UK Retail Sales Unexpectedly Jump in January — Looking Beyond the Headline Number to Debunk it and Uncover Flawed Methodology Used by the ONS

Optimism reached a new high in the UK on Friday and the UK equity market and the GBP jumped, when the Office of National Statistics published an unexpected jump in the retail sales index:

(The Telegraph) — Official retail sales data for January rose 0.9pc month-on-month, well above gloomy forecasts of a 0.4pc decline, as falling inflation and post-Christmas discounting lured consumers back to the shops. 

Economists said the performance was surprisingly strong because it came on the back of a 0.6pc rise in December, which was itself better than had been expected. 

"It suggests at the very least that we will be growing by 0.5pc in the first quarter and probably faster than that," said Scotia Capital economist Alan Clarke, who was one of the first to warn of a contraction before the 0.2pc decline in the final three months of last year. "This is the third strong indication that the UK economy has turned the corner."

As per usual, economists — this highly (over)paid yet ignorant and incompetent bunch — completely missed their forecast, and then tried to explain a posteriori the reason why sales jumped in January, yet again completely missing the point.

First, here are a couple of other pieces of news that were not making headlines — obviously so because market participants are in über-bullish mode and are only look at the bright side of the news:

(The Daily Mail) — Around 14 shops are shutting every day on the High Street, alarming figures show. 

Last year 5,268 shops were closed by major retailers and only 5,094 opened, according to a study by accountants PricewaterhouseCoopers and the Local Data Company. 

It was the first time since the height of the recession in 2009 that more shops were shut than opened.
[...]
The real number of closures could well be higher as the research only focused on chain stores in the 500 biggest town centres.
[...]
London fared worst in 2011, with 1,084 shops shutting and just 983 opening, according to the study.
[...]

Beyond showing the incompetence of Mervyn King, the following report confirms that debt deflation has started in the UK:

(The Daily Mail) — Bank of England Governor Sir Mervyn King yesterday spoke out against the ‘harsh treatment’ of small companies which are still ‘suffering’ at the hands of the banks.

He said ‘market failure’ meant firms are being starved of the funds they need to grow, create jobs and drive the economic recovery.

The startling statistics emerged in Bank of England figures showing that net lending fell by £10.7 billion in 2011 – in other words, the banks received £10.7billion more in loan repayments than they gave out in new loans. That took the total fall since the end of 2008 to £82.7 billion.

After all the manipulation and fiddling that the BoE is doing, the one thing that is currently working fine — small business not borrowing, and banks not lending to insolvent firms — is considered to be a "market failure". This is the favorite game of central planners and socialists: blame the market for their own failure, and make a bigger mess trying to fix it.

Summary:

• Retail sales as reported by the ONS jumped in Jan
• While business are closing at an alarming rate of 14 shops a day for the whole of 2011
• And debt has been deflating for 3 years in a row, showing that business are not trying to borrow to expand (in obvious contradiction with what would happen if sales were rising).

So, where am I going will all this?

As with any thing reported by the government, one must look a bit further than the headline number — ironically, market participants whose very job is to do so won't do it — and try to find what is really going on.

Looking at the methodology used by the ONS to calculate their retail sales index gives us the answer:

Understanding the data

Quick Guide to the Retail Sales Index (116.9 Kb Pdf)

Interpreting the data
The Retail Sales Index (RSI) is derived from a monthly survey of 5,000 businesses in Great Britain. The sample represents the whole retail sector and includes all large retailers and a representative panel of smaller businesses. Collectively all of these businesses cover approximately 95 per cent of the retail sector in terms of turnover.

There, you have it: they survey 5,000 businesses, completely ignoring the fact that many businesses are closing on a daily basis. This creates a massive survivorship bias and leads to completely distorted numbers.  Could Wikipedia's quote fit more to the ONS flawed methodology?

Survivorship bias is the logical error of concentrating on the people or things that "survived" some process and inadvertently overlooking those that didn't because of their lack of visibility. This can lead to false conclusions in several different ways. 

The survivors may literally be people, as in a medical study, or could be companies or research subjects or applicants for a job, or anything that must make it past some selection process to be considered further. 

Survivorship bias can lead to overly optimistic beliefs because failures are ignored, such as when companies that no longer exist are excluded from analyses of financial performance.

Should someone send this link to the incompetent people at the ONS so that they can fix their methodology?

Finally, not only the survivorship bias make you miss direct losses due to businesses closing, but these failures make the surviving businesses more prosperous, artificially making the retails sales numbers bigger.

Let me give an example to illustrate this last point: imagine your local baker closes down because it wasn't a viable business. Yet, some part of their customers will still want to buy bread and would divert their shopping to another other local baker. The local baker might see it sales raise by say 20%, yet that original baker lost 100% of its sales. So the surveyed shop would report a jump in sale of 20%, but the loss of that 100% from the closed-down baker will not be accounted for in the retail sales number.

Debunking Silly Calls of Manipulation on Silver prices and Apple shares

Sprott has not finished making a fool of himself — It's the third time in about a week:

(Bloomberg — 2011-05-12) — [...] Sprott, whose hedge funds and mutual funds mostly invest in energy and metals, said silver was “manipulated down” last week after it fell $6 in 13 minutes on a Sunday evening when trading was light. [...]

Basically, Sprott thinks it's normal for silver to climb $3-4 a day, for 10 days in a row or so; or to double in price in 6 weeks, or triple in 6 months, but if it falls $6 within a single trading session, it's sign of manipulation? Well, it was either a manipulation on the way UP and on the way DOWN, or it's not a manipulation at all. You can't just put claim gains as if you were wining thanks to your claims, and dismiss any loss and call for manipulation...

Fortune magazine reports:

It was 3:48 p.m. on Friday April 29 and traders who had purchased Apple (AAPL) April 29 $350 "calls" -- options that gave them the right to buy Apple shares in blocks of 100 for $350 per share -- were sitting pretty. The stock was trading around $353.50 and those calls were worth more $350 apiece (the difference between the price of the stock and the so-called "strike price" of the option times 100).

Then, in an extraordinary burst of trading -- exacerbated by the rebalancing of the NASDAQ-100 scheduled for the following Monday -- more than 15 million shares changed hands and the stock dropped below the $350 strike price just before the closing bell. Result: The value of those calls disappeared like a puff of smoke.
[...]
How is this manipulation being accomplished? Who is doing it? And why aren't they being punished? Those are very good questions, which we'll try to address in subsequent articles.

Apple Stock manipulated because it dropped $2-3 in a few minutes? Well, just to debunk this silly theory, let me tell you that anybody who has been heavily trading options, or who has studied their pricing behaviour in real markets know that this pegging at expirations day is very real, and volatility very high. Some people make a living of this, and have written books about strategies to apply during those very specific times. I would highly recommend Jeff Augen's Trading Options at Expiration: Strategies and Models for Winning the Endgame.

If you add index rebalancing of a major index such as the Nasdaq on top of it, you end up with very high and unusual activity. For the records, I think Apple used to account for 20% of the whole index. This is enormous.

UK government cuts 500,000 government jobs, asks the BoE to print, print, print

I was about to write a post about Osborne's bright move to cut on 500,000 wasteful and useless public jobs, but then Cameron jumped in and ruined the good karma that was building in the UK:

Oct. 20 (Bloomberg) -- Chancellor of the Exchequer George Osborne detailed the deepest budget cuts ever in Britain, eliminating 500,000 public-sector jobs and imposing a levy on banks to extract the “maximum sustainable” revenue.
[...]
Osborne said he agreed with the Office for Budget Responsibility estimate that 490,000 public-sector workers will lose their jobs over four years. He said much of that will be achievable by not filling vacant posts.

Unfortunately, just a couple days later, Cameron and Osborne started pressuring the BoE (as if they needed to be pressured to do so...) to print, print, and print:

Oct. 22 (Bloomberg) -- Bank of England Governor Mervyn King is under pressure to show just how far he’s willing to go to support Prime Minister David Cameron’s once-in-a-generation austerity drive.

Cameron, 44, has broken with the convention established by the previous Labour government and publicly put the onus on the Bank of England to shore up Britain’s economy. Finance minister George Osborne, 39, said as recently as yesterday that the central bank can “deploy monetary policy tools” to offset the budget squeeze he unveiled this week to cut half a million jobs.

“I’ve always been, if you like, a fiscal conservative but a monetary activist,” Cameron said this month.

King said in early 2008 that it would be “foolish” for politicians to try to influence monetary policy. The financial crisis has nevertheless reshaped the relationship between the central bank, based in London’s eastern financial district, and the Treasury in Westminster.

At stake is the independence that King says helped foster the longest streak of uninterrupted economic growth in two centuries and low inflation in the decade before the crisis hit.

This is one of these OMG!!!! moments... Low inflation? Economic growth? Then, out of the blue, the worst in a lifetime crisis? There was no economic growth to begin with, there was just massive, historic credit inflation. Sometimes, reporters should just avoid putting in there own analysis when the subject is beyond their understanding...

Just about two weeks ago, I wrote my Thoughts on the never seen before actions of the Bank of Japan:

The actions of the Bank of Japan, besides being completely wasteful and destructive, just confirm some of the many facts that we already knew:

• Complete lack of independence from the political power
• Complete lack of understanding of economics
• Complete of integrity

Remember "Central Banks independence myth"? Politicians are making the monetary policy in Japan. The same holds true for the UK, the US, Europe and every other country with an "independent" central bank.

The Monkey Experience

This blog is also about [...] the world that has been pulled over your eyes to blind you from the truth. And sometimes, we are blinding yourself by following conventions and processes without turning on your brain and questioning it.

This is not new, but I felt like sharing it.

So next time remember this simple experience and make sure you know the reason why are doing what you are doing:

Begin with a cage containing five monkeys. Inside the cage, hang a banana on a string and place a set of stairs under it. Before long, a monkey will go to the stairs and start to climb towards the banana. As soon as he touches the stairs, spray all of the other monkeys with cold water. After a while, another monkey makes an attempt with the same result, and all the other monkeys are sprayed with cold water. Pretty soon the monkeys will try to prevent it.

Now, put away the cold water. Remove one monkey from the cage and replace it with a new one. The new monkey sees the banana and wants to climb the stairs. To his surprise and horror, all of the other monkeys attack him. After another attempt and attack, he knows that if he tries to climb the stairs, he will be assaulted.

Next, remove another of the original five monkeys and replace it with a new one. The newcomer goes to the stairs and is attacked. The previous newcomer takes part in the punishment with enthusiasm! Likewise, replace a third original monkey with a new one, then a fourth, then the fifth.

Every time the newest monkey takes to the stairs, he is attacked. Most of the monkeys that are beating him have no idea why they were not permitted to climb the stairs or why they are participating in the beating of the newest monkey. After replacing all the original monkeys, none of the remaining monkeys have ever been sprayed with cold water. Nevertheless, no monkey ever again approaches the stairs to try for the banana. Why not? Because as far as they know that's the way it's always been done around here.

Central Banks Market Tinkering & The Unintendended Consequence - pt 2

Another unintended and costly consequence of the Fed tinkering the rates and changing the rules overnight and panicking has been spotted by Mish:

Why Banks Aren't Lending

• Banks are insolvent.
• Banks do not trust each other.
• There can be no trust with suspended mark to market accounting. No one believes what assets on balance sheets are really worth and there is no way to find out.
• By suspending mark to market accounting the SEC heightened mistrust.
• As part of the TARP passed by Congress, the Fed is paying interest on reserves.
  

Bernanke wanted ability to pay interest on reserves to put in a floor on interest rates. I am quite certain he believed he could hold rates at 2 with this provision. It did not work that way did it? The Fed Fund rates is now at 1.50 and interest rates futures suggest it is headed to 1.00 by March.

But an easily seen (yet still unseen by the Fed) ramification of paying interest on reserves is the fact that banks can collect interest by leaving money on deposit at the Fed rather than lending it out [emphasis mine].

Why should banks risk lending money to consumers or bank when instead they can deposit money at the Fed and collect interest? Thus, paying interest on reserves not only failed to put in a floor on rates, it also gave banks one huge reason not to lend.

This cancerous activity is now starting to get extremely counterproductive.

What Bill Gross wants, Bill Gross gets

Yesterday (I mentioned it here):

(Reuters) - Bill Gross, head of the world's largest bond fund, on Monday urged the U.S. Federal Reserve to take more dramatic steps to jump-start paralyzed credit markets, including direct purchases of commercial paper.

[...] Gross, chief investment officer at Pacific Investment Management Co, wrote in his October letter to investors released Monday afternoon.

Today:

Oct. 7 (Bloomberg) -- The Federal Reserve Board, invoking emergency powers, will create a special fund to backstop the U.S. commercial paper market in an effort to support the financing needs of corporations.

One of the axioms of the Fed is the following:Take from the people to give to Bill Gross.

Fed's stealth cut of interest rates

I mentioned it at several occasions previously (here for example): the Fed is going to cut rates to 1% and is shooting it's very last bullets and it is now confirmed by Bloomberg: Fed Sets Floor Below Rate Target, Engineering `Stealth' Cut

The Fed may now pay interest on bank reserves while it floods financial markets with liquidity, pushing down the overnight lending rate by about 0.75 percentage point to 1.25 percent.

``Absolutely, it's a stealth easing,'' said John Ryding, founder and chief economist of RDQ Economics LLC in New York and a former Fed researcher.

The announcement, and a Fed decision to double the auction of cash to banks to as much as $900 billion, failed to avert a 3.9 percent decline yesterday in the Standard & Poor's 500 Index.

The next step? Comrade Gross is asking the Fed to start buying commercial papers and unsecured papers. Soon the Fed will own all the US dept securities, and is likely to also buy those abroad, since Paulson has to bail out China. Bernanke must be happy, this will bring a lot of profits for the Fed while it doesn't cost anything to print electronic money!

Comrades Bush, Paulson and Bernanke Welcome You to the USSRA (United Socialist State Republic of America)

Now that the markets are getting a little bit more sober, after the crazy and irrational binge of yesterday, all of the sudden, Mr Market understood suddenly that wiping out the shares of Fannie and Freddie wasn't such a great idea after all. With approximately $15 billion of market cap for the common stocks (combined market cap of Fannie and Freddie) and more importantly, $40 billion of preferred shares held by major investment banks and financial institutions in the US, this other unintended consequence has wiped out the last remaining capital cushion of some major financial institutions, such a Lehman Brothers (which shares collapse by about 49% today after having fallen 15% the previous day) and Washington Mutual (down about 20% today). They are probably going to collapse in the next week or two. The other consequence is the deficit of the federal government which hit $407 billion (estimation, excluding the Freddie and Fannie bailout! source).

Given all these bad news in the US and the bailout which will increase the US debt by immediately by $200 billion (and probably many times that amount during the next few years), the rally in the US dollar seems more and more irrational or being the result of central bank intervention as the guys from SeekingApha believe.

Comrades Bush, Paulson and Bernanke Welcome You to the USSRA (United Socialist State Republic of America)

This is the title Nouriel Roubini gave to his latest post today, where he really doesn't try to be politically correct with the events of the several past months:

Today instead the US has performed the greatest nationalization in the history of humanity. By nationalizing Fannie and Freddie the US has increased its public assets by almost $6 trillion and has increased its public debt/liabilities by another $6 trillion. The US has also turned itself into the largest government-owned hedge fund in the world: by injecting a likely $200 billion of capital into Fannie and Freddie and taking on almost $6 trillion of liabilities of such GSEs the US has also undertaken the biggest and most levered LBO (“leveraged buy-out”) in human history that has a debt to equity ratio of 30 ($6,000 billion of debt against $200 billion of equity).

So now Comrades Bush, Paulson and Bernanke (as originally nicknamed by Willem Buiter) have now turned the USA into the USSRA (the United Socialist State Republic of America). Socialism is indeed alive and well in America; but this is socialism for the rich, the well connected and Wall Street. A socialism where profits are privatized and losses are socialized with the US tax-payer being charged the bill of $300 billion.

[...]

This is the biggest and most socialist government intervention in economic affairs since the formation of the Soviet Union and Communist China. So foreign investors are now welcome to the USSRA (the United Socialist State Republic of America) where they can earn fat spreads relative to Treasuries on agency debt and never face any credit risks [...]

So Comrades Bush and Paulson and Bernanke will rightly pass to the history books as a troika of Bolsheviks who turned the USA into the USSRA. Fanatic zealots of any religion are always pests that cause havoc and destruction with their inflexible fanaticism; but they usually don’t run the biggest economy in the world. But these laissez faire voodoo-economics zealots in charge of the USA have now caused the biggest financial crisis since the Great Depression and the nastiest economic crisis in decades. So let them be shamed in public for their hypocrisy and zealotry that has caused so much financial and economic damage.

Of market interventions, bailouts and unintended consequences

While the markets are celebrating with euphoria what is known as the biggest bankruptcy in the history, a succession of lies and a market manipulation and a huge con orchestrated by the managers of Fannie and Freddie, Karl Denninger points us to the unintended consequences that this event is now triggering:

Thirteen ``major'' dealers of credit-default swaps agreed ``unanimously'' that the rescue constitutes a credit event triggering payment or delivery of the companies' bonds, the International Swaps and Derivatives Association said in a memo obtained by Bloomberg News today. Market makers for the privately traded contracts will discuss how to settle them in a conference call at 11 a.m. in New York, the document said. (source: Bloomberg).

Given the trillions of USD in notional terms in the CDS markets, this will get interesting and potentially devastating for the financials institutions which insured the bonds...

[UPDATE] Mish also has posted his point of view with additional details and info here.

Independ movies to wake up America (and the rest of the world)?

Well, it's the week-end, so you need to relax, why not avoiding turning our brains off during the week-ends and go and watch these eye-opening movies? It looks like the perfect timing for a wake-up call in the US, with the elections etc. and independent movies are trying to do what the regular media is not doing.

• I.O.U.S.A boldly examines the rapidly growing national debt and its consequences for the United States and its citizens. Burdened with an ever-expanding government and military, increased international competition, overextended entitlement programs, and debts to foreign countries that are becoming impossible to honor, America must mend its spendthrift ways or face an economic disaster of epic proportions.
• Trouble The Water Winner of the Grand Jury Prize at the 2008 Sundance Film Festival, this astonishingly powerful documentary is at once horrifying and exhilarating. Directed and produced by Fahrenheit 9/11 and Bowling for Columbine producers Tia Lessin and Carl Deal, Trouble the Watertakes you inside Hurricane Katrina in a way never before seen on screen. The film opens the day before the storm makes landfall—just blocks away from the French Quarter but far from the New Orleans that most tourists knew. Kimberly Rivers Roberts, an aspiring rap artist, is turning her new video camera on herself and her 9th Ward neighbors trapped in the city. “It’s going to be a day to remember,” Kim declares.
• Stealing America, vote by vote For more than thirty years, exit polls accurately predicted election results. Over the last ten years that reliability has disappeared. What’s going on? The last two presidential elections both came down to a relatively small number of votes, and in both elections the integrity of the voting process has been called into question. With the upcoming election looking to be similarly close, the time has come to ask the questions: What happened in 2000 and 2004? What, if anything, has changed since? And what can be done to ensure a fair and honest tabulation of votes in 2008?
• Flow Irena Salina's award-winning documentary investigation into what experts label the most important political and environmental issue of the 21st Century - The World Water Crisis. Salina builds a case against the growing privatization of the world!s dwindling fresh water supply with an unflinching focus on politics, pollution, human rights, and the emergence of a domineering world water cartel.
  

GDP, Gold, Silver, Consiparicy Theories as per Mish.

Mish has posted as usual, interesting and insightful points of view in his blog.

• The Great Gold, Silver Conspiracy Explained
• Conspiracy Theory Psychology
• GDP Much Weaker Than Headline Numbers

All these articles are very interesting and insightful. Personally, I don't draw a straight conclusion about whether there is a conspiracy or not and I buy the physical and take delivery of it so that I cannot sell them on the short term and am planning on keeping them for next several decades. The lower the price of gold/silver/platinum/palladium/rhodium, the better the buying opportunity is for me.

I am also interested in opposing points of views and enjoy reading Mish.

BUT I find it a little confusing that he spends so much time debunking conspiracy theories, to then post an article saying the GDP figures cannot be trusted and that the US government is manipulating the data.

My opinion is:

• Governments are manipulating (and have been for the past many years) the inflation figures by a huge extent (and hence manipulating GDP as well) and also employment figures. Of course, the most manipulated figures and lies come from the US government and the duo G. W. Bush/Hank Paulson
  
• Corporations, specially financial companies, are manipulating their income and balance sheets
• The Central Banks manipulating the rates and the value of the currency and hence stealing from the savers and destructing the currencies in order to save banks and a financial system that brought all these issues.
  
• The BoE is printing like crazy as well, and in secrecy...
  
• It is suspicious that Oil, Gold, Silver crash the very month when the Fed needs to see lower inflation in order to be able to lower rates...

Wait and See.

CFTC data suggests gold and silver market manipulation by banks

Rob Kirby published an article spotting a huge anomaly on the Gold and Silver positions held by the US banks. From July to August, short positions in Silver increased by 500%, rising from 6,200 to almost 34,000 contracts and Gold short positions increased about 1,100%, rising from about 7,800 to more than 86,000.

The notional for Gold contracts is 100 ounces while the notional for Silver contracts is 1000 ounces. So basically, these US banks are short about 34,000,000 ounces of silver and about 8,600,000 ounces of Gold.

Here are the relevant CFTC links: July, August

Same applies for non U.S. banks.

US administration still trying to hide the recession

Alright, so today we had the great relief to see that the US GDP rose by 1.9%
Pfeeew!!! No recession, the economy is sound and growing!

But, the market was expecting a lot more than that (2.3% consensus) ; which also rises the question about how much the market can be that irrational.

Bur more importantly, the Chain Deflator used to deflate the GDP from inflation has dropped to 1.1% from 2.6% in the previous quarter.

With inflation rising at record rate and being very hide, it's amazing to see a deflator of 1.1% and see it drop.

Well done! That's creative accounting and artistic number reporting!

Mish exposes BLS BS

From this post, Mish exposes what is really happening in the US compared to the official figures from the BLS.

Commercial filings for the first half of 2008 are up 45 percent from last year, as the national climate for commerce continues to deteriorate amid rising energy and food costs, mounting job losses, tighter credit and a reticence among consumers to part with discretionary income.

From April through June, 15,471 U.S. businesses called it quits, according to data from Automated Access to Court Electronic Records, an Oklahoma City bankruptcy management and data company.

It was the 10th straight quarter that business bankruptcy filings have increased. Nearly 29,000 companies filed in the first half of 2008. Another 60,000 to 90,000 others probably have closed, because roughly two to three businesses fold for every one that files for bankruptcy, said Jack Williams, resident scholar at the American Bankruptcy Institute.

[...]

The BLS reported net expansion of new businesses in all but 3 of the past 15 months. January and July are months in which they partially correct for the ridiculous assumptions made in the other months.

Too many things happening this week

I will need to sum up all this:
- SEC manipulating the markets
- Freedie Mac Willing to raise 10 b$ as share sales while it's market value is 5 b$ (after a short squeeze due to the SEC actions resulting in a 40-50% rise of the stock price in 2 days)
- Kucinich on his way for impeaching Bush
- Citi and Merrill making new and colossal write-downs
- Bunning vs. Paulson (See Mish and also a video on YouTube - found on Tanta's posts)
- Housing starts incorrectly interpreted as boosted by the market while the figures are just lifted by building code change (see also NYTimes: Homes Data Gets a Lift, by a Fluke)

BofA/Coutrywide wrote the Dodd-Shelby Bailout

I am simply copy-pasting Mr Mortgage's post here, as the news must get out there and what is happening in this non-democracy that is the US is just outrageous:

This $300 billion Dodd-Shelby bailout is an absolute crime. It bails out the banks by limiting their loss to 10%; a joke since many of the problem areas like CA are down as much as 30% already on the median in the past 12-months and the rate of acceleration of the price declines are picking up steam. The subprime crisis is nearly over and now Prime, Alt-A, Pay Option ARMs and Home Equity Lines/Loans are failing. If they get this $300 billion passed, another $1 trillion+ will have to come on its heels for all of the other bailouts.

This needs to be fought and/or vetoed or it’s potentially $300 billion of taxpayer money down the toilet. Bernanke already cost global citizens enough by ratcheting down rates the most in the shortest amount of time in history, sparking a massive inflation wave in order to save the very investment banks who started all of this in the first place. Now, unless we all do something and get this story out there, another $300 billion will go up in smoke.

The National Review Online has obtained an internal 64 page document on Bank of America letterhead dated March 11th that matches the Dodd-Shelby Bill almost identically.

First, we find out that Dodd is a Countrywide “insider” who claimed ignorance over being given special considerations saving him $75k over the life of his loan and is so ignorant he didn’t read his loan papers. Now, we find out that BofA, who is supposed to be closing on their Countrywide purchase in the next few months, wrote the Bill for him.
If this Bill passes, BofA’s Countrywide buyout is much more palatable and the $60+ billion in toxic loans are mostly covered by the taxpayers. This stinks to high-heaven. its no wonder why BofA is so comfortable closing the CFC deal, which with will cost them at least $40 billion when considering the value of theie toxic assets (loans) vs massive debt.

And, wait a sec, there is more and worse !!!

This just in, found by a TickerForum memeber… www.FreedomWorks.org says that “Senate Housing Bill Requires eBay, Amazon, Google, and all Credit Card companies to Report Transactions to the Government”.

“Washington, DC - Hidden deep in Senator Christopher Dodd’s 630-page Senate housing legislation is a sweeping provision that affects the privacy and operation of nearly all of America’s small businesses. The provision, which was added by the bill’s managers without debate this week, would require the nation’s payment systems to track, aggregate, and report information on nearly every electronic transaction to the federal government.

FreedomWorks Chairman Dick Armey commented: “This is a provision with astonishing reach, and it was slipped into the bill just this week. Not only does it affect nearly every credit card transaction in America, such as Visa, MasterCard, Discover, and American Express, but the bill specifically targets payment systems like eBay’s PayPal, Amazon, and Google Checkout that are used by many small online businesses. The privacy implications for America’s small businesses are breathtaking.”

Please read the original post for more info and also spread the word.

Data on Housing Relief Questioned

David Cho and Renae Merle, Washington Post Staff Writers, report that:

Banks and mortgage firms are providing questionable information about the number of subprime mortgage borrowers they are helping and the rate at which homeowners are falling into foreclosure, according to the top regulator for the nation's largest banks.

Those details are crucial for regulators to gauge the severity of the housing crisis and evaluate the effectiveness of the steps lenders are taking to address the problems.

(hat tip Tanta@CalculatedRisk)

"Wildly Creative" employment report in the US [updated]

I am happy to see that I am not the only one to consider the figures coming out of the BLS as total rubish and see that actually quite few people seem to be concerned about the way employment figures are calculated by the BLS in the US.

I will just relay Mish's posts here. On the 5th of June 2008, he wrote:

Friday we get to see how creative the folks at the BLS get with their birth/death model. Whatever it is, the mainstream media is likely to put lipstick on a pig.

And we got the confirmation on the 6th of June's employment report, and Mish's comment:

Once again the BLS should be embarrassed to report this data. Its model suggests that there was 42,000 jobs coming from new construction businesses, 23,000 jobs coming from professional services, and a whopping 217,000 jobs in total coming from net new business creation. The economy has slowed to a standstill and the BLS model still has the economy expanding quite rapidly.
[...]
This report was the 6th consecutive disaster, and 5th consecutive contraction. Service jobs were only positive because 17,000 useless government jobs were created. Somehow we are supposed to believe the economy is not in recession.

For those unfamiliar with the way the BLS "counts" the number of unemployed people, and their death/birth model, you will learn a great bunch of things from Mish's post.


Here are some more figures, as found in "Employment Situation Worsening" by Anthony Cherniawski, The Practical Investor, LLC | June 9, 2008:

The CES Birth/Death Model added 217,000 hypothetical jobs in May, so the real number may have been –266,000 in May instead of the –49,000 enumerated by the BLS. According to the government statistics, we added 77,000 hypothetical leisure & Hospitality jobs and 42,000 hypothetical Construction jobs in the month of May. At the same time, those marginally attached to the workforce (seeking full-time work, but only employed part-time) increased in May.

In summary, the U.S. lost jobs for a fifth month and the unemployment rate rose by the most in more than two decades, as an influx of students into the workforce drove the biggest jump in teenage joblessness since at least 1948.

It's official, there is no inflation in the US

Core CPI rose 0.1% in April 2008 while the CPI rose 0.2%.
I am happy to see that everything is going just fine in a perfect world. Or is it?

Looks like I am not the only one believing that all the figures are false

In his editorial titled Opportunity on a Silver Platter Jim Willie explains why he believes most the figures including GDP and unemployment rate have been manipulated and why the current recovery is a "sucker's recovery" (the new buzz word I am hearing everywhere for the past few days).