April 5, 2013
- “Experts” confounded on jobs for three days running, and the return of the chained-CPI monster: unpacking two “special numbers”
- An alarming new strain of flu… and the promising new drug that could stop it in its tracks
- Where no central bank has gone before: Amoss on the “chaos” coming from Japan’s mad monetary experiment (and, for PRO-level readers, an update on a related play)
- Bitcoin withstands hackers… the hot new trend in funerals… the most insulting email The 5’s ever received… and more!
Bloomberg needs a new “expert” panel of economists. Or so we have to conclude after the government’s big jobs report this morning.
The ADP report Wednesday, first-time unemployment claims yesterday and the nonfarm payrolls report today: Three days in a row we’ve had jobs numbers that were not only “worse than expected,” they were worse than the most pessimistic among dozens of guesses.
For all its statistical hijinks, the BLS could conjure only a five-figure number of new jobs in March — 88,000. As a reminder, that’s not even enough to keep up with population growth.
The U-3 unemployment rate — the one mainstream media fixate on — dropped to 7.6%, the lowest since the “official” start of the recession in December 2007. Alas, that came about only because 663,000 people left the labor force for good. Presumably, most of them did not retire with a gold watch.
The labor-force participation rate — the percentage of the working-age population in the labor force — sank to 63.3%. That’s the lowest since May 1979 — when Margaret Thatcher became British prime minister and topped the charts with “Reunited.”
If the unemployment rate were still measured the way it was back then — and John Williams at Shadow Government Statistics still does — it would be 22.9%. That’s actually down a bit from the record 23.0% the last three months.
See, it’s not so bad!
“What if the feds tell you the unemployment rate is 7.6%” wrote Bill Bonner yesterday, eerily anticipating the number the feds reported today.
“What if they tell you that GDP is growing at 2.5% per year? What if they insist consumer prices are rising at a 2% annual rate?
“The numbers used by the federal government… and by economists, generally… are special numbers.
“They look like normal numbers. They use the decimal system. You can add them. You can subtract and multiply them. But they are imposters… crooked… bent… perverted. They do not mean the same thing as stand-up, normal numbers. They may not mean anything at all.”
The market reaction to today’s “special number” is, well, curious.
Stock traders, seeing unmistakable signs of a slowing economy, have sent all the major indexes down 1% or more. The Dow is holding up the best at 14,467; small caps are faring worst, the Russell down nearly 1.5%.
But precious metals traders, seeing affirmation that the Fed will continue to step on the QE gas, have bid up gold to $1,564. Silver has recovered the $27 level.
Why stock traders didn’t react the same way, as they have many times to a lousy jobs report the last four years, we’ll chalk up as one of those ineffable cosmic mysteries.
Treasuries are benefiting too; the 10-year yield is down to 1.75%, the lowest this year.
Another “special number” is one that just won’t die — “chained CPI” is back in the news.
Actually, the “news” today is no different from what we told you on July 7, 2011: The president is ready to put Social Security on the chopping block if his political foes will agree to start raising taxes.
Anyway, here we go again: “Chained CPI” has found its way into the president’s 2014 budget proposal that he’ll submit next week. It’s another way of gaming the consumer price index to mask a rising cost of living, with the explicit aim of lowering the cost-of-living increases for Social Security recipients.
It’s also a very old trick by now — another way of enhancing the “substitution effect” so beloved by the statisticians. This trick began with the Greenspan Commission’s reforms in the ’80s: If steak got too expensive and you bought hamburger instead, the statisticians insisted your cost of beef hadn’t really gone up.
The next trick came with the Boskin Commission in the ’90s. If hamburger got too expensive and you substituted beans, well, the statisticians said your cost of protein hadn’t really gone up.
Chained CPI is effectively saying if you substitute cat food for beans, you’re still no worse off than before. Or when you were still buying steak in the ’80s, apparently.
The impact on “long-term deficit reduction” will be almost nil — $200 billion over 10 years. The national debt is set to rise another $7 trillion over the next decade, according to the Congressional Budget Office.
Heh… and the CBO’s estimate assumes 16.4 million new jobs added to the tax base in the next 10 years, compared with 2.5 million over the last 10.
[Ed. note: With an eye toward “special numbers” that mask sorry economic realities, Bill Bonner recently took part in a “meeting of the minds” with several other luminaries — including Doug Casey, John Mauldin and Rick Rule. You can eavesdrop on this intimate gathering this coming Monday afternoon. The discussion will have a special focus on the range-bound gold price and the beaten-to-a-bloody-pulp mining shares. Registration for the “Downturn Millionaires” summit is absolutely free. Here’s where to sign up.]
“This could be how pandemics begin,” writes health specialist Laurie Garrett at the Council on Foreign Relations — and a consultant for the movie Contagion.
Shanghai’s teeming poultry markets are shut down today, and the slaughter of 20,000 birds is under way — in hopes of containing a bird flu outbreak that’s sickened 14 people. Six of them have died.
This flu strain is called H7N9. Until now, it hasn’t turned up in humans. That’s the bad news. The good news is that it’s still a “type A” strain.
“Type A flu virus is constantly changing and is generally responsible for the large flu epidemics,” says a primer at WebMD. And every strain of type A can be targeted by a promising flu drug on the radar of Technology Profits Confidential editor Ray Blanco.
Early tests on mice showed huge advantages over the current go-to flu drug, Tamiflu. Now Phase 2 tests are under way and “the results so far are excellent,” says Ray.
“The highest dose regimen showed a statistically significant reduction in the amount of virus present in nasal secretions, as well as significantly reducing the severity and duration of flu symptoms… 93% of patients showed no symptoms after three days, as compared with 41% on placebo. A score of the severity of the symptoms was more than halved.” The safety data look solid, too.
“Not only could this drug become a breakthrough in treating influenza patients, it could become a choice for prophylactic administration for when the ‘big one’– a truly deadly pandemic like the Spanish influenza outbreak of 1918 — hits the planet.”
In the last three weeks, Ray has issued sell recommendations good for gains of 58%… and a clean double of 116%. That’s in addition to average gains of 30% last year, and 52% the year before.
Technology Profits Confidential is our entry-level advisory covering high tech and biotech. Access here.
Currency traders are following the cue of the metals traders today and punishing the dollar in anticipation of continued easy money from the Fed.
The dollar index is down to 82.4. Still, the greenback is holding up well against the Canadian dollar and — to the surprise of absolutely no one — the Japanese yen.
“Japan’s new central bank governor, Haruhiko Kuroda, is itching to lead the global monetary system into the great unknown,” says our Dan Amoss, weighing in on the massive money-printing scheme in the Land of the Rising Sun.
“Japan,” says Dan, “is the first modern, heavily indebted, industrial economy — with a position as a key hub in the global financial system — to aggressively seek a higher inflation rate.
“Kuroda says he’ll do ‘whatever it takes’ to end deflation in Japan. His plan includes printing yen, and buying all sorts of bonds, ultimately doubling the monetary base by the end of 2014. His goal is to get the Japanese public to expect rising prices.
“It reads like a good plan in a textbook, but in the real world, the final result will be chaos; after 20 years of the public expecting mildly falling prices, the switch to an inflationary psychology will be pleasant at first, but then tragic. Once unleashed, inflationary psychology would be extremely painful to reverse; it would involve taking measures that crash all the yen-denominated bull markets currently under way.
“But for now, the Japanese stock market rally continues. Party on! The hangover awaits…”
The Bitcoin market appears to have stabilized after two hacker attacks yesterday. At last check, one Bitcoin was fetching $136.
The largest Bitcoin exchange, Mount Gox, was the subject of a “distributed denial of service” attack, known in the computer world as DDoS. Basically, it overwhelms the site’s servers, slowing it down for ordinary users.
“Attackers have waited until Bitcoin’s price hits a high, sell their Bitcoins and then start a DDoS attack that destabilizes the exchange,” according to a report at Computerworld. “They hope Bitcoin holders will panic and sell, causing the price to drop. The attackers can then buy the cheaper Bitcoins and try the attack again when the price floats higher.”
Mount Gox has managed to fend off the attacks, but the damage to a smaller exchange called Instawallet has proved longer lasting and is “suspended indefinitely.”
If all this Bitcoin talk still has you flummoxed, the Laissez Faire Club is assembling a primer with everything you ever wanted to know about Bitcoin but were afraid to ask. If you want access the moment it’s ready, just follow this link.
So a loved one dies and you fret that turnout for the funeral will be puny. Enter “Rent a Mourner.”
The year-old British service charges 45 pounds an hour — around $68 — to send a small crowd to the service. Crying is included.
“Our staff,” Ian Robertson tells The Telegraph, “will meet with the client beforehand and agree ‘the story,’ so our staff will either have known the deceased professionally or socially. They will be informed of the deceased’s background, achievements, failures, etc., so they can converse with other mourners with confidence.”
Yeah, really.
If you’re tempted to think this burgeoning market addresses a “first-world problem,” you’ll be surprised to learn “We were actually inspired by the market growth in China,” says Robertson. “The Middle Eastern way is to provide wailers — crying women — as opposed to the quiet, dignified methods we use.”
“I like pre-1965 U.S. dimes as a potential, viable currency,” says the first of three brief reader emails today. “Bernanke’s resignation,” he adds, “smells a little like the first quarter of 1945 Germany.”
“Why not mint a $1 trillion coin?” writes a wag with a suggestion for our new 3-D printer. “If the Fed can do it…”
“I’m waiting for you to announce: ‘Because of sequestration, the 5 Min. Forecast will be downgraded to the 4 Min. Forecast.'”
The 5: We’re accustomed to scorn and invective from our readers. But the implication that we accept federal subsidies in the construction of your daily 5 Mins.? That’s a bridge too far…
Have a good weekend,
Dave Gonigam
The 5 Min. Forecast
P.S. “The time to buy gold stocks,” says Bill Bonner, “is when nobody wants to buy them… when even you don’t want to buy them.”
At last check, the HUI index of major gold stocks was 327. Not quite as bad as 24 hours ago, but still pitifully close to levels last seen in — gulp — July 2009.
For a comprehensive review of where the metals markets are, and where they’re going, you don’t want to miss the “Downturn Millionaires” event featuring Bill, Doug Casey, Rick Rule and John Mauldin, among others. It’s absolutely free, and it’s less than three days away. Sign up here for guaranteed access.