September 30

FASB to fold on mark-to-market. Bruce Krasting.

And does FASB have one more reason to fold?
Seems so, as Mortgage-Gate could be getting serious --- so far, GMAC and JPMorgan have been implicated in foreclosing on mortgages without titles, but quite likely this is endemic, and so will affect the entire mortgage origination industry as more and more of those foreclosed upon begin to challenge the process

Are The 250,000 Foreclosure Sales From Q2 About To Be Reversed, As Fitch Prepares To Downgrade Foreclosure Fraud Companies. zerohedge.

Chris Whalen on banks and mortgages. King World News.

September 23

legendary investor Seth Klarman calls market a "Hostess Twinkie". via Pragmatic Capitalist.

John Hussman explains why the economy is weak and deteriorating
the whole thing is worth reading, as always, but what I'd most like to excerpt is:

My view remains that the underlying condition of the U.S. housing market is one of deep insolvency. The Treasury, Fed and the FASB have effectively made a policy out of opaque disclosure, so that at least the deterioration in the housing market is slow to appear on the balance sheets of major banks and financials. At present, the FASB allows "substantial discretion" in the valuation of mortgage-backed securities, which I suspect are being carried at a higher level than the value that the underlying cash flows (mortgage repayments) can actually support. Given that there is little pressure to disclose losses, and that mechanisms are in place (at least until the end of 2012) for the Treasury to bail out the entire flow of bad mortgages that funnel through Fannie Mae and Freddie Mac, it's not clear whether the growing mountain of delinquent and unforeclosed mortgages will provoke an abrupt crisis. My own expectation is that fresh economic pressure would provoke contagious pressure on the housing market to an extent that would be difficult to obscure.

Uniqueness or similarity? Japan’s post-bubble experience in monetary policy studies. Masaaki Shirakawa, BIS.

The lastest Z.1 Flow of Funds report was released last Friday; total credit market debt expanded slightly to $52.1Trillion. this is worth watching due to how debt growth has historically been a leading indicator of GDP growth, as shown by Annaly Capital:

September 20

Its over! The recession, that is; in fact, it ended June 2009.
A trough in business activity occurred in the U.S. economy in June 2009. NBER.

The committee decided that any future downturn of the economy would be a new recession and not a continuation of the recession that began in December 2007. The basis for this decision was the length and strength of the recovery to date.

so, now that the U.S. is not still in recession, Gary Shilling evaluates The chances of a double-dip, via Credit Writedowns.

this is both worth a laugh, and has some material worth some thought:
Postal at the bank. Bruce Krasting.

Flow of funds data came out recently, showing aggregate private debt to GDP ratio has fallen to 267%, which is still very very high, but down significantly from peak of 298%

But in Defaults account for most of pared down debt, the WSJ shows how the U.S. consumer is "delevering" --- virtually all debt reduction is due to loan charge-offs

Retirement on hold: American workers $6 trillion short. Scott Cohn, CNBC.

other data:

not much data today, just NAHB, which was a bit weaker than expected, staying at 13; and Canadian wholesale sales for July, which was down for the 4th straight month and 5 of last 6

tomorrow we get Canadian CPI, expected to blip up to 1.9% from 1.8% YoY, while core CPI is expected to stay steady at 1.6%; in the U.S., we'll get housing starts and building permits and the (probably uneventful) FOMC decision

on Wednesday we'll see how Canadian retail sales did in July; on Thursday we'll get U.S existing home sales and on Friday we'll see how new home sales and durable goods orders fared in the U.S. in August

contrary indicators: Chinese stocks have been a pretty good leading indicator of global equities, and the Shanghai Composite index has gone nowhere for two months; but the CRB has been steadily heading higher (up 11%) over the last 2 months, and is at its highest level since May 2008, while copper (the commodity with a PhD in economics) has also been trending higher (though less steadily), up 27% since early June; meanshile, PIGS spreads are out, but the VIX is down

September 17

data today: more disinflation (chart from Calculated Risk):


to see how much energy prices are contributing to CPI, see EconomicpicData, here.

another chart, this time on how Canada's housing market measures up:

from trendlines.ca

Taxing my patience. Dan Gross, Slate.

5 points to keep in mind as Congress debates the Bush tax cuts.

all the points are good, but the 4th is my favourite, followed by the first half of the 3rd point

for more on the "debate" about the Bush tax cuts, see The tax-cut racket. Paul Krugman, NYT.

America the poor. Robert de Neufville, BigThink.

according to the Census Bureau, a shocking 20.7% of all children in America lived below the poverty line in 2009

quote of the day:

I am not a Democrat, because I have no idea what their economic policies are; And I am not a Republican, because I know precisely what their economic policies are.

Barry Ritholtz.

September 15

"In theory there is no difference between theory and practice. In practice, there is." Yogi Berra.

The fair. Tim Duy, Fed Watch.

A man takes his son to the county fair; the lights and sounds of the amusement rides are like a magnet to the boy. The boy, however, is penniless. His father, seeing the longing in his son's eyes, hands the boy a dollar for the rides, but quizzically adds "if it looks like you are about to have any fun with that dollar, I will take it back from you." The boy is puzzled. First, a dollar only buys three tickets, and the least expensive ride is four tickets. Plus, Dad said he would take the dollar back if he went to buy tickets. So what is the point of even trying to buy any tickets?

Consequently, the father and son stand at the edge of the midway, the father wondering why his son simply stands there while the son wonders why his dad doesn't want him to have any fun. They are soon joined by the boy's grandfather, who, assessing the situation, says that the father should never have given the son a dollar in the first place. "He will just buy candy, which will cost you more later when you have to take him to the doctor to treat diabetes." The father neither agrees or disagrees. Along comes a trusted uncle, who says to give the boy another dime, but "then if he looks like he will have any fun, take back a quarter."

The grandfather and uncle start bickering, loudly, in public, about what to do with the boy and his dollar. Soon another uncle rushes into the fray, proclaiming it is pointless to give the boy a dollar because all the workers are already busy helping other fairgoers. "He can't buy anything anyway, and if he tries, he will just drive up prices for all his cousins." The discussion becomes increasingly heated, drawing the boy's cousins away from the rides. The lights and noise of the fair fade as lines dwindle and the rides grow silent.

All the while, the confused boy is wondering why his father just stands there, refusing to criticize the grandfathers and uncles even as the argue increasingly silly positions. Finally, the father, realizing the boy's confusion, turns to him and says "Reaching consensus in the family is always more important than the fair." The arguing continues as employees begin to turn off the rides, one by one.

This, I believe, is an apt analogy of the current state of monetary policy. A policy that is supporting disinflationary expectations simply because it lacks a credible commitment to any other outcome.

more at the link

Debating the flat earth society about hyperinflation. Mish.

with the new Basel III rules the talk of the week, here's some amusement:

What is a capital standard? Deus ex Macchiato.

note: not that we're concerned here in Canada about the capital ratios, given that our banks are all in good shape, but, more generally, any changes in capital ratios are totally irrelevant if assets are over-valued; if you're not sure the assets are valued properly, what good are any ratios?

for much more, see Capital can't be measured, by Steve Waldman, in which he says:

For any large complex financial institution levered at the House-proposed limit of 15×, a reasonable confidence interval surrounding its estimate of bank capital would be greater than 100% of the reported value. In English, we cannot distinguish “well capitalized” from insolvent banks, even in good times, and regardless of their formal statements.

what's more, what if you can't trust not just the accounting but the accountants? remember LEH, which (i), as noted in Waldman's article, reported 11% tier one capital ratio just 5 days before it went BK; and which (ii) said it had a $32.5 billion liquidity pool, which, it turns out, they overstated by just a measly $30 billion; and which (iii) was window-dressing its books by shifting $50 billion of assets off and back on with "Repo 105" (BoA also manipulated its quarter-end books; & GE admitted in 2009 to cooking its books; and its now being sued again)

and, with FASB letting companies do whatever they want, has there been any evidence of improvement in accounting practices?

speaking of bank rules:

William White says getting tough on banks may not hurt economy. naked capitalism

Will the Basel III bank regulations change anything? Washington's Blog.

The Empire strikes back. Avinash Persaud, voxeu.

I haven't read this yet, so don't know for sure that its worth recommending, but, like Hussman and Grantham and Hoisington, etc., Howard Marks' musings are usually worth the time.

other fare:

How much is left? The limits of earth's resources, made interactive. Scientific American.

who are the terrorists? American military practice has been to indiscriminately kill Iraqi civilians by randomly firing bullets in a 360 degree circle anytime that an I.E.D. hits a U.S. soldier

If, Rudyard Kipling (hat tip to Rosie who quoted the first few lines in one of his recent market musings)

September 12

CMHC - the enabler to Canada's housing addiction and Is there a housing bubble? both by Ben Rabidoux, via zerohedge.

interesting chart on PE ratios in market cycles

from Crestmont Research.

I don't agree with this weak analysis at all: A Japanese lecture for bond investors. Edward Chancellor, FT.

I don't disagree just as a matter of principle; rather, I find his arguments flimsy and unsound --- there are a number of points he makes I take issue with.

Japan is unique relative to other instances of banking crises; okay, sure, maybe so; but does this somehow imply that the U.S. is more likely to follow the path of the other examples rather than that of Japan; if so, why? in what ways are the US' similarities to those other experiences more compelling than to the Japanese situation? we don't know b/c he doesn't say

if deleveraging tails off, that will stimulate demand? sure; of course; but he seems to be implying that that is a fair accompli; really?

Japan suffered from a political imperative to avoid inflation; okay; doesn't the U.S. too continue to insist that low and stable inflation must be maintained? is there any more appetite apparent in the U.S. than in Japan to encourage high inflation to eat away at the debt burden? Ive seen no evidence of that, and he certainly doesn't provide any.

Japan's ability to raise prices was constrained by competition from China; this is said as if it differentiates the US experience from that of Japan; really? the U.S. doesn't face competition from China and other nations?

the banking system has been recapitalized? yes, of course, there were capital injections; but are they truly solvent? have not accounting rules been changed to avoid recognition of losses? is this really that different than the zombie bank situation in Japan? one of Japan's problems identified by Chancellor is the hiding of bad loans that happened there --- but not in the U.S.? really?

the demographic situation in the US is certainly not as difficult today as it is in Japan today, but is it really that much better today in the US than it was in Japan in the early 90s? is the baby-boomer situation not a problem in the US? really? baby boomers realizing that their nest eggs have been seriously compromised by a stock market down 50% from its peak and house prices still falling and now with low interest rates to boot, thats not a disinflationary force in the US?

the US WAS a spendthrift nation; is Chancellor saying that because it did spend beyond its means for most of the last 2 decades it must therefore continue to dissave going forward? really?

the credit impulse has turned positive? really? based on what evidence?

his question "how large is the output gap, really?" is really just the icing on the cake of this very weak piece; what a load of hooey!

Searching for yield. Morgan Stanley Interest Rate Research report, via zerohedge.

Albert Edwards, via zerohedge.

The current situation reminds me of mid 2007. Investors then were content to stick their heads into very deep sand and ignore the fact that The Great Unwind had clearly begun. But in August and September 2007, even though the wheels were clearly falling off the global economy, the S&P still managed to rally 15%! The recent reaction to data suggests the market is in a similar deluded state of mind. Yet again, equity investors refuse to accept they are now locked in a Vulcan death grip and are about to fall unconscious.

The slump goes on: why? Robin Wells and Paul Krugman, NYRB.

I was going to comment about the WSJ economic symposium piece What should the Federal Reserve do next?, commenting that the range of opinion sought is hardly a range (only 1 of the 6, Vincent Reinhart, advocates continued Fed stimulus; i.e. he's the only one who recognizes the current trend of disinflation, the large output gap and the continuing decline in inflation expectations). But I don't need to rant any further, as I found someone who has done so already, in What should the Fed do next? Niklas Blanchard, Modeled Behaviour.

On the value of Treasuries. Jake, EconompicData.

In recent weeks, a number of investors I respect have commented that Treasuries are rich and should be avoided (or even outright shorted). Recent examples include Doug Kass and James Montier, both of whom claim current yields put too much weight on expectations of a double dip. I simply don't agree...While I am not a Treasury bull, it is my view that at a 2.7% yield Treasury bonds are fairly valued when one takes into account the low growth / low inflation outlook, the Fed's extended easing policy, and the potential for capital appreciation rolling down the steep yield curve. Below we'll take a look at these three points in more detail....

a couple of short pieces from David Beckworth: In case you were wondering & What a mess.

It's a depression. Rosenberg, via The Big Picture.

Rome is burning. Karl Smith, Modeled Behaviour. nice rant, including:

There are machines waiting to be worked and people waiting to work them but they are not getting together. The labor market is failing to clear. This is a fucking disaster.... We have people who would be working but are instead watching Judge Judy.

2 anecdotal reminders that credit bubbles aren't just Anglo-Saxon affairs:

Empty flats spell trouble. Andy Xie, China International Business. and Hello from Sao Paolo. Planet Money, NPR.

Quantifying top 10 China risks. Morgan Stanley, via zerohedge.

Unfortunately, I can't disagree with Gonzalo Lira on this one: Why Paul Krugman is an imbecile -- or a fraud. As Lira says, I don't always agree with Krugman, but I have always found reading him worthwhile and have generally respected his views. But now, not so much.

Globalisation. Stephen King (HSBC), FiveBooks.

trailer: Inside Job. via youtube.


recent data:
Cdn jobs about as expected, US jobless claims better (though data questionable, given that 9 states didn't file), but the consumer credit contraction continues, there are more and more people on food stamps, and the Beige Book said there was "continued growth in national economic activity during the reporting period of mid-July through the end of August, but with widespread signs of a deceleration compared with preceding periods"



other fare:

bring on global warming: How Canada will become a superpower, making the Northern Rim the envy of the world. Laurence Smith, via io9.

I was wrong about veganism. Let them eat meat – but farm it properly. George Monbiot, Guardian.

this is what education is coming to??? A class to die for. NYT.

Are you ready for some football?

with Vikings at Saints playing tonight to kick-off the season, I thought I'd put down some forecasts to come back to and laugh at come January; we'll see how little I know:

barring major injuries (like star quarterbacks needing to be pried out of a car at 5:30 a.m. by the jaws-of-life), my playoff team predictions:

NFC
1-Falcons (12-4)
2-Packers (12-4)
3-Cowboys (10-6)
4-49ers (8-8)
5-Saints (12-4)
6-Vikings (10-6)

AFC
1-Ravens (12-4)
2-Chargers (12-4)
3-Patriots (11-5)
4-Bengals (10-6)
5-Colts (10-6)
6-Steelers (9-7)

playoffs

round 1:
Saints over 9ers; Cowboys over Vikings
Steelers over Patriots; Colts over Bengals

round 2:
Falcons over Saints; Packers over Cowboys
Chargers over Colts; Ravens over Steelers

conference championships:
Falcons over Packers
Ravens over Chargers

Superbowl:
Ravens over Falcons

September 6

question: how do we know where we're heading if we don't even know where we are? or where we've been?

there's no economic road map; back in 2006/07, few people recognized that we were in a boom; many, including Ben B., didn't recognize the housing bubble for what it was, much less recognize that there was also a debt bubble; if we (collectively) can't even recognize a boom/bubble of such proportions while we are in it, how are we to recognize where we are in the midst of its aftermath? where are we now??

wasn't there talk not too long ago about policy-makers having tamed the economic cycle? no more booms and busts, eh? what hubris!

the so-called smoothing-out of the business cycle was a function of continuously leveraging up the economy, thereby kicking the can down the road; the downside of all past slumps was mitigated, or, rather, postponed, by using debt to "cure" those ills; can that solution really be applied persistently indefinitely? that which is unsustainable won't be sustained

so now we're supposedly in the "new normal"; but what exactly is normal? were the 1990s and early 2000s really normal? compared to what? historical precedent? were those decades anything like the majority of historical precedent?

can we return to normal? if by doing so we mean reverting to the 1999 or the 2006 versions of normal, chances are not; if each dollar of economic growth over the past 25 year continually cost increasingly extra dollars of debt growth, then is that progress? debt growth represents the pulling-forward of consumption; by increasing debt, we do so to increase current consumption at the cost of future consumption; sooner or later, future consumption has to be depressed in order to pay for that excessive past consumption; if not now, why not?


What If “It” Doesn’t End With a Bang But With a Whimper? Cognitive Dissonance, zerohedge.

Layers of Self Deception

It makes it so much easier to deal with life’s ugly inconsistencies when we can sweep them under the intellectual rug. And it all happens in seconds with barely a blip in our blood pressure. The really tough dissonances might take a little longer, but never underestimate our capacity for self deception. And this cognitive tango is always running in the back ground with very little conscious awareness. Unless, of course, we train ourselves to see what’s going on. But who’d want to do that?

Since recognizing these cognitive gymnastics and then compensating for them requires self examination and personal courage, is it any wonder the average Joe’s worldview is distorted? It may come as a shock to learn that for all of us, our worldview isn’t affected so much by a lack of information as our lack of desire to (re)examine, update and accept it. The only information vacuum we live in is the one we create between our ears....

We all own a pair of rose colored glasses that are completely customizable and personalized. One might say that denial is self inflicted propaganda for it serves the same purpose as corporate and governmental propaganda, that of spinning the (ugly) truth into something more palatable.

As we grow, and as needed to survive and thrive, we modify and alter our beliefs to accommodate “the real world”. But we do this begrudgingly and only when we’re left with little or no choice....

Think of using denial as a holding pattern while we attempt to land new information for assimilation. The problem begins when we become trapped in the holding pattern and are unwilling to accept the differences or reject incorrect beliefs. We then become mired in the muck of our rigid belief system and denial is no longer used as a bridge but as a dam.

Why the end of the equity cult means trillions in upcoming outflows from stocks. Robert Buckland, Citi, via zerohedge.


other fare:

I love these videos by RSA Animate: The surprising truth about what motivates us. Dan Pink talk via RSA Animate via YouTube.

Dick Cheney's oily dream. Washington's Blog.

September 5

Income and spending report generates illusion of gains. David Stockman, Minyanville.
lies, damn lies, and statistical revisions


other fare:

chart from CIA World FactBook

draw a line from top-left down thru Hong Kong in bottom-right; strong negative correlation; most notable outliers include Vietnam & former Soviet republics below the line, and U.S. well above

The Speech President Obama Should Give about the Iraq War (But Won’t). Juan Cole, Informed Comment.

Ye cannae change the laws of physics. The Economist.

Greatest of all-time. Peter Struck, Lapham's Quarterly.
the best paid athlete of all-time is not Tiger, nor Michael, but Gaius Appuleius Diocles

also from Lapham's, some Charles Barkley-isms, to go along with some Yogi Berra-isms, including

We don’t need refs, but I guess white guys need something to do....

You should be able to go and pick out one fan a game and beat the hell out of him....

I heard Tonya Harding is calling herself the Charles Barkley of figure skating. I was going to sue her for defamation of character, but then I realized I have no character.

September 3

data:
NFP down just 54k, vs expectations of -105k, and past month revised to just -54k also, from previous # of -131k; manufacturing payrolls down (despite what ISM employment indicator suggested) but private payrolls up 57k

unemployment rate rose a touch to 9.6%, as expected; unemployment was up, it wasn't up as much as the labor force; the employment-population ratio rose a touch to 58.5

ISM Non-Manufacturing fell more than expected, to 51.5 from 54.3

ECRI WLI fell to 120.6 and its growth rate to -10.1



other fare:
we can't reliably predict tomorrow's weather, but we're forecasting 2012.

September 2

WHY oh why does the Fed, in its minutes from their August 10 meeting, released the other day, say (at the start of the policy action section) that:

inflation was likely to stabilize near recent low readings in coming quarters and then gradually rise toward levels they consider more consistent with the Committee’s dual mandate for maximum employment and price stability

On what basis did they come to that conclusion? macroeconomics says that when unemployment is high and when there's a large output gap, then inflation falls; historical precedent says the same; so why does the Fed think inflation is soon going to stabilize and soon thereafter start rising? do they just say that so they can keep sitting on their hands?

I have argued before, repeatedly, that the Fed is pushing-on-a-string: current monetary policy measures are intended to ease credit strains and encourage greater lending, which, it is hoped, would stimulate economic growth. But the easy money is not getting to the public because (a) the public has more debt than it wants so doesn't, in aggregate, want to take on more debt, and (b) the financial sector has more non-performing loans and questionable credit already on its books so doesn't, in aggregate, want to increase its exposure to risky credit. These roadblocks are what is preventing Fed policy from being as effective as hoped, and is thus why the Fed is pushing on a string.

However, this is not to suggest that there aren't potential Fed policy tools that could be implemented that would not be limited by those roadblocks and therefore should not be just more ways of simply pushing on that same string. As Krugman said years ago in his 1998 paper Japan's Trap, printing money is not sufficient when you're at the zero bound. What could they do, that they haven't yet done, to avoid the whole string problem? Bernanke knows --- he just hasn't done it yet: free money / helicopter drop.

The Fed has expanded the monetary base, but its sitting in excess reserves, due to roadblocks mentioned above. But if all private citizens got a check in the mail for $1000, surely a reasonable proportion of that found money would be spent. Yes, some of it would likely be applied to reducing credit balances; but surely this would be the most likely policy tool the Fed could employ to stem deflationary pressures by goosing the economy. I've mentioned this in past forecast meetings: give the money to the people, not the banks.

More on this in The right kind of helicopter drop. David Beckworth.

Chris Whalen says to forget QE; instead, get tough on banks, via Reuters.
I totally agree with the idea of putting more heat on banks, and forcing them to clean up their books; but not with using the GSEs to subsidize housing; wasn't that a big part of the problem before? should housing be subsidized more than it is already? this isn't fair to non-homeowners, and it doesn't help the market clear; there's more efficient ways of getting money into hands of households than doing it via GSE-engineered refinancing of all mortgages

The inflation cure. Paul Krugman.

Jan Hatzius is shrillish. Krugman again.

And now that the writing is on the wall, Morgan Stanley finally admits 2nd half growth won't be as robust as it had been forecasting. I suspect they're still too bullish. In any case, the reason why I'm linking to this is because I think this is just classic:

There's no mistaking the weakness of incoming US data.... However, unless we know why the economy has weakened, we have trouble assessing the future. In our view, the main culprit for weakness relative to our forecast is waning or less-than-expected support from global growth

Seriously? Not the waning of fiscal stimulus? Not the end of the inventory bounce?? Not stagnant labour markets and continuing credit contraction??? With Europe having had a better-than-expected Q2 and with Asia still strong, the problem confounding U.S. growth is weak global growth? Surely they jest.

Similarly (more closing of barn doors, post horse), BoA sliced their 2010 and 2011 forecasts, also via zerohedge.

After salami-slicing our forecast in recent months, we are ready to make a deeper cut.

Normally I wouldn't link to stuff like this --- but I make exceptions when its about one of my favourite economists: nope, not David Malpass; and, no, not Larry Kudlow or Ben Stein; this one's about Brian Wesbury:
Wrong! Krugman.

And how's this for impeccable logic? Apparently, Ethan Harris, head of economics at BoA/ML thinks the U.S. economy is so bad that the chance of avoiding a double dip back into recession may actually be pretty good, via Bloomberg.

back in the real world:
The world is flat - and getting flatter. John Taylor, via zerohedge.

Just as cash-for-clunkers and housing purchase subsidies merely delayed the day of reckoning for automobile and housing sales, we fear that last year’s substitution of public central bank leverage for private balance sheet repair has merely delayed the full extent of household expenditure adjustment. Given the scale of the credit cycle that just ended, the probability of a double-dip recession is far higher than the historical comparison to other post-war cycles suggests. From a starting point where the Fed is already committed to purchase hundreds of billions of dollars of Treasuries just to maintain its current policy stance, we expect the persistence of weak labor markets to force it to launch “QE2”, further depressing back-end yields.

To draw on Thomas Friedman’s analogy, as the deleveraging process becomes globalized the developed world’s yield curves will literally flatten. Shifts in the yield curve in August are the beginning of a larger trend reflecting weak economic performance well into next year, anticipating central banks’ efforts to counter that weakness.

Canada's housing bubble: an accident waiting to happen. Canadian Centre for Policy Alternatives. that title reminds me of an older post:
Personal debt in Canada: the ticking time bomb. Bankruptcy Canada.

A termite-riddled house: Treasury bonds. Gonzalo Lira.

valuation update. Doug Short.

is this a scary chart?

from Long-term trends in public finances in the G-7 economies. IMF.

Who Are You Going to Believe, the IMF or Your Lying Eyes? Dean Baker.

A quantitative approach to tactical asset allocation. Mebane Faber, via SSRN.

Equity risk premiums - the 2010 edition. Aswath Damodaran, via SSRN.



data:

vehicle sales were down in August; domestic sales fell to 8.7 million from 9.1 in July, while total sales fell to 11.5 from a downwardly-revised 11.6 in July and down 19% from August 2009; GM's sales fell 25% from the previous August (which was boosted by cash-for-clunkers), Ford's fell 11%, Toyota's fell 34%, Honda's 33%; on the other hand, Chrysler's sales were up 7%

jobless claims pretty much as expected, little changed; no surprises from productivity or ULCs either

Eurozone GDP was revised up to 1.9% from 1.7% YoY

ICI says that it just recorded the 17th consecutive week of net outflows from domestic equity mutual funds, and the outflows are growing



non-BP Gulf of Mexico oil rig link of the day:

despite some reports saying no oil spilled, Coast Guard says otherwise:
Mile-long sheen after Gulf oil platform explodes. MSNBC.

and a reminder that Canadian shores are not immune from accidents.



other fare:

German military report: peak oil could lead to collapse of democracy. der Spiegel.

A date that will live in oblivion. George Packer, The New Yorker.

What President Obama called the end of the combat mission in Iraq is a meaningless milestone, constructed almost entirely out of thin air, and his second Oval Office speech marks a rare moment of dishonesty and disingenuousness on the part of a politician who usually resorts to rare candor at important moments.

along the same lines:
Flying the flag, faking the news. John Pilger, New Statesman.
Loud noises from Washington about a US pull-out from Iraq are a poor disguise for America’s determination to keep waging war.

In his book Propaganda, published in 1928, Bernays wrote that the "intelligent manipulation of the organised habits and opinions of the masses is an important element in democratic society", and that the manipulators "constitute an invisible government which is the true ruling power in our country".

Stephen Hawking has a new book coming out in a week, called The Grand Design, co-written by American physicist Leonard Mlodinow: God was not needed to create the Universe. Telegraph.

Roger Federer pulls a rabbit out of his hat. amazing shot!

Sept 1 - it's a new month

"... in an information-rich world, the wealth of information means a dearth of something else: a scarcity of whatever it is that information consumes. What information consumes is rather obvious: it consumes the attention of its recipients. Hence a wealth of information creates a poverty of attention and a need to allocate that attention efficiently among the overabundance of information sources that might consume it."

Herbert Simon

bounded rationality: individuals are only partially rational and their rationality is bound by the information they consume, the complexity and abundance of the information available to them and the finite amount of time they have to make decisions




start of a new month -- risk on: stocks up, bonds down; and that was even before the surprisingly strong ISM! U.S. 10-yrs up over 12bps to yield of 2.59%; stocks up about 2.5%; C$ up over a $1


data:
China's PMI bumped up a touch, to 51.7 from 51.2
MBA Refi Apps, unsurprisingly, given the low level of mortgage rates, increased again
Purchase Apps also increased the last two weeks; but Michael Fratantoni, MBA's Vice President of Research and Economics, points out that the recent increases are off of very low levels, and says "Despite the slight increase in purchase activity in the past week, the continued low level of purchase applications indicates we are unlikely to see an increase in new home sales reported for August or existing home sales reported for September"
ADP, for what its worth, came in weaker than expected, at -10k, with past month revised down modestly to +37k
construction spending was down 1% in July, worse than forecasted, and June was revised down to -0.8% from +0.1%
I said on August 26 that "regional manufacturing surveys give us a good idea of what to expect for the ISM"; guess what? not so much! I guess what happens in Dallas, Kansas City, Milwaukee, Chicago, Richmond, Philadelphia; and what capital goods orders, x-def, aircraft did are not indicative of what will happen in ISM; ISM was up to 56.3 from 55.5 in July, easily surpassing the expected # of 52.7; production, employment, inventories and prices were all up; new orders were down


other fare:
John Lanchester on Understanding High Finance, Gary Gorton on Financial Crises, and Charles Morris on Crashes. all at FiveBooks.