Wednesday, September 30, 2015

Mish's Global Economic Trend Analysis

Mish's Global Economic Trend Analysis


Obama's "Model for US" Plant Moves to Canada; Mish's Model vs. Obama's Model

Posted: 30 Sep 2015 09:09 PM PDT

Last year, president Obama visited GE's 106-year-old Waukesha, Wisconsin plant.

At the plant, GE builds large piston engines for power and oilfield use that run on natural gas or methane from landfills.

President Obama called the plant "a model for the country." 

This week, GE announced that it will move production to Canada. The move will cost the US 350 manufacturing jobs.

Is Obama's "model" the correct one for the US?

Placing the Blame
Some place the blame for the Manufacturing Move on export financing.
In its latest salvo aimed at persuading Congress to renew the U.S. Export-Import Bank's charter which expired in June, GE will invest $265 million in a new state-of-the-art manufacturing plant at a Canadian location yet to be determined.

In exchange for moving the production from Waukesha, Wisconsin, Export Development Canada will provide financing support for a range of future products, including some still made in the United States.

The announcement stands in sharp contrast to a 2014 visit to the site by President Barack Obama, in which he touted its worker training program as "a model for the country."

"I'd say the workers at Waukesha are the real world casualties in the right-wing fight to close the EXIM Bank," said Frank Larkin, a spokesman for the International Association of Machinists, which represents plant workers.

In recent weeks, GE has announced several deals to locate thousands of new jobs out of the United States following EXIM's closure and to access government export credit from the United Kingdom, France, Hungary and China.

GE Vice Chairman John Rice told Reuters that foreign export credit agencies are "rolling out the red carpet" for the industrial conglomerate, more than tripling the export financing capacity it received under EXIM.
GE Debunks EXIM Theory

GE says those engines are not typically sold with EXIM financing, so let's look elsewhere for the reason. What about the dollar?

Canadian Dollar 2003-2015 Round Trip



The Canadian dollar, frequently referred to as the "Loonie" because of a loon image on a coin, recently had as much as a 10% premium to the dollar. Now the Loonie rests with a 25% discount to the dollar.

Corporate Income Tax to Blame?

Republican Representative James Sensenbrenner, who represents Waukesha and opposes EXIM "in its current form," said in a statement that the manufacturing move was a "sober reminder of the urgent need to stay competitive in the global marketplace" and called for lower corporate tax rates.

GE Pays No Corporate Income Tax

Amusingly, 15 Fortune 500 companies paid no federal income tax on $23 billion in profits in 2014, and they paid almost no federal income tax on $107 billion in profits during the past five years.

Yep, GE was one of those companies.

CBS, General Electric, Interpublic Group, JetBlue Airways, Mattel, Owens Corning, PG&E, Pepco Holdings, Priceline.com, Prudential Financial, Qualcomm, Ryder System, Time Warner, Weyerhaeuser and Xerox all paid no corporate income tax because they move operations and manufacturing to places where foreign income tax collection is low and export tax credits high.

Can corporate income tax be a problem when GE paid none?

Actually, yes.

Right now, the US practically begs corporations to move overseas via high tax rates coupled with numerous foreign loopholes including deferred taxes on investments and profits overseas. Every few years, Congress floats a "repatriation" tax holiday in which businesses bring the cash back to the US tax free.

Mish's Model vs. Obama's Model

Rather than close loopholes like president Obama proposes, I have a better idea: Set the corporate income tax to a flat 0% in the US and something above 0% on US corporate production and profits outside the US.

Watch the jobs come back home in a jiffy.

On a smaller scale, Illinois needs to learn the same lesson. For discussion of the sorry state of Illinois, please see ...


Mike "Mish" Shedlock

CPI and HICP Deflation in Spain Accelerates

Posted: 30 Sep 2015 03:54 PM PDT

After a brief 0.1% rise in inflation in June and July, Spain's National Statistics Institute (INE) estimates the CPI stands at ‒0.9% in September, five tenths lower than that registered in August.



The above is a "flash" reading.

The INE reports Spain's HICP (Harmonised Index of Consumer Prices) a measure that normalizes Spain with the rest of Europe "stands at ‒1.2% [year-over-year]. If confirmed, the annual change of the HICP would have decreased seven tenths as compared to the previous month.".

Spain is Europe's fastest growing economy, but ECB president Mario Draghi is hell-bent on putting an end to deflation.

Of course, we are talking about price deflation, not monetary deflation, not asset bubble deflation, not credit deflation. Central banks and economists alike would be best off not caring one bit about routine price deflation.

Mike "Mish" Shedlock

What if a Tumor Stole Your Memories? Then Years Later, Surgery Restored Those Memories?

Posted: 30 Sep 2015 12:03 PM PDT

I just received a fascinating email today from Demetri Kofinas, Executive Producer of Offline Productions.

Because of a brain tumor, Kofinas went years not knowing what he was saying, where he had been, or what he was doing. For example, he might have said Barack Obama in a sentence when he really meant American actor and filmmaker Denzel Washington.

The condition grew worse over time. New York state and Boston the city could easily be the same, or even reversed on a map. He lost most of his friends as it appeared to them he was on some wildly powerful drugs.

He could not remember anything he was doing or even why he was there. The memories were stored somewhere in his brain, but he could not process information correctly at the moment, nor retrieve those memories later.

Following brain surgery, he was immediately coherent. Over the next few weeks and months all his lost memories came back.

For the whole story, please see Demetri Kofinas' article A tumor stole every memory I had. This is what happened when it all came back.

Those living in New York, may wish to see Twelfth Night, Offline Productions' rendition of a Shakespearean classic.

Mike "Mish" Shedlock

Chicago PMI Unexpectedly Dives to Negative Territory; Production at Lowest Since July 2009; Emanuel's Tax Hikes Will Make Matters Worse

Posted: 30 Sep 2015 10:42 AM PDT

The Chicago PMI is in negative territory, plunging to 48.7 from a prior reading of 54.4 and a Bloomberg Consensus Estimate of 53.6.
Giant swings are common enough for the Chicago PMI which collapsed nearly 6 points in September to a sub-50 reading of 48.7. This indicates slight monthly contraction in the Chicago region's composite activity.

New orders are below 50 as are backlog orders, the latter for an 8th straight month. Chicago-area businesses can't rely on backlogs as much to keep up production which is also under 50 and at a 6-year low. Contraction in prices is deepening.

Recent History Of This Indicator

The Chicago PMI is expected to slow to 53.6 in September from 54.4 in August when delays in shipments gave the index a lift.
Production Plummets to Lowest Since July 2009 

Digging into to the Chicago PMI report we note Production Plummets to Lowest Since July 2009.
The Chicago Business Barometer declined 5.7 points to 48.7 in September as Production growth collapsed and New Orders fell sharply. The drop in the Barometer to below 50 was its fifth time in contraction this year and comes amid downgrades to global economic growth and intense volatility in financial markets which have slowed activity in some industries. The latest decline followed two months of moderate expansion, and while growth in Q3 accelerated a little from Q2, the speed of the September descent is a source of concern.

Three of the five components of the Barometer were in contraction in September with only Employment and Supplier Deliveries above the 50 neutral level. Production led the decline with a sharp double-digit drop that placed it at the lowest since July 2009. New Orders also fell significantly and both key activity measures are running well below their historical averages.
Economist's Comment

Chief Economist of MNI Indicators Philip Uglow said, "While activity between Q2 and Q3 actually picked up, the scale of the downturn in September following the recent global financial fallout is concerning. Disinflationary pressures intensified and output was down very sharply. We await the October data to better judge whether this was a knee jerk reaction and there is a bounceback, or whether it represents a more fundamental slowdown."

Get Me the Hell Out of Here

There is no need to wait to October to understand the trend. A fundamental slowdown is pretty obvious. Illinois and Chicago in particular have huge issues.

Illinois manufacturers are voting with their feet. As noted on August 13, in Get Me the Hell Out of Here ...

Manufacturers in Illinois have had it with tax hikes after tax hikes coupled with the most costly workers' compensation setup in the nation. And businesses are voting with their feet. In July, five firms left Illinois for good. A sixth, Hoist Liftruck, a manufacturer of industrial forklifts, announced plans in August to move more than 300 manufacturing jobs from Bedford Park, Illinois, to East Chicago, Indiana.

I wonder how the economists all missed the slowdown. What the heck are they watching? Or are they still listening to Janet Yellen who insists this is all "transitory"?

Tax Hikes Not The Answer

Tax hikes in the midst of a slump are precisely the wrong thing to do.

Yet, a week ago, Chicago Mayor Rahm Emanuel announced the largest tax hike in history. For details, please see Chicago Tax Collector Hath Arrived With Massive Tax Hike: Emanuel Says "No Stone Unturned ... Not Done Yet".

It will not be just businesses fleeing Illinois, mobile taxpayers will leave as well. And in fact they already have.

As noted by Michael Lucci, Vice President at the Illinois Policy Institute, Food Stamp Growth Outpaces Illinois Job Creation 5-4 During Recovery.

Illinois Food Stamp Usage vs. Jobs

During the recovery from the Great Recession, the Land of Lincoln, alone in the Midwest, had more people enter the food-stamps program than start jobs. Food-stamps growth in Illinois has outpaced jobs creation by a 5-4 margin.



During the recovery, Illinois put more people on food stamps than every other Midwestern state combined.

And After losing 117,000 manufacturing jobs during the recession, Illinois has only regained 17,400 of those factory jobs since January 2010.

Meanwhile, the other Great Lakes states have pulled far ahead of Illinois during the recovery. Michigan has added 135,600 manufacturing jobs, Indiana has added 80,400, Ohio has added 74,500 and Wisconsin has added 48,700. 

Illinois Plans to Make Matters Worse

Illinois sheds manufacturing jobs and gains food stamp recipients. High taxes, a very poor business climate, especially Worker's Compensation procedures, are precisely to blame.  So is inadequate pension funding and untenable pension promises.

Illinois needs reform, especially on pensions and a slew of business climate changes. Yet Emanuel and the "progressives" think higher taxes and higher food stamp benefits are the solution.

Rather than fix fundamental problems in the public union sector, Emanuel plans to leave no stone unturned when looking for additional revenue. What more do businesses in the Chicago area need to hear to decide to leave?

Six corporations left in July and August, yet economists are surprised by the plunge in activity.

Millennials will bear the brunt of these poor decisions. So I ask, Question to Millennials: Why Are You Not Mad as Hell Yet?

Mike "Mish" Shedlock

Read More ..

Tuesday, September 29, 2015

Mish's Global Economic Trend Analysis

Mish's Global Economic Trend Analysis


Food Stamp Growth Outpaces Illinois Job Creation 5-4 During Recovery

Posted: 29 Sep 2015 07:17 PM PDT

Congratulations (of sorts) once again go to Illinois, the only state in the Midwest where SNAP (food stamp) growth outpaced job creation during the recovery. SNAP stands for Supplemental Nutrition Assistance Program, renamed from "food stamps" so as to not sound so derogatory.

What follows is a guest post from Michael Lucci, Vice President of Policy for the Illinois Policy Institute.

Illinois' dismal business climate continues to inhibit jobs growth, especially in manufacturing, as the state put 25 people on food stamps for every factory job created during the recovery from the Great Recession. Illinois is the only state in the Midwest to have added more people to food-stamp rolls than to employment rolls during the recovery from the Great Recession. Job losses from the Great Recession occurred from January 2008 to January 2010, and since then, states have had five-and-a-half years of recovery.

During the recovery from the Great Recession, the Land of Lincoln, alone in the Midwest, had more people enter the food-stamps program than start jobs. Food-stamps growth in Illinois has outpaced jobs creation by a 5-4 margin.



In every other Midwestern state, jobs growth has dramatically outpaced food-stamps growth during the recovery. In fact, in every other state in the region, jobs growth dwarfs food-stamps growth. But during the recovery, Illinois put more people on food stamps than every other Midwestern state combined.



Manufacturing has borne the brunt of Illinois' policy failures. From the state's broken workers' compensation system, to the highest property taxes in the region, to the lack of a Right-to-Work law while surrounding states enact Right to Work, Illinois has the worst policy environment in the Midwest for manufacturers.

The result for Illinois factory workers? The Land of Lincoln has put 25 people on food stamps for every manufacturing job created during the recession recovery.



And the recovery that Illinois' manufacturers have experienced has been especially anemic. After losing 117,000 manufacturing jobs during the recession, Illinois has only regained 17,400 of those factory jobs since January 2010. Meanwhile, the other Great Lakes states have pulled far ahead of Illinois during the recovery. Michigan has added 135,600 manufacturing jobs, Indiana has added 80,400, Ohio has added 74,500 and Wisconsin has added 48,700.



Illinois' lack of jobs growth, especially in blue-collar industries, has driven more and more Illinoisans to dependency on government, while residents of the other Great Lakes states join the ranks of the employed and leave the food-stamps program. Michigan surpassed Illinois in 2014 for manufacturing jobs created, while Illinois has surpassed Michigan for the percentage of residents on food stamps. Illinoisans depend on food stamps more than do the residents of any other state in the region.




Illinois' slow jobs growth and increased government dependency – particularly when contrasted with the success of its neighbors – demonstrate the importance of Gov. Bruce Rauner's Turnaround Agenda, which addresses Illinois' top economic reform needs. Those include:


Illinois needs reform in many areas, including government-worker pensions, fair election maps and term limits for politicians. But Illinois must start with turning around the state's economy to facilitate more opportunities for jobless Illinoisans, and more tax revenues from increased growth. Rauner's Turnaround Agenda would put Illinois on the path toward responsible budgets, improved jobs growth and decreasing government dependency.

Michael Lucci, Vice President, Illinois Policy Institute

Mish Comment: Mayor Rahm Emanuel's "progressive" answer is to seek the biggest tax hike in history. Emanuel plans to leave no stone unturned when looking for revenue.

For details, please see Chicago Tax Collector Hath Arrived With Massive Tax Hike: Emanuel Says "No Stone Unturned ... Not Done Yet"

Mike "Mish" Shedlock 

Spain's Secessionist Party Leaders to be Charged with "Act of Disobedience"

Posted: 29 Sep 2015 11:54 AM PDT

In the wake of a parliament-majority win by independence parties in last Sunday's Catalonia region election, the strike-down of dissent by Madrid continues.

The Financial Times reports Secessionist Party Leaders to Appear in Court Over Role in Breakaway Vote.
Catalan president Artur Mas will have to appear as a formal suspect in court next month over his role in organising a non-binding independence vote last year that was fiercely opposed by Spain.

Tuesday's announcement comes just two days after a closely watched election in the Spanish region that saw Mr Mas and other pro-independence leaders win a majority of seats in the Catalan parliament.

The two secessionist parties, Mr Mas's Junts pel Si and the far-left CUP, argue the result gives them the mandate to break Catalonia out of Spain in the next 18 months.

The judicial move against the Catalan president is likely to further inflame tensions between the Spanish government and the regional government — and was immediately denounced by Catalan leaders as a political stunt.

Mr Mas and his colleagues are under investigation for committing an act of disobedience, which under Spanish law carries a sentence of up to 12 months in jail.

The news sparked sharp criticism from political leaders in Catalonia, many of whom accused the Spanish government of using the judicial system for political purposes.

Apart from the Catalan president, Irene Rigau, a regional minister, and Joana Ortega, the former vice-president of Catalonia, will also appear in court. All three have been declared formal suspects, a status that means they are just short of being formally charged.
Contamination

Spain's justice minister Rafael Catalá said that the decision to declare Mr. Mas a formal suspect had been taken after, not before, Sunday's regional election, in an effort not to "contaminate" the democratic process.

If "contaminate" means "to not provide an even bigger majority for the secessionists", I can accept the justice minister's statement.

Big independence battles are just around the bend. Catalonia has about 16 per cent of the Spanish population and about 20 percent of the national economy.

Mike "Mish" Shedlock

Striking Weakness in Home Prices

Posted: 29 Sep 2015 09:33 AM PDT

For the third month in a row, the Case-Shiller 20-city seasonally adjusted home price index declined. Last month was revised lower. Economists were surprised.

The Bloomberg Econoday Consensus was for a month-over-month rise of 0.1%, instead prices declined by -0.2%.
Case-Shiller is reporting what is becoming striking weakness in home prices, at -0.2 percent in July for the adjusted 20-city index which, after a downward revision to June, is the third straight 2 tenths decline. Twelve of 20 cities show contraction in the month with the deepest for a third straight month in a row coming from Chicago at minus 1.2 percent. Year-on-year readings are all still positive led by San Francisco at plus 10.4 percent with Washington DC at the bottom at 1.7 percent.

Year-on-year, the 20-city index, whether adjusted or unadjusted, is at plus 5.0 percent vs 4.9 percent in July. The unadjusted month-to-month index, reflecting summer strength in home sales, was up 0.6 percent in August for however the weakest reading since the winter weather of February.

This report is very closely watched and offsets last week's gain for FHFA prices which are trending slightly higher than Case-Shiller. Home sales have been mixed this year with existing homes showing strength through most of the year but weakness in the latest report and vice versa for new homes which had been weak but have since popped higher. Lack of home-price appreciation is a negative for household wealth and spending and may be another symptom of general price weakness.
Case Shiller 20-City Index



Year-over-year comparisons have held stable at 5% in spite of month-over-month declining prices because of easy comparisons. Year-over-year comparisons will be increasingly difficult in the upcoming months.

Mike "Mish" Shedlock

Read More ..

Monday, September 28, 2015

Mish's Global Economic Trend Analysis

Mish's Global Economic Trend Analysis


Question to Millennials: Why Are You Not Mad as Hell Yet?

Posted: 28 Sep 2015 11:11 PM PDT

Millennials, why are you not angry about ...

  1. Having to pay Social Security when it won't be there for you.
  2. Paying exorbitant taxes for public pension handouts and boomer retirements at age 50 for which you receive negative benefits.
  3. Obamacare for which you overpay to support the obese and the nicotine addicts.
  4. Enormous student debt burdens for which you received little benefit.

I ask this in response to an email I received from Rich Renza who writes ...

Hello Mish
I'd like to introduce myself as a school teacher and an avid reader of your blog since 2006. I have never left a comment, but I have been reading Global Economic Analysis on a daily basis since I stumbled upon it shortly after selling a condo here in South Florida. Your analysis of the real estate bubble was spot on and aside from your astute analysis, I appreciated how you took complex economic topics and made them much easier to comprehend. Your blog was quickly added to my favorites on my home and school computer and even though I do not have a strong background in economics, it became a daily read.

As a history and mathematics teacher, I took an interest in your coverage of many topics that potentially affected my students. When you wrote about trends that I felt that I could discuss with my (8th grade) students I did. My class has enjoyed spirited discussions on the cost of college tuition, oil prices, the negative impact of the Federal Reserve and the advent of self-driving cars, thanks to your blog.

I took special notice of your blogs regarding issues that Millennials were facing, such as stagnant wages, student loan debt and delayed family formation. Since I began teaching in 2001, I've worked with several thousand students and have witnessed my high school graduates attempt to deal with these challenges. Through the classroom, my impact is limited only to the students that I personally come in contact with.

This motivated me to write an e-book that focuses on Social Security from the perspective of younger Americans. During my research, I often cited your posts on employment, Millennial trends, housing statistics and autonomous vehicles to support my key arguments.

As you know, most Millennials do not believe that they will receive any benefits from Social Security when they retire. Many are confused and disgusted that they are being taxed into a program that will not serve them. My belief is that all Americans deserve the right to choose to opt-out of participation in the Social Security program by discontinuing their payroll tax contributions, if they so desire.

I have created a site and blog, Take Back Your Six Percent to organize young Americans to pressure politicians to allow them the right to opt-out. My e-book, "How Are You Not Angry Yet" is about How Social Security is Destroying the Futures, Finances and Hopes of Generations X, Y and Z and How We Can Put an End To it. It breaks down the complex topic of Social Security in a slightly humorous way that most readers can easily understand.

The bottom line is that your blog, in part, inspired my e-book. Your work motivated me to write even when I worked a second job at night to supplement my teaching income. The amount of effort and detail that you put into each post raised the expectations that I had for my own work. I can honestly say that you inspired me to do better in my life. Thank you for that.

Thank you for your time,

R.J. Renza, Jr.
Renza was recently on a debt Dialogues podcast at the Ayn Rand Institute.

The podcast can be played at Social Security Debt Dialogues.

Mad As Hell

I have not yet read Renza's e-book, so I cannot endorse it. But I can say the notion that millennials overpay and under receive is a valid one.

For years I have been wondering when millennials as a generation will reach this "Not Going to Take It" point.



We will not see change until millennials get mad enough to change conditions.

Related Articles


Mike "Mish" Shedlock

#1 Reason Stocks are Declining; Is Hillary to Blame for Biotech Smash?

Posted: 28 Sep 2015 03:01 PM PDT

In the wake of yet another big market selloff (biotechs down over 6% today), the Nasdaq 100 index down 2.87%, and the S&P down 2.56%, mainstream media parrots floated numerous reasons behind the selloff.

All of the parrots are wrong.

Lack of Inflation?

Bloomberg interviewed Jeff Korzenik, Fifth Third Bank's chief strategist in its piece What's Really Driving Today's Selloff in U.S. Stocks?.

In the accompanying video, Korzenik blamed the Fed and a "lack of visible inflation".

In the same video segment, Jamie Dimon bragged about the strength of the US economy and the health of the US consumer. As long as a bubble is expanding, things always look good.

Of course the idea that inflation is a benefit to stocks and the economy is preposterous, but that's what puppets have been trained to believe, and say. 

China to Blame?

Reuters writer Noel Randewich says Wall Street Drops as Anxious Investors Eye China.

"U.S. stocks finished sharply lower on Monday and were on track for their worst quarter in four years as investors worried about the health of China's economy and its potential impact on the timing of a U.S. interest rate increase."

Is Hillary to Blame for Biotech Smash?

Reuters writers Ransdell Pierson and Bill Berkrot say Democrats Take Aim at Drug Prices, Prompting Sharp Drops in Biotech Stocks.
Democratic lawmakers on Monday attacked "massive" price increases of two heart drugs from Canada's Valeant Pharmaceuticals International Inc, fueling a rout in drugmaker shares on worries of a government and insurer clampdown on U.S. drug prices.

The Democratic House members also urged panel Chairman Jason Chaffetz, a Republican, to invite Valeant Chief Executive Michael Pearson to testify at a hearing next week. That would put him in the same hot seat as Martin Shkreli, chief executive officer of privately held Turing Pharmaceuticals, who had already been called to testify.

Tiny Turing has been widely criticized for a price hike of more than 5,000 percent for its Daraprim treatment for a dangerous parasitic infection.

Clinton on Monday called on Turing to roll back the $750 price to its original $13.50.

Clinton last week unveiled a plan that includes a $250 monthly cap on out-of-pocket costs for prescription drugs; it would allow the Medicare plan for the elderly to negotiate drug pricing, and permit Americans to buy drugs more cheaply from other countries.

"(Stock) selling hasn't really stopped since Hillary Clinton made her comments last week on Monday," said Jeff Jonas, a portfolio manager with Gabelli funds. "The Democratic committee members would certainly continue that trend that Hillary started."
Biotech Sector Daily



That looks pretty ominous. But let's put a proper perspective on things.

Biotech Sector Weekly



History suggests the recent selloff is just a start of a correction. Charts like those above smack of bubbles, and bubbles typically do not deflate in an orderly manner.

#1 Reason Stocks are Declining

To paraphrase Bill "It's the economy, stupid" Clinton, I suggest "It's the valuations, stupid."

Valuations are well beyond absurd. Many biotechs won't ever make a dime. And it's not just biotechs. Most market segments have absurd valuations.

The market is starting to care, a reflection of a change in sentiment. Hillary's statements may have been a catalyst for a sentiment change, but most likely she merely goosed sentiment that had already changed.

Not to Blame

  • China is not to blame.
  • Hillary is not to blame.
  • Fed hikes are not to blame.

To Blame

Rate hike discussion is not to blame.

However, the Fed itself is to blame for creating the loosey-goosey conditions that fostered a bubble in equities and junk bonds.

The Fed will now have to deal with yet another asset bubble crash (they don't even see coming). Price deflation the Fed foolishly attempted to defeat, is now more likely than ever.

Price deflation never was, nor ever will be, an economic problem. Asset bubbles are always a problem. The Fed still has not figured this out. Thanks to group think, the Fed never will figure this out.

Bubble Debate

For more on bubble valuations and why I expect negative real returns for 7-10 years, please see Bubble Debate; Equity Allocations vs. Shiller PE; Simple World.

Mike "Mish" Shedlock

Self-Driving "WEpod" Shuttles Hit the Road in Europe; Autonomous Car Updates

Posted: 28 Sep 2015 11:41 AM PDT

This November, in the Netherlands, the WEpod six-person passenger van, will become the world's first self-driving vehicle in regular traffic, where cars and trucks also go.


The WEpod can be booked using an app which will allow passengers to reserve a seat and specify their starting points and their destinations. Vehicles are expected to select their itineraries independently.

The electric pod was originally designed by French vehicle manufacturer and robotic specialists EasyMile. It was developed for Citymobil2, an EU-funded project looking at automated road transport systems across urban Europe.

Through Citymobil2, the electric driverless shuttles have already transported 19,000 passengers in Vantaa, Finland and carried passengers on the EPFL university campus, in Lausanne, Switzerland.

The vehicles will initially ride on a fixed route, but it is expected to expand to more routes and other regions in the Netherlands from May 2016 onwards.
Test Phase

The test phase will be on real streets and roads, but not during rush hour. The WEpods will have additional equipment such as cameras, radar, laser and GPS to track the environment.

The maximum initial speed of a WEpod will be a painfully slow 25 kilometers per hour (15.53 miles per hour).

I suspect that may be too slow for safety reasons, not too fast.

Regardless, this will all be worked out soon enough.

Audi on Highway

Looking for highway tests? Then check this out.



Link if video does not play: Audi's Self-Driving Car in Action.

Cars Guide reports First Self-Driving Audi Due in Two Years.



Please note this is 2015. Some people keep telling me that my target of 2020 is way too soon. I still have some Neanderthal readers who insist it will not happen until 2050, if at all.

In limited fashion, it's happening now (November 2015 to be more precise), on real streets, with no standby driver.

Autonomous passenger cars on the US highways by 2020 now seems like a certainty. And millions of truck driving jobs will vanish by 2025.

Mike "Mish" Shedlock

Dallas Fed Region Activity Bad as Expected

Posted: 28 Sep 2015 10:12 AM PDT

The Dallas Fed Manufacturing Survey was as bad as expected in relation to Bloomberg Econoday Consensus of -9.0.
The Dallas Fed rounds out a full run of negative indications on the September factory sector with the general activity index remaining in deeply negative ground at minus 9.5. New orders are at minus 4.6 which, however, is an 8 point improvement from August. Production is actually in positive ground at 0.9.

Other readings include a decline in the workweek and the fifth straight contraction for employment. Price readings show little change for inputs but, like other reports, contraction for finished prices.

The Texas economy has been depressed all year by the energy sector while the nation's factory sector continues getting hurt by weak foreign demand and strength in the dollar.
Additional Details

Here are some additional details from the Dallas Fed Survey.
Texas factory activity was essentially flat in September, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, remained near zero (0.9), suggesting output held steady for a second month in a row after several months of declines.

Other indexes of current manufacturing activity increased in September, but some remained in negative territory. The new orders index posted a second negative reading but rose 8 points to -4.6, and the growth rate of orders index also remained below zero but rose to -4.3. The shipments index pushed to around zero from -3, and the capacity utilization index posted its first positive reading in eight months, coming in at 4.9.

Perceptions of broader business conditions remained weak in September. The general business activity index, which has been negative all year, rose 6 points to -9.5. The company outlook index plunged to -10.3 in August but recovered somewhat this month, climbing to -5.2.

Labor market indicators reflected employment declines and shorter workweeks. The September employment index posted a fifth consecutive negative reading, falling to -6.1. Twelve percent of firms reported net hiring, while 18 percent reported net layoffs. The hours worked index fell markedly from 0.6 to -11.1, suggesting a decline in workweek length from August.

Price and wage pressures were mixed in September. The raw materials prices index came in near zero—suggesting stable input prices—after a -8 reading last month. The finished goods prices index remained negative at -10.9, although it was up from a multiyear low of -15.7 in August. Meanwhile, the wages and benefits index remained positive but edged down to 15.6.
Mike "Mish" Shedlock

Read More ..

Sunday, September 27, 2015

Mish's Global Economic Trend Analysis

Mish's Global Economic Trend Analysis


Refugees Shop for Best Handouts and Climate; Disgruntled Migrants Decide "Finland's No Good"

Posted: 27 Sep 2015 06:07 PM PDT

Beggars can be choosy. And they are. For example, many refugees whine 'Finland's No Good', because of the cold.
Hundreds of predominantly Iraqi migrants who have travelled through Europe to reach Finland are turning back, saying they don't want to stay in the sparsely-populated country on Europe's northern frontier because it's too cold and boring.

Migrants have in recent weeks been crossing back into Sweden at the Haparanda-Tornio border just an hour's drive south of the Arctic Circle, and Finnish authorities have seen a rise in the number of cancelled asylum applications.

"You can tell the world I hate Finland. It's too cold, there's no tea, no restaurants, no bars, nobody on the streets, only cars," 22-year-old Muhammed told AFP in Tornio, as the mercury struggled to inch above 10 degrees Celsius (50 Fahrenheit) on a recent blustery grey day.

He had already travelled from Tornio to the capital Helsinki almost 750 kilometres (465 miles) south, and then back up to the Tornio border again to return to Sweden.

Another group of around 15 Iraqi refugees waiting at the bus station that Tornio shares with its Swedish twin town Haparanda also said they wanted to go back to southern Sweden.

"Finland is no good," the men echoed each other.
Reader Blair who sent me the link commented: "So, the search continues, by those whose lives were in grave danger, for free services... in a nice climate... with a lively social scene."

Mike "Mish" Shedlock

Catalan Separatist Parties Victorious, Unprecedented Voter Turnout

Posted: 27 Sep 2015 01:28 PM PDT

The showdown in Spain between the independence parties and Madrid is sure to heat up following today's elections.

Here is a link to the Live Vote Totals.

With 70% of the vote counted, the parliament totals look like this:



In terms of popular vote, it appears the separatists will fall short of an absolute majority. Separatists will get about 47% of the popular vote.

Pro-Independence Rally on Friday



Above image from Financial Times.

Current totals show prime minister Mariano Rajoy's conservative Popular party is going down in a crushing defeat with only 8.46% of the vote.

Mike "Mish" Shedlock

Total Lunar Eclipse September 27-28: Where to See It, How to Photograph It

Posted: 27 Sep 2015 11:57 AM PDT

There is a Total Lunar Eclipse tonight visible of most of the US. You may want to watch it. The moon will likely appear strong red or orange, giving the name "blood moon".



click on table for sharper image

The Penumbral phase is weak and not easily seen so you may wish to observe it at other times.

Photographer Michael Frye took a time series of the Lunar Eclipse Over the Trona Pinnacles last April.



I missed that eclipse because it totally clouded up here. I will likely miss the one tonight because of clouds.

If your mission is to photograph the the moon, see the above article and also his article Photographing the Lunar Eclipse.



Oak tree and lunar eclipse sequence, December 10, 2011, Sierra foothills, California. ©Michael Frye

Michael Frye is one of the best, if not the best landscape photographer in the US.

I highly recommend his PDF ebook Landscapes in Lightroom: The Essential Step-by-Step Guide.

If you are a photographer using Lightroom, regardless of where you live, please do yourself a favor and get his book, recently updated to include new Lightroom 6 and Photoshop CC features including HDR Merge and the Panorama Merge.

Mike "Mish" Shedlock

Read More ..

Saturday, September 26, 2015

Mish's Global Economic Trend Analysis

Mish's Global Economic Trend Analysis


How US Corporations "Cooperate" With China; Xi’s China: A Place Called Hopelessness

Posted: 26 Sep 2015 06:12 PM PDT

In response to Why I'm Never Going to "Two-Bit" China an anonymous reader sent links to a video on how US companies are forced to cooperate with China and an article on "Xi's China" from the Daily Beast.

Both may be a bit over the top, or not, in the eyes of the viewer. Let's start with the video from China Uncensored.

China Tells US Tech Companies to "Cooperate"



Xi's China: A Place Called Hopelessness

Next please consider  Xi's China: A Place Called Hopelessness
As China's President Xi Jinping visits the United States this week, Americans will have little sense what it's like for his people back home. His top internet censor, Lu Wei, organized a technology summit in Seattle earlier this week.  Alibaba's Jack Ma and Apple's Tim Cook have been in tow, in addition to other tech giants. After a round of diplomatic pomp in Washington D.C., President Xi will address the United Nations General Assembly in New York on Monday before returning to Beijing in time for National Day celebrations at home. His message will be of success in the present and for the future.

Ask the ant tribe. They're educated, young professionals who live in near-poverty conditions, grinding away at soul-crushing jobs—not careers—that yield no personal satisfaction and zero financial growth. Typically from rural areas, most have settled in northwest Beijing, where their living quarters are cramped and they have no personal space. They're smart, they work hard, yet receive no recognition and can't shake off anonymity. So, people call them ants.

This year, nearly 7.5 million fresh Chinese university graduates entered the workforce, or attempted to. But because of the massive influx of new labor, increased year on year, competition has become cutthroat even as salaries have fallen, in some cases, lower than the wages received by factory workers. Cost of living continues to increase in tier-one cities, and prospects for members of the ant tribe eventually to own their own houses are slim. "I'll never be able to get married and provide for a family. I feel like I'll always be stuck in these six square meters," groaned Xiao. Rent is ¥1300, or about US$200, a month. That may not seem like much, but after other expenses, most of Xiao's ¥3,300 ($520) paycheck is gone.

In the fantasy world that the Chinese Communist Party has created for its revised history books, the state takes care of every citizen. But the ant tribe knows firsthand that this is not the case. Calling the Chinese president by his nickname, Xiao said, "Xi Dada says the youth are this country's future, but most of us don't have any opportunities. We graduated from university but there aren't any jobs available to us, at least not in the subjects we studied."

Xi Jinping's crusade against corruption has "swatted flies" and "hunted tigers," who conveniently are the Chinese leader's political enemies. China's millionaires can't leave the country fast enough. China's rural areas have a gaping security vacuum; forced demolitions, evictions, and land seizures still take place frequently, at times with deadly results. Soon, the CCP will begin transforming 82,000 square miles of land around Beijing into a megacity that's about the size of Kansas, and it will hold over 100 million people, or more than one-third of America's population. What will the ant tribe look like when that time comes? What does it mean for Chinese society when routine overtakes imagination, if it hasn't already?
China is hardly the miracle its proponents make it out to be. And it's system of government outright sucks.

Make statements like that in China and you will get arrested, or worse.

Mike "Mish" Shedlock

How Long Will Janet Yellen Last as Fed Chair? Fed Declines to Comment on Her Health, I Will

Posted: 26 Sep 2015 12:43 PM PDT

Fed Chair Janet Yellen's health is in question after she could not read her prepared text in a lecture on inflation last Thursday.

About 50 minutes into her speech, she paused for about 25 seconds, then repeated phrases and missed words.

MarketWatch reports Yellen Stumbles Towards End of Speech at Amherstt. 

Yellen Video #1



Fed Declines to Comment

The Wall Street Journal reports Fed Declines to Comment on Yellen's Health
The Fed chairwoman, 69 years old, faltered roughly 50 minutes into a lecture on the economy and inflation Thursday at the University of Massachusetts Amherst. She stumbled over her prepared text, paused for long stretches several times, missed and jumbled some words in the text, and coughed before concluding her speech and leaving the stage.

The Fed spokeswoman, Michelle Smith, on Thursday said Ms. Yellen "felt dehydrated at the end of a long speech under bright lights" and was seen by emergency medical technicians as a precaution, but "felt fine afterward" and attended a dinner on campus.

Bloomberg News reported Ms. Yellen appeared fine after her dinner and flew back to Washington on Friday from Hartford, Conn., telling fellow passengers at the airport that she felt better. "I look good now, don't I?" she said, according to the news outlet.
Yellen Video #2 - Close Up



Claim Investigation

Inquiring minds may wish an investigation of Yellen's claim "I look good now, don't I?"

Here is a sample of recent images from which readers can judge.



It's Better to Look Good Than Feel Good

Yellen says she looks good. And you know what they say.



Link if video does not play: "Fernando's Hideaway"

Let's be honest. Yellen looks God awful. She is 69 but looks 80. There is a load of pressure on the Fed Chair, and I highly doubt she can last another year.

How many rate hikes will she get in before she steps down for health reasons? Any?

By the way, the Fed has not hiked in 20 years in any year in which the stock market was negative year-over-year at the time.

Mike "Mish" Shedlock

Read More ..

Friday, September 25, 2015

Mish's Global Economic Trend Analysis

Mish's Global Economic Trend Analysis


Herman Stekler Award for Bold, Inaccurate Recession Forecasting: 2015 Lakshman Achuthan of ECRI; Mish 2016?

Posted: 25 Sep 2015 12:59 PM PDT

I received a nice email today from Prakash Loungani. He gave a presentation at the Federal Forecasters Conference yesterday. His presentation was on the inability and unwillingness for forecasters to predict recessions.

Loungani says that to get forecasters to predict recessions (even inaccurately) we should have a Stekler Award for Courage in Forecasting. The award would be in honor of noted forecaster Herman Stekler who has always insisted that forecasters should predict recessions early and often and that he himself has predicted 9 of the last 5 recessions.

The 2015 award would go to Lakshman Achuthan of ECRI, who called for a U.S. recession in 2012 in September 2011. ECRI recently admitted that the call had been a false alarm but gave a detailed and useful explanation for why it made the call.

I am in the running for the 2016 award because in January, I predicted that Canada and the U.S. would slip into recession this year.

The slides are quite funny.



Click on the right and left arrows, not the down arrow.

Link if slideshow does not play. Herman Stekler Award for Inaccurate Recession Forecasting

Related Links


Mike "Mish" Shedlock

Market Rallies then Fades on News Yellen Expects Hikes This Year; Futures Still Imply No Hikes

Posted: 25 Sep 2015 12:16 PM PDT

Stocks Rallied a bit today on news that Yellen still expects a hike this year, but have since given up those gains.

S&P 500 10-Minute Chart



Reuters reports Wall Street Up on Yellen Comments; Health Stocks Drag Nasdaq
U.S. stocks were higher in early afternoon trading on Friday after Federal Reserve Chair Janet Yellen said she expects interest rates to be raised this year, easing concerns about slowing global growth and prompting a rally in bank shares.

However, the continuing selloff in health stocks and a drop in Google's shares due to a regulatory investigation limited gains on the Nasdaq.

Yellen said on Thursday that the Fed does not expect recent global economic and financial market developments to significantly affect its policy.
If the above chart holds the story after the closing bell will look like this: "Wall Street Down on Yellen Comments".

Futures Still Imply No Hikes

A quick check of CME Fedwatch shows the Fed Fund Futures gave a big yawn to the notion Yellen is going to hike.



Fed fund futures did not change a bit. The CME still has the probability of a hike at 35%.

Bear in mind, those odds reflect a quarter point hike. I am of the opinion the Fed will hike in eighths, or possibly quarter point ranges starting not with a hike from the current 0%-.25% to .25%-.50%, but rather a hike to the range .125%-.375%.

That of course assumes the Fed will hike at all. If Yellen wanted to convince the market she was going to hike, she should not have given the market a litany of 10 reasons the Fed did not hike at the last meeting.

Mike "Mish" Shedlock

Tracking the Implosion of Brazil; Be Careful of What You Wish; Perfect Storm; Email from Brazil; More Intervention Madness

Posted: 25 Sep 2015 02:16 AM PDT

Perfect Storm

Reader Lucas from Brazil writes about the "perfect storm".
Hello Mish

Brazilian interest rates are skyrocketing. Rates went up more than 2 percentage points in a month. Bond trading was suspended due to the quick devaluation.

Nobody is talking much about it, but energy corporation Petrobras is down 95% from the peak (in dollars). They have a high dollar exposure, and some estimates say that since June, Real devaluation alone was responsible for a +R$100B increase in debt.

Brazil's majors oil investments are in (really) deep water drilling, and they may be not worthy anymore. Petrobras debt is now equivalent to 8% of the whole country GDP.

And while. our president doesn't have support to do anything.

It's a perfect storm here.

Lucas
Petrobras



In classic bubble action, shares of Petrobas went from $4 to $77 back to $4. Executives no doubt, cashed out at every opportunity.

Brazil Real



The Brazilian Real went from 1.6 to the US dollar to 4.1 to the US dollar. That's a decline of about 54% .

Brazil 1-Year Government Bonds



Since 2007, the yield on 1-year Brazil government bonds went from just over 7% to over 16%.

Flashback March 2012

Please note the inserts on the second two charts. I highlighted the March 2012 candle because that's when Brazil Declared New Currency War on US and Europe.
"When the real appreciates, it reduces our competitiveness. Exports are more expensive, imports are cheaper and it creates unfair competition for businesses in Brazil," said Guido Mantega, the finance minister who was the first to use the controversial term "currency war" in 2010.

President Dilma Rousseff later weighed in on the debate, vowing to defend Brazilian industry and stop developed countries' policies from causing the "cannibalisation" of emerging markets.

The move comes as Brazil's central bank also steps up direct intervention in the market, selling dollars and offering derivatives called reverse currency swaps to curb the real's near 9 per cent surge against the US dollar this year.
Be Careful of What You Wish

It was just a few short years ago that Brazil was bitching about the strength of the Real. Brazil got its wish.

More Intervention Madness

On Thursday, we learned Brazil Real Mounts Biggest Rally in 7 Years on Intervention Suggestions
The Brazilian Real rallied nearly five percent Thursday following statements by the country's central bank president, which stated that he will explore the use of foreign exchange (FX) reserves to defend the currency against persistent declines versus the US Dollar. Brazil Central Bank (BCB) President Alexandre Tombini mentioned that different options will be used to stabilize the currency. Options that may be employed include swap contracts and dollar repurchase agreements.
What If Intervention Fails?

One day proves nothing.

I have a simple question for Brazil: What if intervention fails?

If Brazil blows all of its reserves defending a pseudo-peg that cannot be maintained, it will find itself in very dire straits. Untenable currency prop jobs are the way to ruin.

Ask Argentina; Ask Russia; Ask China who recently tried and failed to prop up its stock market. Heck ask Switzerland who recently had to abandon its peg to the euro.

The only thing that will stabilize the Real is sound economic policy and a stable government.

Until then, there is no question. Intervention "will" fail.

Mike "Mish" Shedlock

Read More ..