RobertBrusca's blog

In the end having a system without rules is not the same as having a system without consequences. It may be hard to figure out the consequences in such a poorly articulated system, but in time the system will tell you.

That is what EMU is finding out and what the rest of the world is discovering as the flaws in the global financial system become more apparent. But we are much better at finding flaws that at finding solutions.  

The European debt struggle may have just entered a new phase. Don’t blink. Like any classy magician’s trick the idea is to get you looking one place while the real action is going on somewhere else. And that has been the recipe over the past week or so. While everyone has been watching the Spanish and Portuguese debt auctions, the real damage was done in Germany where the German government’s bid-cover ratio on a ten-year bund auction came in less than ‘one.’  

Just a few thoughts and facts before the employment report for March is out. No time like just before the report to issue some thoughts so that the next day you can be shown to be horribly wrong, but here it goes.

Private sector reports from ADP, Bloomberg, and Challenger Gray and Christmas point to continued improvement in economic conditions. Better to go with this flow than to fight the tape.

The real story of Germany, to be blunt, is that it is a parasite economy. Its domestic demand lags. It has a labor force with different values than most. It will live with low wage increases and low inflation. It has lured other EMU members into a currency bloc and let them run such persistently higher rates of inflation (with no criticism of it!) that Germany now OWNS any domestic demand that other EMU countries can generate. Germany is like the vampire squid economy of Europe. Now it’s kind of caught in its own huge blinding squirt of ink, since its banks have lent to these other EMU countries to finance their excessive consumption and Germany is entangled. But on the real-economy side of things, the German economy is eating their lunch, however, meager.

There is nothing highbrow or insightful about eschewing seasonally adjusted data. Zinging seasonally adjusted methodology because it is not perfect is throwing the baby out with the bathwater. Many people love to be critical of what they cannot - or refuse to- understand. Of course, if you do not LIKE or WANT TO ACCEPT the message in the ‘SA’ data, the NSA data may provide a refuge for the naysayer. And I suppose that is its true purpose more than people thinking seasonal adjustment is done by the anti-Christ or something.

Jobless claims still are good news but their newest news is not so good news. The progress on claims falling is less than we thought and the current momentum is diminished.

The big broad downtrend is still there but the recent downtrend which saw the pace of claims falling faster has had its wings clipped. Too soon to say if this is a key development or not. But it could drive optimists to drink.

Housing is improving! Housing is improving! Housing is improving!

if I say it enough will someone believe it?

This post has a link to a Bloomberg story about a revival in Seattle where house bidding wars are in progress: Date March 27, 2012. You won't believe it. It reads like a story from the heart of the days of the bubble market.

Bernanke’s argument that he can push demand harder to reduce unemployment is based on the notion that unemployment is more cyclical than structural. Unfortunately that seems like a bad bet given the evidence. The greatest bulge in unemployment in this cycle is from not-temporary unemployment instead of from temporary unemployment. And that category’s contribution to the unemployment rate is larger than in this expansion at this point than in any previous expansion at the 32-month mark since at least the 1970s. Ben seems to be rolling the dice on a bad bet. But it’s a bet that gives him a rationale for postponing tightening which is what his Great Depression lesson tells him to do. Right now all we really know is the ‘what’ of his policy ‘not the ‘why.’

  The Fed's new price rule raises more questions than it answers. The real question is whether 'the rule' is a beard for the Fed's coming plan to ignore it and work on its unemployment 'mandate?' Can the expression of a rule, even one that is poorly articulated, cause expectations to cluster around it?  And is that where the Fed is going...  

Bernanke and Draghi in a snit? Fed and ECB at odds? US-German regulatory run-around? Has Draghi just enaged in an act of ill-advised hubris or does he have a secret plan to stimualte Europe?   

While beset with foreclosures, short sales and ongoing distress housing soldiers on and builds momentum. Prices are now rising. Do not take lightly the impact of rising prices on the housing market.   

Housing remains a mess and recovery continues to be something found best in Disneyland at fantasy land (although not in Disney's movie-making business). The sector is showing only feeble growth as the American nightmare continues to chip away at the American dream. Or If every man's home is his castle, what am I doing in the moat,and why won't my banker lower the drawbridge?

Current oil spike dominates oil move in 1970s-really!