Replies to post #285983 on Zeev's Turnips Patch-No Politics (ZEEV)

[basserdan]

The King Report
M. Ramsey King Securities, Inc.
Wednesday Aug. 18, 2004 – Issue 2976 "Independent View of the News"

Here’s the most important thing you need to know about July CPI, and the same is true of August and September CPI: Q3 CPI is used for all COLAs. Ergo, the temptation to ‘fool’ with Q3 CPI is exceedingly strong because it saves Uncle Sam (robs Americans) billions of dollars.

Lower than warranted CPI overstates real GDP and real earnings. Within minutes of the CPI release a George Bush web site crowed, "Easing inflation in July had the effect of pushing up inflation-adjusted earnings. Real average weekly earnings, which posted a big 0.8 percent drop in June, rose 0.7 percent last month, according to a separate Labor Department report." But consumers have checkbooks shackled to reality. The consumer checkbook is not seasonally, hedonically or chain-weighted adjusted.

Permabulls, the Street propaganda machine and its appendages in the financial media heralded Tuesday’s economic data. These people ignored the disappointing readings in July industrial production and capacity utilization as well as the lower revisions of both for June. July industrial production was 0.4% (0.5% expected) and June is revised to -0.5% from -0.3%. July capacity utilization was 0.4 worse than expected at 77.1%. June is revised to 76.9% from 77.2%. Why would capex boom with 77.1% capacity utilization? And those that believe much of that unused capacity is obsolete don’t seem to realize that new capex, actually a historic capex boom, is occurring on a different continent.

The main reason for econobulls getting jiggy is the better than expected housing starts and permits. As we keep harping, housing starts greatly outpace sales, which means inventory building at the top of (if not a bubble) a long, historic run in housing. Plus permits keep soaring. If Easy Al continues to keep interest rates at emergency levels, and industrial loan demand stays soft, bankers and other financial entities will eagerly supply loans to builders. And builders will gladly take money and build, regardless of market fundamentals. You’d think more people would under stand the concepts of sated demand and borrowing future economic activity for immediate gratification.....