The dividend is about 21 Dow points, a pimple, and I believe it is payable in early December. I think that by then they will engineer a ramp to "cover" the impact that will have on capitalization weighed indices.
G'morning Joe, I think this is an important 'read.'
Unlike most of the toned down and tuned out media crapola out there, I find it refreshing to come across commentary from an author who, imo, seems to "get it." Bolding for emphasis mine.
Canaries and Coal Mines
by Rob Kirby November 10, 2004
In a speech this summer to a credit union conference, Mr. Greenspan reiterated that the balance sheets of American households are generally in "good shape." With personal and corporate debt levels in the U.S. running at unprecedented [some would argue unsustainable] levels, fueled only by currency debasing historic low rates of interest Mr. Greenspan insists that everything is ok? While trying to get my head around this exaltation I cannot help but wonder how much disdain this elitist man must have for us commoners. With the tone of the man's utterances I get the distinct feeling that we're all being talked down to-like we all don't 'get it.' Maybe he's right. Perhaps we're too naïve and truly don't 'get it.'
Perhaps we've finally made it to the Emerald City and we truly are standing before the wise and omnipotent wizard of Oz? Perhaps unprecedented debt levels don't matter? Perhaps foreigners will fund unprecedented and unlimited amounts of American debt and conspicuous consumerism indefinitely? Somehow I doubt this is truly the case. I am deeply suspicious that this story does not have a very happy ending. I also feel queasy that the man/men behind the curtain pushing and pulling all the levers is/are really not a very good wizard[s] at all.
You see folks, the kind of inflation [monetary debasement] we are currently experiencing amounts to government sanctioned theft - and remember, it's only sanctioned because it is government that is doing the stealing. Historically, inflation is measured in the economy in much the same way noxious fumes are meant to be detected by a canary in mine. In the mining sense, the death of the canary notifies unwary miners that air quality is unfit for human consumption. In the case of the economy, PPI [producer price index], precious metals prices and CPI [consumer price index] are generally regarded as the primary gauges of inflation. Big upside moves in any of these is a harbinger of imminent inflation.
PPI is or used to be released every month at the same time. This index by and large measures inputs or raw materials that go into the manufacture of consumer goods. Reporting of the PPI has been delayed by the Bureau of Labor Statistics no less than 2 times thus far this year. On one occasion we were told that data gathered was "unfit" for consumption? I ask, does this not sound eerily familiar [perhaps toxic]? On the other occasion we were told that government computer obsolescence rendered computers unable to perform a "new method" of calculating the data set. You will have to excuse me, dear reader, for my reluctance to accept the notion that "new" or "improved" [when it relates to the manner in which governments ultimately measure their liabilities] doesn't really mean more as in "usurious."
In more than 20 years around financial markets I have never known PPI to be delayed like this. I can say with clear conscience that a great many base materials and inputs that one would normally associate with PPI have recently undergone unprecedented price increases. Reporting of much higher producer prices would not only increase costs/obligations of government but be highly inconsistent with the Fed's low interest rate policy we are currently experiencing.
Sharply rising precious metals prices have traditionally signaled inflationary pressures building in the economy. In response to rising inflation, prudent central bankers generally raise interest rates to quell demand for goods thus slowing the economy and enticing would be consumers to save. By capping the prices of precious metals [gold and silver] with derivatives or through outright gold sales [or leases that amount to the same thing], a central bank would mask a critical telltale symptom of rising inflation.
When the consumer price index is reported each month the financial markets largely react to the headline number-which is most often reported or referred to in the financial press. A more thorough examination of the published number one generally finds a 'statement of confession,' which can usually be found in the footnotes to the number. The footnotes are seldom reported in the mainstream press. The footnotes to a recent CPI release contained the following confession:
"Extreme values and/or sharp movements which might distort the seasonal pattern are estimated and removed from the data prior to calculation of seasonal factors... For the fuel oil, natural gas, motor fuels, and educational books and supplies indexes, this procedure was used to offset the effects that extreme price volatility would otherwise have had on the estimates of seasonally adjusted data for those series. For the Nonalcoholic beverages index, the procedure was used to offset the effects of labor and supply problems for coffee. The procedure was used to account for unusual butter fat supply reductions, decreases in milk supply, and large swings in soybean oil inventories affecting the Fats and oils series. For the Water and sewerage maintenance index, the procedure was used to account for a data collection anomaly and dry weather in California. For Dairy products, it mitigated the effects of significant changes in milk production levels and higher demand for cheese. For Electricity, it was used to offset an increase in demand due to warmer than expected weather, increased rates to conserve supplies, and declining natural gas inventories. For New vehicles, New cars, and New trucks, the procedure was used to offset the effects of a model changeover combined with financing incentives."
In essence, this confession amounts to an admission - that anything that goes up in price is essentially excluded from the Bureau of Labor Statistics measure of CPI.
So where does it all end-I'm not exactly sure? Maybe we'll all muster up the courage or find the heart or come to the conclusion through some good old-fashioned smarts that the wizard must be confronted? While the allure of a system awash in artificially cheap credit has produced an ether-induced giddiness and complacency - I do pinch myself as a reminder that we all live in places a lot like Kansas. Funny thing - in Kansas there really are no yellow brick roads or good or bad witches. But seemingly we have been cursed with an abundance of extremely lousy huckster wizards.
The canaries in the coal mine [PPI, precious metals prices and CPI] have been removed from the equation altogether or rendered ineffective by manipulation. With the advent of hedonic taxidermy, the canaries we can see are of little more use than hood ornaments. The fact that the canaries have all been removed from the mine tells me we're in a very dangerous place and it's highly likely that the end is perilously close at hand. Although no one in the mainstream [Wall Street subsidized] media wishes to tell us this story, I managed to figure this much out on my own.
this is incredible - or rather, it is all too credible. reality has long fled the scene at the BLS, we all know that, but it becomes obvious here just to what extent it has done so.
it should be clear that this always, and exclusively, concerns DOWNward adjustments.
as Mr. King ( author of the King report ) has asked in connection with hedonics: how come, when 'substitution' is applied ( e.g. it is assumed that people switch to chicken, when beef is too expensive, and dog food when chicken becomes too expensive - leaving CPI unchanged regardless of which items increase in price ) , that there is no 'hedonic adjustment' for the associated LOSS IN QUALITY?
note that nowadays, almost 50% of the CPI's components receive hedonic 'quality adjustments' ( quality always and exclusively increases of course ) , which is expressed as a reduction in price ( which does not in reality exist ) .
the cumulative distortion in inflation, productivity and GDP data is so enormous by now that we get 'recoveries' that are in reality contractions, and are constantly served up 'productivity increases' and CPI data that require the credulity of a 3-year old to be swallowed.
what's most astonishing is that in spite of the fact that even Bill Gross has by now written an extensive condemnation of this nonsense, US mainstream economists, politicians, bureaucrats and journalists all make as if these data were for real, could be discussed as if everything were perfectly normal, and form the basis for 'policy'.
it's as if we were sitting around a black cloth and were earnestly debating which shade of white it is.
please note: all the vacuous bluster about the 'superiority' of the debt-laden US economy stems from these data distortions. i don't know if the countries on the receiving end of criticisms by Mr. Snow ( -job ) are aware of this, but they should be."
And lastly, a fitting response to Heinz' commentary:
"If the powers that be can lie so blatantly in order to win support for the war in Iraq, why should anybody be surprised that they also lie about comparatively mundane things like the CPI?"
PMI Mortgage Insurance Co. Releases Autumn Risk Index
Thursday November 11, 8:05 am ET
WALNUT CREEK, Calif.--(BUSINESS WIRE)--Nov. 11, 2004--PMI Mortgage Insurance Co., a subsidiary of The PMI Group, Inc. (NYSE:PMI - News), today released its autumn 2004 Risk Index. PMI's Risk Index represents PMI's view on geographic house-price risk and the probability of a regional home-price decline as measured over the next two years. Based on PMI's Risk Index model, as of November 2004, the average risk value of the 50 largest MSAs is 186. This implies that on average, there exists an 18.6 percent probability of an overall house price decline, as measured within the next two years and across the 50 largest housing markets.
The autumn 2004 average risk value of the 50 largest MSAs increased sequentially, quarter-over-quarter, by 8.8 percent. As of August 2004, PMI Risk Index data showed that the average risk value of the 50 largest MSAs was 171, which implied a 17.1 percent probability of an overall house price decline, measured within the next two years and across the 50 largest housing markets.
Analysts at PMI have attributed the average risk value's sequential increase to homebuyers' anticipation of mortgage interest rate increases from historically low levels, which have spurred home sales and home prices. PMI analysts suggested that slow income growth was another factor. PMI analysts conclude that lower affordability may eventually have an impact on the demand for housing and the sustainability of record appreciation, though their degrees and effects will vary by region.
The 5 lowest ranked, least risky MSAs are Cincinnati, Nashville, Salt Lake City, Indianapolis and Pittsburgh. In these markets, homes have become more affordable relative to three years ago, mainly because of the impact of lower interest rates on affordability.
The Northeast and Southern California MSAs registered the biggest change, as their Risk Index values and ranking have risen compared to the previous quarter. These two regions have experienced especially strong appreciation in recent quarters. Boston and Nassau-Suffolk, NY are the second and fourth riskiest MSAs. Affordability, which is one of the key variables in measuring the Risk Index model, declined the fastest in four Southern California MSAs.
San Jose, Oakland, and San Francisco are three of the top five MSAs at the top of the risk index list. The three high-risk Northern California MSAs have slightly lowered their risk from the previous quarter. While experiencing stagnant economic growth in high-tech sectors, economic conditions in San Jose, Oakland, and San Francisco have slightly improved with lower unemployment rates and less negative employment growth. The region, however, continues to lead the nation in house-price risk with slower job growth and lower housing affordability compared to the national average.
PMI Risk Index by MSA
Risk Risk MSA Index MSA Index --- ----- --- ----- San Jose, CA PMSA 509 Greensboro--Winston-Salem-- High Point, NC MSA 119 Boston, MA-NH PMSA 483 Houston, TX PMSA 109 Oakland, CA PMSA 473 Kansas City, MO-KS MSA 107 Nassau-Suffolk, NY PMSA 470 Phoenix-Mesa, AZ MSA 105 Portland-Vancouver, or-WA San Francisco, CA PMSA 419 PMSA 105 San Diego, CA MSA 405 Orlando, FL MSA 103 New York, NY PMSA 383 Atlanta, GA MSA 99 Fort Worth-Arlington, TX Orange County, CA PMSA 357 PMSA 94 Sacramento, CA PMSA 355 Chicago, IL PMSA 92 Los Angeles-Long Beach, CA Norfolk-Virginia Beach- PMSA 333 Newport News, VA-NC MSA 87 Providence-Fall River- Warwick, RI-MA MSA 330 St Louis, MO-IL MSA 86 Detroit, MI PMSA 318 Baltimore, MD PMSA 86 Riverside-San Bernardino, CA Raleigh-Durham-Chapel Hill, PMSA 264 NC MSA 84 Cleveland-Lorain-Elyria, OH Denver, CO PMSA 255 PMSA 76 Minneapolis-St Paul, ,MN-WI MSA 251 New Orleans, LA MSA 75 Bergen-Passaic, NJ PMSA 248 Milwaukee-Waukesha, WI PMSA 71 Fort Lauderdale, FL PMSA 217 Columbus, OH MSA 69 Miami, FL PMSA 193 San Antonio, TX MSA 69 Newark, NJ PMSA 191 Philadelphia, PA-NJ PMSA 67 Average 186 Las Vegas, NV-AZ MSA 66 Washington, DC-MD-VA-WV PMSA 137 Cincinnati, OH-KY-IN PMSA 64 Charlotte-Gastonia-Rock Hill, NC-SC MSA 136 Nashville, TN MSA 64 Tampa-St Petersburg- Salt Lake City-Ogden, UT Clearwater, FL MSA 135 MSA 61 Austin-San Marcos, TX MSA 133 Indianapolis, IN MSA 60 Dallas, TX PMSA 131 Pittsburgh, PA MSA 58 Seattle-Bellevue-Everett, WA PMSA 120
The PMI Risk Index
The PMI Risk Index is a statistical model based on certain measures of economic activity and conditions that PMI believes is predictive of the likelihood of home price declines over the next two years. Factors used to derive the PMI Risk Index include the House Price Index from the Office of Federal Housing Enterprise Oversight, labor market statistics from the Bureau of Labor Statistics and the affordability index, which captures changes in the demand for housing as a function of local median household income and interest rates.
The PMI Risk Index scale ranges from one to 1,000, where a higher score indicates a higher likelihood of future home price declines. For example, a PMI Risk Index of 100 indicates a 10% chance of a decline in home prices over the next two years.
Because the PMI Risk Index scale is linear, if the PMI Risk Index for an MSA were to increase by 100%, say to 200 from 100, then, according to the PMI Risk Index model, the risk of home price decline has also doubled. Alternatively, if the score were to decline by 50%, for example to 50 from 100, the risk of home price decline has also declined by 50%.
A complete copy of the latest PMI Economic and Real Estate Trends report containing the latest PMI Risk Index scores and analysis is available at:
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