The Big Picture |
- Inconvenient Numbers? Change ‘em.
- Where New Yorkers Move To
- Ryan v Obama: Some Chart Porn
- Global Tactical Asset Allocation GTAA Commodities
- LPS Foreclosure Data
- Stocks Up, Volume Down
- Steinhardt Calls Buffett “Greatest PR Person of Modern Times”
- Morning Reads
- No Whining Be Happy
- The Warning
| Inconvenient Numbers? Change ‘em. Posted: 06 Apr 2011 03:13 PM PDT Well, just like that, with this blog post, Heritage has now changed its forecast for the unemployment rate under the Ryan budget. The new numbers are linked to in the post — the PDF is here.
An interesting 24-hour period, to be sure. Adding: Heritage went out of its way (here) to defend its methodology — strongly implying to me that they saw no reason to change it. Yet change it they did.
Someone capture that page before it, too, makes its way down the memory hole. This smells just a bit scandalous. |
| Posted: 06 Apr 2011 11:30 AM PDT Earlier this week, the NYT discussed how surprised the City was that their population had hardly grew. Which brings me to this Moritz Stefaner visual exploration of where New Yorkers moved to in the last decade: > |
| Posted: 06 Apr 2011 09:00 AM PDT UPDATE DEUX: Heritage has now revised its numbers — see post above at 18:13 Eastern. UPDATE: Apparently, in one document that can be found here, Heritage has simply disappeared the line item in which the unemployment rate falls to 2.8 percent by 2021. The document states: ”Updated as of April 6, 2011 at 11:04 a.m. EST,” which update was presumably the removal of the unemployment rate projections. At this moment (13:30 Eastern), it still appears — for now – in this document (which I have saved in multiple spots). It is, frankly, remarkable to me that they would take such an action. Apparently when one’s analysis does not stand up to even the most cursory examination, the solution is simple: Delete the offending data. Invictus here, folks. Filling in a bit for our traveling host with a side-by-side glimpse of our competing budget plans. Paul Krugman has very recently written here and here about some improbable aspects of the Ryan budget proposal. In that vein, I thought it might be instructive to take a look at some of the similarities and differences of forecasts in Obama’s forecasts projections versus those being offered by Ryan. What I have done in each case is as follows: I downloaded the appropriate series from the St. Louis Fed (or in one case BEA.gov), always on an annual basis. In almost all cases I made what I believe is a reasonable assumption for 2011 to bridge me from known 2010 (and prior) historical data to 2012 and beyond forecasts. Those assumptions are noted. I then simply took forecast numbers from the Heritage Foundation’s analysis of the two plans (the forecasts are in Appendix 3). Any input errors in creating the charts below are solely my fault, though I endeavored — under my noon deadline — to enter everything as accurately as possible. Please note any errors in comments. (Click through any image for larger.) First up, Real GDP. (FRED Series identifiers appear on most charts.)
Moving on to the Unemployment Rate:
So the proposed Ryan budget is going to reduce the unemployment rate to a historic — at least on an annual basis — low of 2.8 percent by 2021. And although that would have to be considered full employment and a taut labor market by just about anyone’s standards, we will see little or no impact on wages and/or inflation (beyond what Obama forecasts). In fact, the Ryan and Obama forecasts are almost literally on top of each other when it comes to inflation — but then Obama is not forecasting a 2.8 percent unemployment rate. In fact, his forecast is for almost twice that (5.2 percent at best). Honestly, is it possible to take seriously a projection that we are going to get the unemployment rate down to 2.8 percent by 2021 (or, actually, any time, for that matter)?
You literally cannot see Obama’s inflation forecast because Ryan’s sits atop it. So let’s move on to jobs. How much more robust will the jobs market (private payrolls) be under Ryan’s numbers than Obama’s?
So the Ryan plan will produce about 2.5MM more private payroll jobs — about 21,000/month above Obama – over the next 10 years. I’m not sure how that translates into a 2.8 percent unemployment rate. (In the spirit of current sentiment, I assume not a single government worker will be hired in the next 10 years, at least, and therefore will not look at overall non-farm payrolls.) Here are private sector wages and salaries followed by real disposable income. I would have thought a 2.8 percent unemployment rate would produce some discernable wage inflation beyond what we see below:
Unfortunately, it does not appear that the Ryan plan does anything meaningful on the one line item that matters most to the vast majority of Americans — Real Disposable Income – again, the lines are virtually on top of each other.
Presumably because this is a much more serious proposal that will get our house in order, Ryan’s plan forecasts lower rates on the 10-year note than Obama’s. The bond vigilantes will be held at bay as some $6 trillion is cut from the budget, or something like that.
The Heritage analysis contains comparisons on many more metrics than I’ve presented above; I simply chose a few that I thought might be of most interest. I may make further comparisons as time permits. In wrapping this up, let me state for the record that I think virutally all forecasting beyond about 24 months — in almost any discipline – is generally an exercise in futility (of course there are exceptions). That said, the integrity and viability of what’s put before us always warrants some scrutiny and should be at least given the sniff test. |
| Global Tactical Asset Allocation GTAA Commodities Posted: 06 Apr 2011 07:37 AM PDT Most commodities remain deeply overvalued. As with other assets it does not really matter in the short-term (as long as the trend is positive) but it is paramount for longer-term projections. We have little doubts that commodity long-only who buy to hold are going to experience a >50% drawdown (from current levels) on their industrial metals, crude oil and agricultural positions sometimes in the next 24 months. |
| Posted: 06 Apr 2011 07:30 AM PDT I have been meaning to get to this since last week — the numbers are pretty fantastic. From LPS’ First Look/Mortgage Monitor:
The LPS report also noted that “February's data also showed a 23 percent increase in Option ARM foreclosures over the last six months, far more than any other product type. In terms of absolute numbers, Option ARM foreclosures stand at 18.8 percent, a higher level than Subprime foreclosures ever reached.” Amazing. |
| Posted: 06 Apr 2011 06:00 AM PDT Standard & Poor's 500 Index versus Volume (200-day ma)
> Futures look strong this morning, following yesterday’s low volume back and fill — the NYSE consolidated volume was the quietest of the year to date. But as the chart above reveals, the further this rally has run, the lighter the volume has become. I cannot speak to what the silicon is up to, but broad carbon based participation is surely missing. That is surprising, because sentiment — a carbon, not silicon factor — is up in the nosebleed areas: Bulls at 57.3 versus Bears at 15.7. While volume has been anemic, breadth has been especially strong, with individual names fairly correlated to the broader index. Hence, it is less of a “stock pickers market” and more of a market participation environment. David Wilson of Bloomberg notes that trading volumes are going to get even worse: “Trading may contract further when Citigroup Inc. carries out a 1-for-10 reverse stock split, proposed in March. Citigroup has accounted for 6.2 percent of U.S. volume during the past two years, according to Bloomberg data. The reverse split is set for completion after the close on May 6.” > Source: |
| Steinhardt Calls Buffett “Greatest PR Person of Modern Times” Posted: 06 Apr 2011 06:00 AM PDT Michael Steinhardt, chairman, WisdomTree Investments, reveals his honest opinions about Warren Buffett, whom he says has managed to con virtually everyone in the press and calls greatest PR person of modern times. He also discusses the economy, the Fed and “Sokol-gate.” TUE 05 APR 11 | 07:02 AM ET |
| Posted: 06 Apr 2011 05:03 AM PDT Everyone else is on Pacific coast time, still sleeping off the effects of protein, fat and alcohol, while I can’t help but get up at my regular hour. (Last night, we gobbled down delicious steak at Starks in Santa Rosa). Even the dogs are asleep. So I am sitting all alone in the kitchen of a big dark house, where its still too dark to see the Horse Barn out back. Ahhh, but the rest of the world is already up and at ‘em. Gotta find out what’s going on, so these are what I am looking at this morning:
During my travels, did I miss anything worthwhile ? |
| Posted: 06 Apr 2011 05:00 AM PDT |
| Posted: 06 Apr 2011 04:22 AM PDT In The Warning, veteran FRONTLINE producer Michael Kirk unearths the hidden history of the nation’s worst financial crisis since the Great Depression. At the center of it all he finds Brooksley Born, who speaks for the first time on television about her failed campaign to regulate the secretive, multitrillion-dollar derivatives market whose crash helped trigger the financial collapse in the fall of 2008. “I didn’t know Brooksley Born,” says former SEC Chairman Arthur Levitt, a member of President Clinton’s powerful Working Group on Financial Markets. “I was told that she was irascible, difficult, stubborn, unreasonable.” Levitt explains how the other principals of the Working Group — former Fed Chairman Alan Greenspan and former Treasury Secretary Robert Rubin — convinced him that Born’s attempt to regulate the risky derivatives market could lead to financial turmoil, a conclusion he now believes was “clearly a mistake.” Born’s battle behind closed doors was epic, Kirk finds. The members of the President’s Working Group vehemently opposed regulation — especially when proposed by a Washington outsider like Born. “I walk into Brooksley’s office one day; the blood has drained from her face,” says Michael Greenberger, a former top official at the CFTC who worked closely with Born. “She’s hanging up the telephone; she says to me: ‘That was [former Assistant Treasury Secretary] Larry Summers. He says, “You’re going to cause the worst financial crisis since the end of World War II.”… [He says he has] 13 bankers in his office who informed him of this. Stop, right away. No more.’” Greenspan, Rubin and Summers ultimately prevailed on Congress to stop Born and limit future regulation of derivatives. “Born faced a formidable struggle pushing for regulation at a time when the stock market was booming,” Kirk says. “Alan Greenspan was the maestro, and both parties in Washington were united in a belief that the markets would take care of themselves.” Now, with many of the same men who shut down Born in key positions in the Obama administration, The Warning reveals the complicated politics that led to this crisis and what it may say about current attempts to prevent the next one. “It’ll happen again if we don’t take the appropriate steps,” Born warns. “There will be significant financial downturns and disasters attributed to this regulatory gap over and over until we learn from experience.” ~~~ Watch full program online: ~~~
Watch the full episode. See more FRONTLINE. |
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