On the 19th of this month Ransom Notes Radio had our featured guest C.A.F.E. economist Mark Skousen on to talk about the government gaming the economic numbers. During the interview Skousen touted his own solution to fuzzy fed math.
Instead of measuring Gross Domestic Product (GDP), we should measure Gross Output (GO), says the head of the Center for Austrian Finance and Economics.
And starting this month the Bureau of Economic Analysis adopted it.
How big of an idea is it?
We'll let's let Steve Forbes tell you in a piece he wrote for Forbes.com:
Why is GO such a big deal? Because it measures the economy in a far more comprehensive and accurate manner. GDP represents the value of all final products and services. It ignores all the steps that go into the making of these things. It’s sort of like looking at a carton of milk and paying no heed to everything that goes into creating that milk and getting the carton onto the store shelf.
Noted economist Mark Skousen has long been pushing for a more accurate way to measure the economy and thus deserves a Nobel for his work on this (and won’t get it, given the politics of the economics profession these days). Skousen is well aware of what GO means. As he wrote on Forbes.com, “Consumer spending is largely the effect, not the cause, of prosperity.”
You can hear the Ransom Notes radio interview right here:
John spoke with economist Mark Skousen about government rigging economic data.
Welcome to John Ransom’s Stocks in the News where the headlines meet the trendlines. <
Stock number one: EPL Oil & Gas, Inc
Why EPL Oil & Gas (EPL) Is Soaring Today—Reuters
EPL Oil & Gas(EPL_) was soaring 29.82% to $37.79 at 10:58 a.m. on Wednesday after news broke that Energy XXI(EXXI_) would purchase the company for total consideration of $2.3 billion.
The deal would create the publicly-owned independent oil producer on the Gulf of Mexico shelf, according to the companies' statement. Ben Marchive, Energy XXI Executive Vice President of Exploration and Production, said in a statement that the combined company would own and operate 10 oil fields on the shelf with cumulative production each exceeding 80 million barrels of oil.
Trailing PE: 18; Forward PE: 13
Estimate Trend: NA
Ransom Note Trendline: Sell EPL
Stock number two: Energy XXI
Energy XXI to buy EPL Oil & Gas for $1.5bn—FT.com
John Schiller, chairman and chief executive of Energy XXI, said the deal would extend his company’s potential for “getting more oil out of old oilfields” in the Gulf of Mexico, adding: “We are getting a lot more oil out of the ground than people thought you could 10 years ago”.
The absorption of EPL, he said, would create “the only publicly traded pure play on the Gulf of Mexico shelf, with the highest concentration of large, mature oilfields ever owned by a single shelf operator”.
Trailing PE: 12 Forward PE: 12
Estimate Trend: Revision…due to buyout
Ransom Note Trendline: Sell Energy XXI
Stock number three: Federal National Mortgage Association
The mystery of Fannie and Freddie's stock dive-- CNN.com
After it was revealed Tuesday that the Senate Banking Committee had reached a bipartisan agreement to overhaul the housing finance system and wind down Fannie Mae (FNMA) and Freddie Mac (FMCC), shares in both companies plummeted by 30% and 26%, respectively. Even the most commonly traded classes of preferred shares (Fannie's FNMAS and Freddie's FMCKJ) traded down Tuesday and in early trading on Wednesday.
Trailing PE: NA; Forward PE: 1.57
Estimate Trend: Flat
Ransom Note Trendline: Avoid Fannie Mae and Freddie Mac
Urban politics is a nasty game. The taxi business can be a nasty business. Where the 2 come together there seems to be a synergistic effect. The below article is a case in point.
Taxis about to go out of business because ride sharing is a better way (often) to get around the city? Then threaten the city aldermen with public outings if they listen to the public, the marketplace, and the times and allow the competition in.
What’s even weirder than the threat alone is that it is embedded in an article which seems in some parts satire. The op-ed in Chicago Dispatcher has parts which seem like a sort of a joke (as is explained in the below article) but the threat still is real – even if the author tries to make it more palatable to the public with his poor attempt at humor. The message is sent, joke or not to any closeted aldermen. Let the competition operate and we will make your life hell.
For the record, I say use Uber and Lyft anywhere you can and fight these taxi cronies in the marketplace.
(From CBS Chicago)
A trade newspaper for the city’s taxi industry has threatened to out five aldermen who it claims are “secretly gay,” unless the City Council bans ride-sharing services like Uber, Lyft, and SideCar.
In an editorial in The Chicago Dispatcher, publisher George Lutfallah said the trade publication “has learned that five of the city’s 50 aldermen are closeted homosexuals. In the next issue of this newspaper, set to be published early next month, we will disclose their names unless our demands are met.”
I remain in "negative awe" of China bulls who think the yuan is going to soon replace the US dollar as the world's reserve currency.
As I have pointed out before - China's bond market is nowhere big or liquid enough; China's property bubble is the world's biggest; China's shadow banking system is on the verge of implosion, and Chinese growth is imploding.
Readers know full well that I am not prone to US flag-waving.
That said, the US has the most open, most free capital markets of any major country. In contrast, China has capital controls reminiscent of two-bit South-American countries (amongst numerous other significant problems).
Reuters reports How China's Official Bank Card is Used to Smuggle Money.
Growing numbers of Chinese are using the country's state-backed bankcards to illegally spirit billions of dollars abroad, a Reuters examination has found.
This underground money is flowing across the border into the gambling hub of Macau, a former Portuguese colony that like Hong Kong is an autonomous region of China. And the conduit for the cash is the Chinese government-supported payment card network, China UnionPay.
In a warren of gritty streets around Macau's ritzy casino resorts, hundreds of neon-lit jewellery, watch and pawn shops are doing a brisk business giving mainland Chinese customers cash by allowing them to use UnionPay cards to make fake purchases - a way of evading China's strict currency-export controls.
On a recent day at the Choi Seng Jewellery and Watches company, a middle-aged woman strode to the counter past dusty shelves of watches. She handed the clerk her UnionPay card and received HK$300,000 ($50,000) in cash. She signed a credit card receipt describing the transaction as a "general sale", stuffed the cash into her handbag and strolled over to the Ponte 16 casino next door.
The withdrawal far exceeded the daily limit of 20,000 yuan, or $3,200 (1,925.62 pounds) (1,925.51 pounds), in cash that individual Chinese can legally move out of the mainland. "Don't worry," said a store clerk when asked about the legality of the transaction. "Everyone does this."
Yuan to Replace US Dollar as Reserve Currency?
With capital controls, political controls, no freedom of press, massive problems in shadow banking, massive problems with housing, entire malls and even cities that are unused, the yuan is nowhere near being able to replace the dollar as the world's reserve currency.
China is a decade away at a bare minimum, and that is if everything goes perfect for China (which it won't). Due to lack of political freedom, lack of a liquid bond market, and lack of essential human and property rights, for the yuan to replace the US dollar as world's reserve currency will take decades.
Given that a major global currency crisis is highly likely long before that (with numerous possibilities as a result), I suspect it will never happen. Rather some other monetary system will be in place.
Bretton Woods is on its last legs. What's next is unknown. It may be gold or crypto-currencies, but it isn't the Yuan.
Mike "Mish" Shedlock
Read more at http://globaleconomicanalysis.blogspot.com/#zRJ5HY357hjTxggS.99
One intelligence community source told me the other day that he believed it was possible that Malaysian flight 370 would be found, intact because the plane had not crashed but had been hijacked for unknown reasons.
He may have been right. From MarketWatch:
U.S. counterterrorism officials are pursuing the possibility that a pilot or someone else on board the plane may have diverted it toward an undisclosed location after intentionally turning off the jetliner’s transponders to avoid radar detection, according to one person tracking the probe.
But the huge uncertainty about where the plane was headed, and why it continued flying so long without working transponders, has raised theories among investigators that the aircraft may have been commandeered for a reason that appears unclear to U.S. authorities. Some of those theories have been laid out to national security officials and senior personnel from various U.S. agencies, according to one person familiar with the matter.
But here’s where it gets really interesting…and scary:
At one briefing, according to this person, officials were told investigators are actively pursuing the notion that the plane was diverted “with the intention of using it later for another purpose.”
Another purpose? Perhaps as a giant, human-guided, suicide missile?
At the time of my conversation with my intel source I advised him to keep it to himself and we both laughed, nervously.
I’m more nervous now.
Well, it seems that the good g-men at the SEC, the folks who pursue insider trading, might be moving on insider information themselves. I am shocked! Shocked!
Who would have thought that the secular angels at the Securities and Exchange Commission might be tempted to benefit from their positions of privilege? I have to say this news has hit me hard. I had to sit down.
It gives more credence to those who argue that insider trading should just be legalized that’s for sure.
The result, they wrote, were abnormal returns of about 4 percent for the market in general, and about 8.5 percent for the U.S. stock market. That’s significant. While an SEC employees’ stock purchases are normal, their stock “sales appear to systematically dodge the revelation of bad news in the future,” according to the paper’s findings…
…Rajgopal and White specifically found a high volume of SEC employee sales from 2010 to 2011 before enforcement action in Bank of America, General Electric, Citigroup, Johnson and Johnson, and JP Morgan.
Read more at: Against Crony Capitalism.org
Sings of a global slowdown continue. The HSBC China Services PMI shows China Composite Output and New Orders Both Fall for First Time in Seven Months.
HSBC China Composite PMI ™ data (which covers both manufacturing and services) signalled a contraction of private sector output in China, following a six-month sequence of growth. That said, the rate of reduction was fractional overall, as signalled by the HSBC Composite Output Index posting at 49.8 in February down from 50.8 in January.
Staffing levels declined at manufacturing companies again in February and at the quickest rate in nearly five years. In contrast, service sector firms expanded their payroll numbers for the sixth month running. However, service sector firms were more cautious toward s taking on more staff, as the rate of job creation eased to a five-month low. Consequently, employment levels fell modestly at the composite level.
Backlogs of work decreased across both the manufacturing and service sectors in February. Though only slight, it was the first reduction of work-in-hand at goods producers since July 2013. Meanwhile, outstanding business at service providers fell at a moderate pace that was the quickest in a year. As a result, unfinished business declined marginally at the composite level.
Commenting on the China Services and Composite PMI™ data, Hongbin Qu, Chief Economist, China & Co - Head of Asian Economic Research at HSBC said: “The HSBC China Services PMI suggests that service sector growth seems to be stabilising at a relatively low level. However, combined with the weaker manufacturing PMI, the overall strength of economic growth is moderating and this is starting to weigh on employment growth. Beijing policy makers can and should fine-tune policy to avoid growth deceleration in the first half of the year.”
Comment on the Comment
The comment by Hongbin Qu is ridiculous for two reasons. First and foremost, the idea that central banks can fine-tune anything is ridiculous. History proves just that.
Second, even if central banks could assure short-term growth, it is always at an expense. Hongbin Qu ignores that expense.
If anything, China has overinvested in everything from vacant houses, to vacant malls, to vacant shopping centers, to unused trains and airports. To prevent further malinvestments, China actually needs to slow (and it will).
Mike "Mish" Shedlock
Read more at http://globaleconomicanalysis.blogspot.com/2014/03/china-composite-output-and-new-orders.html#j4JKVMJ0REUtfgdD.99
Welcome to John Ransom’s Stocks in the News where the headlines meet the trendlines.
Stock number one: Liberty Global plc
Pace recovers from supply chain disruptions—FT.com
Pace, the set-top box maker, has reported double-digit earnings growth over the past year as the company recovered from disruptions to its supply chain caused by floods in Thailand and the Fukushima nuclear disaster in 2011.
But the company’s long-term prospects could be affected by the rise of so-called “cord cutters” – people who abandon their set-top boxes and cable subscriptions to instead watch shows on the internet.
Trailing PE: NA; Forward PE: 22
Estimate Trend: Flat
Ransom Note Trendline: Avoid Liberty Global
Stock number two: INSYS Therapeutics, Inc.
Insys Therapeutics announces three-for-two stock split—Fly on the Wall
The Insys Therapeutics board has approved a three-for-two stock split of its common stock to be effected through a stock dividend. The record date for the stock split is the close of business on March 17, with share distribution scheduled for March 28.
Trailing PE: 17.38 Forward PE: 43.22
Estimate Trend: Flat
Ransom Note Trendline: Hold Insys
Stock number three: FuelCell Energy Inc.
FuelCell Energy (FCEL) Catches Eye: Stock Rises 11.3%- Zacks
FuelCell Energy Inc. (FCEL) was a big mover last session with its shares rising over 11% on the day. The move came on solid volume too with far more shares changing hands than in a normal session. This continues the recent uptrend for the company, as the stock has gained nearly 54% in the past one-month time frame.
This alternative energy provider has seen no estimate revision in the last 7 days. The Zacks Consensus Estimate has also remained unchanged over the same period. Yesterday’s rally is encouraging though, so make sure to keep a close watch on this firm in the near future.
Trailing PE: NA; Forward PE: NA
Estimate Trend: Flat
Ransom Note Trendline: Avoid FuelCell Energy
Welcome to John Ransom’s Stocks in the News where the headlines meet the trendlines.Click here to listen to Ransom Notes Radio live or for archives of previous shows.
Stock number one: Yandex N.V.
Russian companies sink in wake of Ukraine invasion—Fly on the Wall
Shares of a number of Russian companies are falling after Russia invaded Ukraine. WHAT'S NEW: Russian soldiers invaded the Ukrainian region of Crimea over the last few days, occupying key strategic locations in the area. The U.S. and other Western countries strongly condemned the move, and warned that Moscow would face consequences if it doesn't back down. Among the companies falling sharply in response to the situation are QIWI (QIWI), which provides payment services in Russia; Yandex (YNDX), a Russian Internet search engine.
Trailing PE: 25; Forward PE: 0.55
Estimate Trend: Up
Ransom Note Trendline: Sell Yandex
Stock number two: General Electric Company (GE
There is no headline-- Me
Trailing PE: 19.87 Forward PE: 14
Estimate Trend: Flat
Ransom Note Trendline: Avoid GE.
Stock number three: Plug Power Inc.
Plug Power up 18%; Analysts raise price target - MarketWatch
Analysts at Cowen and Co. upped their price target on fuel-cell maker Plug Power Inc. PLUG +17.99% to $5.50 a share, from $5 a share, they said in a note to clients Monday. Plug shares added 18% Monday. The company last week announced it had won a contract with Wal-Mart Stores Inc. WMT -0.94% distribuition centers
Trailing PE: NA; Forward PE: NA
Estimate Trend: Flat
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