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FRED
12-02-06, 05:52 PM
U.S. Economy: Manufacturing Unexpectedly Contracts (http://www.bloomberg.com/apps/news?pid=20601087&sid=aJ07TizPV.7g&refer=home)
December 1, 2006 (Courtney Schlisserman - Bloomberg)

Manufacturing in the U.S. unexpectedly shrank last month for the first time in more than three years, exacerbating a housing-led economic slowdown.

The Institute for Supply Management's factory index fell to 49.5, from 51.2 in the prior month. A reading below 50 signals contraction in an industry that accounts for 12 percent of gross domestic product. Construction spending dropped by the most in five years in October, sliding 1 percent, the Commerce Department said in Washington today.

Bonds rallied while stocks and the dollar dropped as traders speculated Federal Reserve Chairman Ben S. Bernanke will be forced to reduce his focus on inflation and cut interest rates in response to slackening growth.

"We're not heading toward a recession, but it's putting the economy into a growth trajectory that'll be sufficiently below potential to prompt the Fed to cut rates," said Eric Green, chief market economist at the securities arm of Countrywide Financial Corp. in Calabasas, California. "By the January meeting, the Fed will see growth as the dominant risk."

AntiSpin: How about: "Four out of five economists recommend no recession for those readers who don't want one." And: "When the economy slows, the good news is so will inflation, so the Fed will soon cut interest rates," say a four out of five economists who work for Wall Street, the government, or orthodox academia and are therefore in no position to countenance the likelihood that the Fed is in no position to pour gasoline on a smoldering pile of inflation.

Betting with the herd always carries the lowest career risk. When it comes to economic predictions, it is always better to fail conventionally and en masse than succeed unconventionally, either alone or in the company of outsiders on the ideological fringe. "No guts, no glory" is not the four-out-of-five-economists' credo.

Last month's manufacturing decline in the U.S. was expected by anyone who read our analysis in June 2005 that the housing bubble had peaked, that the negative wealth effect of declining home values take six to nine months to impact consumer spending, and then another six months or so to show up as declining manufacturing demand.

Does this mean the Fed will cut rates in January? It means they will sure want to, but the fact that the dollar took another dive while the euro and gold shot up on the lousy manufacturing news is further evidence that 2007 is the year of Stagflation Godzilla (http://itulip.com/forums/showthread.php?t=152)–his time has come. The Fed is going to have to manage through this peculiar stagflationary world, and Ben Bernanke is set up for the worst Fed chairman goat job of since 1980.

One major change is that the mainstream press, at least outside the U.S.–such as in Canada where this interview was taken–is now much more receptive to the possibility that a weak dollar may hamstring the Fed in the next U.S. recession. To wit:

reportonbusinessyoutube

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Jim Nickerson
12-02-06, 06:33 PM
Nice interview Eric. One thing I noted is that sometimes when you were speaking your lips were not moving. How do you do that?

Jeff
12-02-06, 06:41 PM
Lexington, MA Dec. 2 - Media stud, Eric Janszen wows the airwaves with his excellent shot on Canadian TV. Film at eleven.

Go dude, very nice interview. No "um", no "er", no throat clearing. Very impressive.

Great content, too, obviously. Those canucks have so much more patience with hard news. Too bad here we get JJ Cramer, instead of thoughtful commentary.

Uncle Jack
12-02-06, 07:24 PM
Those canucks have so much more patience with hard news. Too bad here we get JJ Cramer, instead of thoughtful commentary.

Excellent interview, and I'd like to add to what Jeff said above. That's the real shame of the CNBC interview with whomever they interview. It's not enough for them to interview someone and get some thought provoking discussion, but at times they also have to have someone on from a remote location to argue the point or make the other look like a fool, the 1 out of 5 economists, for instance.

And how about the woman stopping mid-interview and asking, "say, what will be the catalyst for the popping?"

Bigger brains in Canada, or do we just have to settle for the bubble-headed redhead here in the U.S.?

DanielLCharts
12-02-06, 09:44 PM
Alright, time for a little Devil's advocate: why not a period of rising unemployment that stops just before a recession, a la 94-95? Anyone, anyone? Buehler? Anyone?

jk
12-02-06, 09:54 PM
Alright, time for a little Devil's advocate: why not a period of rising unemployment that stops just before a recession, a la 94-95? Anyone, anyone? Buehler? Anyone?
these are more delicate times because of the levels of debt. also '95 was rescued by both the tech bubble and the slower-to-develop housing bubble. now all we've got is a private equity/lbo bubble without enough trickle down to carry the economy.

DanielLCharts
12-02-06, 11:18 PM
these are more delicate times because of the levels of debt. also '95 was rescued by both the tech bubble and the slower-to-develop housing bubble. now all we've got is a private equity/lbo bubble without enough trickle down to carry the economy.

jk, also 94-95 did not see housing production fall off a cliff. this link says a lot: http://research.stlouisfed.org/fred2/series/PERMIT

housing permits - a great leading indicator of the health of the residential housing market - were trending flat to up, not declining at warp speed. so the housing market was getting stronger in 94-95, despite scares that overall economic growth was ailing.

secondly, the 3month-10year spread of the yield curve in 94-95, while not the healthiest of spreads, never said recession odds were over 50%, as they do now.

my two cents.

spunky
12-03-06, 04:13 AM
Yes. americans are sorely out of touch. Gotta worry about Tom Bradys passing numbers, NASCAR or " Desperate Housewives " dont ya know :( I work with a girl from Liverpool; she has been stateside for about 20yrs. She was bemoning the fact she cant get an offshore bank account anymore and how the dollar was getting pounded these days. :D Her american co workers well :confused:
Got Gold ????

0tr
12-03-06, 04:01 PM
I'm confused:

The Fed will be under pressure to drop rates for domestic purposes because of the soon to arrive recession and

The Fed will be under political pressure to maintain (or even raise) rates to continue the current life support for the US ecomony from Asian sources. The Fed will be pressured to prevent Asian funds from flowing instead to europe where rates are rising? Is the carry trade shifting to europe?

jk
12-03-06, 04:10 PM
I'm confused:

The Fed will be under pressure to drop rates for domestic purposes because of the soon to arrive recession and

The Fed will be under political pressure to maintain (or even raise) rates to continue the current life support for the US ecomony from Asian sources. The Fed will be pressured to prevent Asian funds from flowing instead to europe where rates are rising? Is the carry trade shifting to europe?

the euro-zone economy seems to be strengthening, and people expect the ecb to raise rates soon. simulataneously, the u.s. economy is weakening and people expect the fed to lower rates next. this is expressed in the flow of money out of the dollar and into the euro [as well as the pound and some other currencies]. if the dollar is in the process of dropping, foreign investors are less interested in dollar debt instruments, likely pushing up long rates, including mortgage rates.

just as we had a "conundrum" of the fed raising [short] rates while long rates held steady and even dropped, we are likely heading for the mirror-image conundrum of the fed dropping short rates, while long rates rise.

WDCRob
12-03-06, 04:56 PM
Too bad we couldn't see their faces when EJ said gold was going to $2500-3000.

BK
12-04-06, 09:53 AM
Great job..

I don't think the Woman interviewer believed Eric.. - my experience tells me she was expressing doubt rather than expressing agreement or understanding. I could be wrong.

It was obvious she doesn't realize the Bubble inflation/defaltion is underway and inflation is galloping into our lives. What will trigger it - lame question -...its happening and as been happening for a number of years. That she doesn't understand this indicates she may be qualified to work of CNBC.

Journalists in Canada who don't get that Hard assets are surgiing in value - there are big Political battles going on in Canada - Quebec and Ontario want a piece of the Alberta (large oil and Mineral deposits) gravy train. I'm sure every one that reads Itulip is aware of the change in Taxation for Energy Resouce Trusts.