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In The News Today

Posted: Aug 03 2010     By: Jim Sinclair      Post Edited: August 3, 2010 at 12:43 pm
Filed under: In The News

Bernanke: Long way to go for recovery. "We have a considerable way to go to achieve full recovery in our economy," Bernanke said yesterday, "and many Americans are still grappling with unemployment, foreclosure, and lost savings." Constraints faced by budget-strained state and municipal governments are also hindering the recovery.
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Jim Sinclair’s Commentary
All things end.
Treasuries Lack Safety, Liquidity for China, Yu Yongding Says By Bloomberg News – Aug 3, 2010 4:06 AM EDT
U.S. Treasuries fail to provide safety or liquidity when it comes to managing China’s $2.45 trillion foreign-exchange reserves, said Yu Yongding, a former central bank adviser.
“I do not think U.S. Treasuries are safe in the medium-and long-run,” Yu, a member of the state-backed Chinese Academy of Social Sciences, wrote yesterday in an e-mailed response to questions. China is unable to sell the securities in a “big way” and a “scary trajectory” of budget deficits and a growing supply of U.S. dollars put their value at risk, he said.
The State Administration of Foreign Exchange, which manages the nation’s reserves, said last month that U.S. government debt has the benefits of “relatively good” safety, liquidity, low trading costs and market capacity. China’s holdings of Treasuries, the largest outside of the U.S., totaled $867.7 billion at the end of May, down from $900.2 billion in April and a record $939.9 billion in July 2009.
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Jim Sinclair’s Commentary
Stimulus, like a drug addiction, requires more applied all the time to even approach the same level of impact. Can you only imagine what would have to be done to make any dent in the "Ski Jump" form of recovery?

• The Commerce Department released Personal spending and income figures for June that came in unchanged after rising 0.1% and 0.3% respectively in May. These stagnant figures were a further indication that the lack of jobs is hurting the biggest part of the economy.
• Orders placed with U.S. Factories declined in June by -1.2%, more than forecast a sign that manufacturing will cool in the coming months
• The number of contracts to purchase previously owned homes unexpectedly fell in June by -2.6%, indicating that demand kept unraveling after the expiration of a home buyer tax credit.

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Jim’s Mailbox

Posted: Aug 03 2010     By: Jim Sinclair      Post Edited: August 3, 2010 at 12:39 pm
Filed under: Jim's Mailbox
If you don’t like the message conveyed by economic time series, revise it! CIGA Eric
Headline: Consumer spending and personal incomes both weak
Consumers did not boost their spending in June and their incomes failed to increase, further evidence that the economic recovery slowed in the spring. And Americans saved at the highest rate in nearly a year.
At first blush, June’s month over month decline in personal income and consumption in June look weak as presented.
Personal Consumption As A % of Personal Income
Reality alert!
Buried within the U.S. Bureau of Economic Analysis (BEA) economic release, a fact not referenced in the newswire release, are revisions to personal income and outlays time series. Jim and I talked about this a few days ago. I suggested that nearly all government created data series are revised to the point in which historical comparison are completely meaningless. I also suggested that frequency of partial revisions, or revisions dating back only a few years rather than encompassing the entire data series, has been increasing. Before that discussion could go stiff with rigor mortis, the BEA revises the closely tracked personal income and outlay time series. The revision is back date to 2007 rather than 1959.
Compare the two charts. The trend in the personal consumption to income rather has changed noticeably. Unbeknownst to most American, their personal incomes and consumption rose and declined since 2007, respectively. After the alteration of some statistical assumptions/(techniques) and a few clicks of a mouse button, Americans not only saw their income rise but also saving increase as consumption mysteriously declined since 2007.
If you don’t like the message conveyed by economic time series, revise it! This is why we suggest following the economic messages communicated by the capital markets. The alteration of personal income and outlays should serve as all illustration of the growing disconnect between actual and statistical economic reality. The size of the disconnect will only get worse as the sovereign debt crisis worsens.
Personal Consumption As A % of Personal Income:
Previous Commentary: Wednesday, March 3, 2010
Source: news.yahoo.com
Statistical Revision Explained: bea.gov
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