Mish's Global Economic Trend Analysis

Australia Services Index Plunges to Significant Contraction; Bleakest of Views From Retail Shops; Retail and Housing Bloodbath Coming Up
Ron Paul on Face the Nation Blasts Rush Limbaugh's Insincere Apology, Santorum's Fake Conservatism, Government Mandates; Rooting for Santorum; 10 Things That Should Be Clear
Super Tuesday Delegate Rules and Preview; Brokered Convention Revised Math

Australia Services Index Plunges to Significant Contraction; Bleakest of Views From Retail Shops; Retail and Housing Bloodbath Coming Up

Posted: 04 Mar 2012 05:54 PM PST

Two more signs surfaced today that suggest Australia is headed for if not in recession.

Australia Services Index Plunges, Now in Contraction

Bloomberg reports Australian February Services Fall to Lowest in Almost a Year

Australia's services industry declined in February to the lowest level in almost a year, driven by a drop in new orders as the gap between resources and other industries widens, a private survey showed.

The performance of services index sank to 46.7 last month from 51.9 in January, the weakest reading since March last year, Commonwealth Bank of Australia and the Australian Industry Group said in Sydney today. Fifty is the dividing line between expansion and contraction.

Today's report, based on a poll of about 200 companies, is similar to the U.S. non-manufacturing ISM index.

Australia Service Index Components

Index sank to 46.7 from 51.9
Selling prices fell to 44.2 from 46.9
Employment measure slid to 47.5 from 51.2
Sales declined to 47.5 from 49.4
New orders plunged to 45.6 from 54.1
Wages indicator dipped to 57.7 from 57.8

This is nothing short of an absolute disaster. That wages have held up is not good news either. Think retailers or any other service industries will be hiring? If so, think again.

Bleakest of Views From Retail Shops

The Herald Sun comments on the Bleakest of views from the shopfronts.

THE Australian retail sector is in trouble like it's never been before. Not even in the dark days of the 1990 recession.

That should have been made blindingly clear when Woolworths, our biggest and most successful retail group, unveiled on Thursday its first drop in profit in nearly 20 years.

Yes, Woolies is getting out of electronics because it stuffed up with Dick Smith.

This story is repeated, with varying degrees of intensity, across all retail.

The casualty list is long and growing. From women's fashions - one of the mainstays of shopping - to housewares and home furnishings, to the big department stores.

Sales are struggling, profits are plunging, jobs are being slashed and names are disappearing from high streets and shopping centres.

The article concludes with complete economic drivel...

The numbers from the big listed retailers, such as Harvey Norman and David Jones, are ominous enough. We are not really seeing the havoc wreaked across small mum-and-dad retailing.

Lower interest rates would help, leaving more money in consumers' pockets.

That's why it's not wise to rule out further rate cuts, just because of the continued boom in the resources sector.

The jobs and spending from the boom, at least, put some floor under retail. But for the foreseeable future it's going to be good for shoppers.

Not so good for shopkeepers. Or the broader economy.

Retail and Housing Bloodbath Coming Up

There is so much misguided drivel in the article that I hardly know where to start.

Here is some nonsense about a shopper's sweet spot: "For shoppers, it's something of a sweet spot. They've never had it so good. The $100 you spend in a supermarket buys you about 5 per cent more in goods than it did a year ago."

Retail prices in Australia are absurd. A 5% reduction in prices is hardly a bargain. As for the notion mining will carry the economy, forget about it. Commodity prices are going to plunge, and besides, commodities are not a big driver of jobs anyway.

There is no "floor" under retail. The bottom is going to fall out, and unemployment is going to soar. In turn, rising unemployment will clobber Australia's already deep-in-trouble housing sector.

As for small shops, they are completely doomed. Store owners with little leeway on wages will not get the income they need to pay taxes, interest, utilities, and rent.

Expect an across the board retail and housing bloodbath because one is coming.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

Ron Paul on Face the Nation Blasts Rush Limbaugh's Insincere Apology, Santorum's Fake Conservatism, Government Mandates; Rooting for Santorum; 10 Things That Should Be Clear

Posted: 04 Mar 2012 03:27 PM PST

Ron Paul was on Face the Nation today discussing Rush Limbaugh, Rick Santorum, and Government Mandates.

CBS News reports Paul: Limbaugh apologized for personal gain.

Republican presidential candidate Rep. Ron Paul said an apology by conservative talk radio host Rush Limbaugh to Georgetown Law student Sandra Fluke for calling her a "slut" and a "prostitute" was not sincere, and was made only because it best served Limbaugh.

"He's doing it because some people were taking their advertisements off of his program. It was his bottom line he was concerned about," Paul said.

Paul referred to three companies that pulled advertisements from Limbaugh's show following incendiary remarks Limbaugh made about Fluke for testifying before a mock Congressional committee in favor of free contraception insurance coverage at Georgetown, a Jesuit university. [One company's spokesman said that Limbaugh's comments "do not align [with] our values." Another pulled out "Due to continued inflammatory comments - along with valuable feedback from clients and team members" about the remarks.]

Although Paul disagreed with Limbaugh's remarks and called them "over the top," he said the government should not mandate that insurance companies provide contraception coverage.

"This is philosophically and politically important because, does the government have a mandate to tell insurance (companies) what to give?" Paul asked, and then responded to his own question: "So they're saying that the insurance companies should give everybody free birth control pill, that strikes me as rather odd."

Paul was specific in his attack against former Pennsylvania Senator Rick Santorum and his support (as Senator) for Planned Parenthood dollars in a government funding bill.

"He pretends to be the champion of social values," Paul told Schieffer. "That to me is rather bizarre, and that's why I call him a fake conservative."

Attack by Limbaugh Awakens a 'Stop Rush' Campaign

The New York Times reports Attack by Limbaugh Awakens a 'Stop Rush' Campaign

Some of the same activists that persuaded advertisers to boycott Glenn Beck's television show on Fox News in 2009 are now mobilizing against Rush Limbaugh in the wake of his verbal attacks on a Georgetown University law school student this week.

Actually, they are remobilizing. A Twitter account, "Stop Rush," which has been dormant since late 2010, woke up on Wednesday, when Mr. Limbaugh first called the student, Sandra Fluke, a "slut."

On Friday, as complaints from "Stop Rush" and others about Mr. Limbaugh's comments mounted, a handful of companies said that they had halted their advertising on "The Rush Limbaugh Show," at least temporarily.

One of the companies, Quicken Loans, wrote on Twitter, "Due to continued inflammatory comments — along with valuable feedback from clients and team members — QL has suspended ads on Rush Limbaugh program."

Two mattress companies, Sleep Train and Sleep Number, made similar statements on Friday. A representative of Sleep Number wrote on Twitter, "Recent comments by Rush Limbaugh do not align w/ our values, so we made decision to immediately suspend all advertising on that program."

Limbaugh the Epitome of Everything Wrong With Republican Party

Rush Limbaugh and his ilk are the epitome of everything wrong with the Republican party. Limbaugh is a chickenhawk, a sexist, was fired from sports broadcasting for being a racist, was arrested on drug charges, and was addicted to pain killers.

Yet the blazing hypocrite stated "Drug use, some might say, is destroying this country. And we have laws against selling drugs, pushing drugs, using drugs, importing drugs. ... And so if people are violating the law by doing drugs, they ought to be accused and they ought to be convicted and they ought to be sent up."

Asinine talk might appeal to the far right, but the far right is not going to carry the day. Republicans need to be seeking the middle ground and independents. Divisive attacks on abortion, birth control pills, and refusal to consider military cuts are not going to win over independents.

Rooting for Santorum

New York Times columnist Joe Nocera says he is Rooting for Santorum.

I'm rooting for Rick Santorum to win the Republican nomination. Seriously.

You probably think that is because it would be the best possible outcome for President Obama. No doubt it would be. If Santorum were the Republican nominee for president, the independents disenchanted with Obama would come flocking back; their fear of Santorum's unyielding brand of social conservatism would far outweigh their reservations about the incumbent president. A Santorum nomination would likely lead to an epic defeat, ranking with Richard Nixon's 49-to-1 state landslide victory over George McGovern in 1972, or Ronald Reagan's 49-to-1 state whipping of Walter Mondale 12 years later.

But it's not the Democrats I'm really concerned with. It's the Republicans. For more than a decade now, moderate Republicans have been an endangered species, either losing elections or choosing to retire in the face of a hard-line challenger.

During the McGovern-Mondale era, the Democrats were exactly where the Republicans are now: the party had been taken over by its most extreme liberal faction, and it had lost touch with the core concerns of the middle class, just as the Republicans have now.

One person who was drummed out is Lincoln Chafee, the governor of Rhode Island, a Republican turned independent. "I care about deficits," he told me, "but, on social issues, I believe that people should have the right to make their own decisions." As a result, he said, "I realized that there wasn't any room in the Republican Party for me."

When I asked him what it would take to change the Republican Party, he had a quick answer: "What it usually takes is a good drubbing at election time."

If Mitt Romney takes the nomination and then loses to Obama, the extremists who've taken over the party will surely say the problem was Romney's lack of ideological purity. If, however, Santorum is the nominee — and then loses in a landslide — the party will no longer be able to delude itself about where its ideological rigidity has taken it.

An alcoholic doesn't stop drinking until he hits bottom. The Republican Party won't change until it hits bottom. Only Santorum offers that possibility.

The Republican party needs to get rid of the extreme right-wingers like Limbaugh and Santorum, the phonies like Mitt Romney, and the war-mongers like McCain. If they did, they could hold the center for decades (assuming there was anything left of the party).

10 Things That Should Be Clear

It should be clear by now that cutting taxes and spending more money will not shrink the budget.
It should be clear by now the US cannot afford to have troops in 140 countries
It should be clear by now that wars are expensive and we cannot afford more of them
It should be clear by now that some bargaining is needed to bring the deficit under control
It should be clear by now that some tax hikes coupled with genuine structural reforms to rein in collective bargaining of public unions would be a good idea
It should be clear by now that republicans need independents and the center to win
It should be clear by now that the war on drugs cannot be won, should not be fought, and US prisons are overloaded at great expense as a result
It should be clear we need less government on social issues, on drugs, on war-mongering, on taxes, on education, on spending, on everything, not just half of everything along party lines.
It should be clear that Mitt Romney, Rick Santorum, and Rush Limbaugh are not the future of the Republican party
It should be clear Republicans risk losing to a very weak, unpopular Democrat president in the midst of economic uncertainty and miserably high unemployment rates

Those things should be clear but obviously they are not. Perhaps a Democrat landslide is what it takes to make the case clear.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

Super Tuesday Delegate Rules and Preview; Brokered Convention Revised Math

Posted: 04 Mar 2012 01:55 AM PST

On Monday February 27, I laid out the Mathematical Case for Brokered Convention. Since then, Michigan, Wyoming, and Washington have posted results. The table below reflects those results.

I made additional changes to my super Tuesday estimates based on new information regarding delegate rules. For example, many states have minimum percentages to receive any delegates and this favors Mitt Romney and Rick Santorum except in Georgia where rules heavily favor Gingrich.

Finally, the LA times and Krem have posted different explanations for how the Idaho caucus works. There are now three possible scenarios for Idaho in play (depending on which explanation is correct).

Totals through March 3 in the table below are from Real Clear Politics 2012 Republican Delegates.

March 6 Super Tuesday numbers are my estimates.

State	Primary	Count	Romney	Santorum	Gingrich	Paul
Total to Date	-	374	166	72	33	29
Iowa	Jan 3	28	6	7	0	0
New Hampshire	Jan 10	12*	7	0	0	3
South Carolina	Jan 21	25	2	0	23	0
Florida	Jan 31	50*	50	0	0	0
Nevada	Feb 4	28	14	3	6	5
Minnesota **	Feb 7	40	2	17	1	4
Colorado **	Feb 7	36	9	17	2	1
Maine **	Feb 11	24	9	3	0	7
Michigan	Feb 28	30*	16	14	0	0
Arizona	Feb 28	29	29	0	0	0
Wyoming **	Feb 29	29	10	8	1	6
Washington **	Mar 3	43	12	3	0	3
Georgia	Mar 6	76	24	6	46	0
Ohio	Mar 6	66	36	30	0	0
Tennessee	Mar 6	58	20	38	0	0
Virginia	Mar 6	49	49	0	0	0
Oklahoma	Mar 6	43	12	21	10	0
Massachusetts	Mar 6	41	38	3	0	0
Idaho **	Mar 6	32	18	0	0	14
North Dakota	Mar 6	28	8	7	6	7
Alaska	Mar 6	27	10	11	3	3
Vermont	Mar 6	17	15	2	0	0
Super Tuesday Est	Mar 6	811	396	190	131	53

* States penalized half of their delegates.
** Not all delegates assigned, or assigned to candidates who have dropped out
*** Idaho Rules are in Question. See explanation below.

Thru Super-Tuesday (If Idaho Splits)
Romney: 396
Santorum + Gingrich + Paul: 374
Other: 41

Thru Super-Tuesday (If Idaho Goes to Paul)
Romney: 378
Santorum + Gingrich + Paul: 392
Other: 41

Thru Super-Tuesday (If Idaho Goes to Romney)
Romney: 410
Santorum + Gingrich + Paul: 360
Other: 41

As you can see there is a decent-sized swing in play for Idaho, depending on the exact caucus rules. Even assuming Romney wins 100% of the Idaho delegates, he would still have barely over 50% of the delegates to date. However, that would probably, but not necessarily be enough as he would pick up some of those 41 and he rates to do reasonably well in California.

Nonetheless, even if Romney does as outlined above, the possibility for a brokered convention still exists. If Romney does worse than expected on Super Tuesday, it's a whole new ball game. It would also be a whole new ballgame if Romney were to do poorly in California, or split the delegates three ways here on out.

Super Tuesday Delegate Rules, Preview, Estimates

The rules for each primary are from the LA Times article Super Tuesday 2012: What's at stake and who's in the lead

Except where noted, polls are from Real Clear Politics Super Tuesday Poll.

GEORGIA PRIMARY
Delegates at stake: 76
How it works: 34 delegates will be awarded proportionally to any candidate receiving more than 20% of the statewide vote. The winner in each of the state's 14 congressional districts will earn another two delegates, and the second-place finisher will win one, unless one candidate wins more than 50% in a district.

Georgia Predictions
Gingrich wins all 14 districts for 28
Romney comes in second in all 14 districts for 14
Gingrich gets 52% of 34 for 18
Romney gets 28% of 34 for 10
Santorum gets 20% of 34 for 6

Totals
Gingrich: 46
Romney: 24
Santorum: 6
Paul: 0

OHIO PRIMARY
Delegates at stake: 66
How it works: 15 delegates will be awarded on a proportional basis to any candidate receiving more than 20% of the statewide vote. If a candidate has more than 50%, though, he wins all 15. Another three delegates will be awarded to the winner in each of the state's 16 congressional districts.
In both cases, voters are electing delegates who have pledged to vote for a presidential nominee. Santorum, it should be noted, did not file delegate lists in all of the congressional districts.
The final three delegates are the elected state party leaders.

Santorum is not on the ballot in 3 of 13 districts.
See Family of three GOP delegates gets Santorum on ballot in an Ohio district for an explanation.

Ohio Predictions
Of the 15 at-large

Romney: 7
Santorum: 8

Of 16 Districts
Romney wins 3 by default and 6 contested for 27 delegates
Santorum wins 7 contested for 21 delegates

State Party Leaders give Romney 2, Santorum 1

Totals
Romney: 36
Santorum: 30

TENNESSEE PRIMARY
Delegates at stake: 58
How it works: 28 delegates will be awarded on a proportional basis to any candidate receiving more than 20% of the statewide vote. If one candidate has more than 66% of the vote, he wins all 28. In the nine congressional districts, a candidate will win all three delegates if he wins 66% of the vote. If the winner and runner-up both have between 20% and 66% of the vote, the winner receives two delegates and the runner-up gets one. The other three delegates are the elected state party leaders.

A more recent MTSU Poll show those percentages are holding.

Tennessee Predictions
Of the 28 at-large Santorum wins 18
Of the 28 at-large Romney wins 10

In the 9 Congressional Districts Santorum wins all 9 for 18
Romney come in second in all 9 for 9

State party leaders give 2 to Santorum, 1 to Romney

Totals
Romney: 20
Santorum: 38

VIRGINIA PRIMARY
Delegates at stake: 49
How it works: 13 delegates will be awarded proportionally to any candidate receiving 15% of the vote. But because there are only two candidates on the ballot -- Romney and Paul -- it will likely be winner-take-all. Three delegates will also be awarded to the winner in each of the 11 congressional districts.

Prediction
Romney wins all 49

OKLAHOMA PRIMARY
Delegates at stake: 43
How it works: 25 delegates will be awarded on a proportional basis to any candidate receiving more than 15% of the statewide vote, unless one candidate has more than 50%, in which case he wins all 25. In each of the state's five congressional districts, three delegates will be awarded proportionally to candidates with 15% of the vote, unless, again, one had more than 50% of the vote in that district. The other three delegates are the elected state party leaders.

Oklahoma Predictions
Santorum wins 48% of 25 for 12
Romney wins 28% of 25 for 7
Gingrich wins 24% of 25 for 6

15 district Delegates
Santorum wins 7
Romney wins 4
Gingrich wins 4

Santorum wins 2 party leader votes, Romney 1

Totals
Romney: 12
Santorum: 21
Gingrich: 10

MASSACHUSETTS PRIMARY
Delegates at stake: 41
How it works: 11 delegates will be awarded proportionally to any candidate receiving more than 15% of the statewide vote. Another three delegates will be awarded based on the vote in each of the state's nine congressional districts, again proportionally to any candidate receiving more than 15% of the vote. The other three delegates are the elected state party leaders.

Based on the rules it appears Santorum will be lucky to win even a handful.
Totals
Romney 38
Santorum 3

IDAHO CAUCUSES
Delegates at stake: 32
How it works: According to the Idaho Republican Party, a secret vote will be held at each county caucus, lasting several rounds. In each round, the candidate with the least number of votes is eliminated until one reaches 50%. County results will then be tabulated statewide, with 29 delegates awarded proportionally based on the final tallies. The other three delegates are the elected state party leaders.

Note: That description from the LA Times differs considerably from this
Idaho Caucus Explanation:

Voters will go to locations for their county and use ballots or tokens to support a candidate on Tuesday, March 6th. There are five candidates for Idaho voters to choose from and they will keep voting until a winner is selected.

In each round the candidate with the fewest votes or anyone with less than 15% is out of the race. The voting ends at the county level when there is a final vote for two candidates or one has more than 50% of the vote for that county.

The delegates assigned for that county will then represent the winning candidate. Counties will report their winner to the state office in Boise. If one candidate has more than 50% of the vote for all of Idaho, they get all 32 delegates. Otherwise, the candidates split delegates they won in each county

Predictions
Assuming the LA Times is correct, the delegate totals will be split between Mitt Romney and Ron Paul. Otherwise Paul or Romney will win them all.

Scenario 1: Mitt Romney: 18 Ron Paul: 14
Scenario 2: Mitt Romney 32
Scenario 3: Ron Paul 32

NORTH DAKOTA CAUCUSES
Delegates at stake: 28
How it works: The caucuses will begin the process of allocating delegates to the national convention, but all 28 will remain unbound, meaning they can ultimately vote for whichever candidate they choose.

Predictions
This is somewhat of a crapshoot but no one is likely to dominate and Paul's organization in caucus states should help.

Romney: 8
Santorum: 7
Paul: 7
Gingrich: 6

ALASKA DISTRICT CONVENTIONS
Delegates at stake: 27
How it works: 24 delegates will be awarded on a proportional basis to candidates, based on the statewide vote, at individual district conventions. The other three delegates are the elected state party leaders.

Predictions
This is another crapshoot but one that favors Santorum and Romney
Totals
Romney: 10
Santorum: 11
Paul: 3
Gingrich: 3

VERMONT PRIMARY
Delegates at stake: 17
How they're awarded: 11 delegates will be awarded on a proportional basis to any candidate receiving more than 20% of the statewide vote, unless one candidate received a majority. Another three delegates will be allocated to the overall statewide winner. The final three delegates are the elected state party leaders.

Rules are such that Romney will walk away with the lion's share
Predictions
Romney: 15
Santorum: 2

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

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