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The Fed's Job Is Only Half Over
The level of asset prices and associated risk premiums will demand careful assessment as we return to normal.

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Group of 20 Agrees on Far-Reaching Economic Plan

Don't bank on your home as an ATM

The economic fundamentals that drove home values up in the 20th century -- sustained growth in incomes, population and household wealth -- have been sputtering for decades. Though the future isn't necessarily bleak, economists say there's no reason Americans should continue to see a home purchase as a path to wealth.
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Investor Reading 925

Existing Home Turnover Ratio, and Distressing Gap


Although the turnover ratio has fallen from the bubble years, the level is still above the median for the last 40 years. This suggests 2009 is about a normal year for existing home turnover.
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Back from the Brink--GREG MANKIW'S BLOG


The latest speech from the CEA Chair.
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Paul Krugman: It’s Easy Being Green

It’s important, then, to understand that claims of immense economic damage from climate legislation are as bogus, in their own way, as climate-change denial. Saving the planet won’t come free (although the early stages of conservation actually might). But it won’t cost all that much either.
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The Producer Price Index for Finished Goods advanced 1.7 percent in August, seasonally
adjusted. This increase followed a 0.9-percent decline in July and a 1.8-percent advance in June.

Prices for finished goods less foods and energy rose 0.2 percent in August after edging down 0.1 percent a month earlier.

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The Producer Price Index for Finished Goods advanced 1.7 percent in August, seasonally adjusted, the Bureau of Labor Statistics of the U.S. Department of Labor reported today. This increase followed a 0.9-percent decline in July and a 1.8-percent advance in June. In August, at the earlier stages of processing, prices received by manufacturers of intermediate goods rose 1.8 percent and the crude goods index moved up 3.8 percent. On an unadjusted basis, prices for finished goods fell 4.3 percent from August 2008 to August 2009, following a record 6.8 percent 12-month decline in July.

Finished goods

In August, over ninety percent of the finished goods increase was the result of higher energy prices, which moved up 8.0 percent. The indexes for finished goods less foods and energy and for finished consumer foods also contributed to the advance in finished goods prices, rising 0.2 percent and 0.4 percent, respectively.

Finished energy: The index for finished energy goods climbed 8.0 percent in August, the largest monthly increase since a 10.2-percent rise in November 2007. About eighty-five percent of the August advance can be attributed to higher gasoline prices, which surged 23.0 percent. Rising prices for home heating oil and liquefied petroleum gas also contributed to the increase in the finished energy goods index. (See table 2.)

Finished core: Prices for finished goods less foods and energy rose 0.2 percent in August after edging down 0.1 percent a month earlier. Accounting for over half of this increase, the light motor trucks index moved up 0.8 percent. Higher prices for passenger cars also were a major factor in the advance in the finished core index.

Finished foods: Prices for finished consumer foods moved up 0.4 percent in August following a 1.5-percent decline in July. Almost half of this increase can be attributed to higher prices for fresh fruits and melons, which rose 5.9 percent.

Intermediate goods

The Producer Price Index for Intermediate Materials, Supplies, and Components advanced 1.8 percent after falling 0.2 percent in July. Accounting for about eighty percent of the August increase, prices for intermediate energy goods rose 7.1 percent. Prices for intermediate materials less foods and energy gained 0.6 percent and the index for intermediate foods and feeds moved up 0.3 percent. For the 12 months ending in August, the decline in intermediate goods prices slowed to 12.3 percent from a record decrease of 15.1 percent from July 2008 to July 2009. (See table B.)

Intermediate energy: The index for intermediate energy goods increased 7.1 percent after decreasing 1.4 percent in July. A major contributor to the August increase was diesel fuel prices, which rose 15.9 percent. Higher prices for gasoline and lubricating oil base stocks also had a significant impact on the intermediate energy goods index. (See table 2.)

Intermediate core: Prices for intermediate materials less foods and energy climbed 0.6 percent, the third consecutive monthly increase. Accounting for over half of the gain in August, the steel mill products index increased 6.8 percent. Rising prices for primary basic organic chemicals also had a considerable effect on the intermediate core index.

Intermediate foods: The index for intermediate foods and feeds advanced 0.3 percent after declining 2.0 percent in July. A 6.1-percent increase in the index for corn, cottonseed, and soybean cake and meal accounted for nearly all of the increase in intermediate foods and feeds prices.

Source Bureau of Labor Statistics of the U.S. Department of Labor

Bob DeMarco is a citizen journalist and twenty year Wall Street veteran. Bob has written more than 500 articles with more than 11,000 links to his work on the Internet. Content from All American Investor has been syndicated on Reuters, the Wall Street Journal, Fox News, Pluck, Blog Critics, and a growing list of newspaper websites. Bob is actively seeking syndication and writing assignments.

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Health Care in Japan--Would it Work in the U.S.?

There is an excellent article on the Washington Post website that discusses healthcare in Japan.

Half a world away from the U.S. health-care debate, Japan has a system that costs half as much and often achieves better medical outcomes than its American counterpart. It does so by banning insurance company profits, limiting doctor fees and accepting shortcomings in care that many well-insured Americans would find intolerable.

Health care in Japan -- a hybrid system funded by job-based insurance premiums and taxes -- is universal and mandatory, and consumes about 8 percent of the nation's gross domestic product, half as much as in the United States. Unlike in the U.S. system, no one is denied coverage because of a preexisting condition or goes bankrupt because a family member gets sick.

After reading the article, I learned that the healthcare system in Japan is far from perfect. Then I thought, our system here is far from perfect, and we spend twice as much as Japan for our currently pitiful system.

I really cannot understand why we can't define the problem here. Do we want universal coverage like they have in Japan? Yes or No? If we want universal coverage why don't we limit the discussion to the best solutions to accomplish this goal? Why can't we accept that it is impossible to create a perfect system?

Politicians like to tell their constituents over and over how the U.S. is the greatest country in the world. Is this true, or are we deluding ourselves?

You cannot solve a problem until your first define the problem. Only then can you start to flesh out all the possible solutions.

We are woefully inept in this country at executing real solutions to problems. As a result, we get half-backed solutions from our politicians that result in enormous waste and lots of corruption.

It is time for this pattern of wasting tax payers dollars to end. Its time for someone to stand up, define the problem, offer a clear cut solution to the problem, and then fight like hell for what they believe in.

To read the Washington Post article go here.

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Unemployment Trend Remains Ugly (Graph)

Savvy investors understand that the market usually bottoms and turns up long before unemployment peaks. In other words, the market discounts the bad news in advance. So it is easy to understand how the market can rally in spite of the negative unemployment report.

There has not been much discussion about the number of people that are falling off the unemployment insurance payrolls each month. Another 1.5-2 million people will stop getting checks by the end of the year. Unless, of course, these benefits are extended. Additionally, the civilian labor force is dropping or the numbers would be much worse.

We will discuss the growing number of people that have been unemployed 27 weeks or longer, and the real unemployment rate shortly.

The uptrend in unemployment is still strong as evidence by this chart.

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Bob DeMarco is a citizen journalist and twenty year Wall Street veteran. Bob has written more than 700 articles with more than 18,000 links to his work on the Internet. Content from All American Investor has been syndicated on Reuters, the Wall Street Journal, Fox News, Pluck, Blog Critics, and a growing list of newspaper websites. Bob is actively seeking syndication and writing assignments.

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Original content Bob DeMarco, All American Investor

THE Unempoyment Situation (Bullet Point Version)

Nonfarm payroll employment continued to decline in August (-216,000), and the unemployment rate rose to 9.7 percent, the U.S. Bureau of Labor Statistics reported today. Although job losses continued in many of the major industry sectors in August, the declines have moderated in recent months.

The Situation

• In August, the number of unemployed persons increased by 466,000 to 14.9 million,
• The unemployment rate rose by 0.3 percentage point to 9.7 percent,
• Since the recession began in December 2007, the number of unemployed persons has risen by 7.4 million, and the unemployment rate has grown by 4.8 percentage points,
• The civilian labor force participation rate remained at 65.5 percent in August The employment population ratio, at 59.2 percent, edged down over the month and has declined by 3.5 percentage points since the recession began in December 2007,
• In August, the number of persons working part time for economic reasons was little changed at 9.1 million. These individuals indicated that they were working part time because their hours had been cut back or because they were unable to find a full-time job,
• Among the marginally attached, the number of discouraged workers in August (758,000) has nearly doubled over the past 12 months,
• The average workweek for production and nonsupervisory workers on private nonfarm payrolls was unchanged at 33.1 hours

Employment Situation

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Bob DeMarco is a citizen journalist and twenty year Wall Street veteran. Bob has written more than 700 articles with more than 18,000 links to his work on the Internet. Content from All American Investor has been syndicated on Reuters, the Wall Street Journal, Fox News, Pluck, Blog Critics, and a growing list of newspaper websites. Bob is actively seeking syndication and writing assignments.

New Orders Durable Goods (Chart)

New orders for Durable goods orders to rise from the March lows, however you can see they are still well below trend. This series will be important to watch in the last quarter of this year.

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Manufacturing ISM Report On Business (NAPM, Graph)

The Institute for Supply Management factory index (ISM)index rose to 52.9% in August, the first time the index has been above 50% since the early days of the recession in January 2008.



"The year-and-a-half decline in manufacturing output has come to an end, as 11 of 18 manufacturing industries are reporting growth when comparing August to July. While this is certainly a positive occurrence, we have to keep in mind that it is the beginning of a new cycle and that all industries are not yet participating in the growth. The August index of 52.9 percent is the highest since June 2007. The 4 percentage point increase was driven by significant strength in the New Orders Index, which is up 9.6 points to 64.9 percent, the highest since December 2004. The growth appears sustainable in the short term, as inventories have been reduced for 40 consecutive months and supply chains will have to re-stock to meet this new demand."

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WHAT RESPONDENTS ARE SAYING ...

• "Production is picking up as demand [for] orders is being accelerated." (Nonmetallic Mineral Products)
• "Demand from automotive manufacturers increasing thanks to 'Cash for Clunkers.'" (Fabricated Metal Products)
• "In addition to improved business come the complications of a supply chain drained of inventory." (Paper Products)
• "The sudden increase in customer demand, plus the low inventories held at services centers, is causing a shortage in the supply of raw steel." (Transportation Equipment)
• "[It] appears customers' inventories are getting low, and they are cautiously placing orders." (Apparel, Leather & Allied Products)

PMI

Manufacturing's 18 consecutive months of decline ended in August as the PMI registered 52.9 percent, which is 4 percentage points higher than the 48.9 percent reported in July. This is the highest reading since June 2007, when the index also registered 52.9 percent. A reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent indicates that it is generally contracting.

A PMI in excess of 41.2 percent, over a period of time, generally indicates an expansion of the overall economy. Therefore, the PMI indicates growth for the fourth consecutive month in the overall economy, as well as expansion in the manufacturing sector for the first time since January 2008. Ore stated, "The past relationship between the PMI and the overall economy indicates that the average PMI for January through August (42.2 percent) corresponds to a 0.3 percent increase in real gross domestic product (GDP). However, if the PMI for August (52.9 percent) is annualized, it corresponds to a 3.7 percent increase in real GDP annually."

Bob DeMarco is a citizen journalist and twenty year Wall Street veteran. Bob has written more than 700 articles with more than 18,000 links to his work on the Internet. Content from All American Investor has been syndicated on Reuters, the Wall Street Journal, Fox News, Pluck, Blog Critics, and a growing list of newspaper websites. Bob is actively seeking syndication and writing assignments.

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