying, and failing doing this. Pray tell, you laugh? Here's Brabec & Komlos on your need to be cut-and-chiseled.
It's Chart September
EURCHF INDEX OVDV
Ken Prewitt can barely contain himself. August was math-free and we do equations when there is snow on the ground but autumn means charts of all types. Here's EUR-CHF shown as a "surface." Summary: There is a modest one-way bet on the Swiss franc to strengthen. That's the green peak over to the right, with the redder area being the "bet" on a stronger euro. Out past six months or so in the future the symmetric "smile" becomes a decided "smirk" of certitude. The Swiss National Bank is not smiling.
Blair
Here's our Robert Hutton on the new Tony Blair doorstop. Anthony Seldon has done good work here. We thank him for his appearances on BOTE. This is the killer one-volume on Churchill. Somehow saying Churchill rings different than Blair. Will we say Cameron?
Johnny Damon, Detroit, Michigan
I hate Ken. I like Dan Shaughnessy. Ken pointed out Dan pointing out it's September. Wait 'til next year.
Discuss.
Posted by: Tom Keene on August 31, 2010
Baum Swims Portfolio Balance Channel
There is a heatwave on the East Coast so Caroline Baum dives into the monetary channel with this must-read. She was last seen outside St.Louis in search of monetarists.
The Zurich Dog Didn't Bark
Cross-asset analysis is often about what is not happening. Before the Monday afternoon downturn, my screen showed a set of data that was really doing quite well. Except, one item. EUR-CHF wouldn't stop. This barometer of European and global tension was screaming barking, "Watch me! Watch me!" Here is the ever stronger Swiss Franc, some 23% stronger against the euro from October 2007.
EUR-CHF: From 1.65 to 1.29
A Contingent Helicopter Drop
Caballero of MIT writes a smart note on doing things now with locked in assumptions for our future. (Note to politicians: "future" is somewhere out past the next election.)
Barro Sets Off Winter of Discontent Made Glorious By ...
Mark Thoma, as always, does a great job summarizing an important event. Here is a set of responses to Robert Barro's WSJ op-ed. Chris Low at FTN writes that Samuelson to Blinder to Krugman agree with Barro in their textbooks. Professor Barro's interview with me can be heard at Tom Keene on Demand.
Posted by: Tom Keene on August 28, 2010
"Brutal" Austerity?
Chairman Bernanke gets the press at Jackson Hole, but President Trichet is the must-read speech. Our Simon Kennedy listened carefully as the engineer distilled a potentially brutal "lost decade." How lost is lost? Here's Japan's rollover in top-line nominal GDP.
Japan's Animal Spirit Deflates to Early-1990s Levels
William White
It's like whom do the doctors send their families to... Here's Michael McKee with the quiet academic who the monetary elite read on the airplane. Here's one of White's classic papers...way out in front.
Profit Consensus
John Taylor's Economics One is must-read because he aggressively advances others' work. Here he pushes Ron McKinnon's Beijing Consensus. Mark J. Perry's Carpe Diem is a veritable chartathon and has a killer corporate profit treatment ... with an assumption of future job creation. But where will the jobs be created?
Research
Sven Jari Stehn writes a jewel for Goldman Sachs on structural unemployment. Summary: The grim picture is way more cyclical than expected and suggests "large-scale slack is likely to perpetuate disinflation." Daniel Silver at JPM overlays existing home sales "units sold" on top of "median price." I eyeball -10 percent year-over-year. Duck.
Governing Alone
Peggy Noonan opines on the President. I'll not opine but would suggest Team White House dust off James MacGregor Burns. Start with this jewel and then search back decades for "motivation and morality." Burns, at 92, is must-read as we search for our vineyard of liberty.
Discuss.
