Ulla Johnson Bohemian macrame woven cotton high waist belt

A great belt by Ulla Johnson.  This was bought a couple of years ago.  Retailed around $150.  Color: navy.  Size: Petite/extra small (US 0-2), meant to be worn at true waist/high waist.  In excellent condition.  And, can be worn both ways as shown in photos.

Asking: $30 + shipping

In Memory of Spock: Live Long and Prosper; Is He or Isn't He? Fish Tomatoes, Hand Transplants, Sci-Fi vs. Reality

One of my favorite characters in TV history was Star Trek's "Spock". Yesterday, Leonard Nimoy, Spock of ‘Star Trek,’ Died at 83.

Leonard Nimoy, the sonorous, gaunt-faced actor who won a worshipful global following as Mr. Spock, the resolutely logical human-alien first officer of the Starship Enterprise in the television and movie juggernaut “Star Trek,” died on Friday morning at his home in the Bel Air section of Los Angeles. He was 83.

His wife, Susan Bay Nimoy, confirmed his death, saying the cause was end-stage chronic obstructive pulmonary disease.

Mr. Nimoy announced last year that he had the disease, attributing it to years of smoking, a habit he had given up three decades earlier. He had been hospitalized earlier in the week.

His artistic pursuits — poetry, photography and music in addition to acting — ranged far beyond the United Federation of Planets, but it was as Mr. Spock that Mr. Nimoy became a folk hero, bringing to life one of the most indelible characters of the last half century: a cerebral, unflappable, pointy-eared Vulcan with a signature salute and blessing: “Live long and prosper” (from the Vulcan “Dif-tor heh smusma”).

There's much more in the article. Inquiring minds may wish to take a look.

Is He or Isn't He?

Nimoy is author of two contradictory autobiographies:

• “I Am Not Spock,” published in 1977
 
• “I Am Spock,” published in 1995.

Vulcan Greeting



Nimoy Explains Origin of Vulcan Greeting



Link if video does not play: Leonard Nimoy Explains Origin of Vulcan Greeting.

In Memory of Leonard Nimoy

Science Friday has an interesting article Memory of Leonard Nimoy.

In an enclosed video in the above link, Nimoy talks with Ira Flatow, physics professor John Kramer, and science fiction writer Robert Sawyer about the relationship between science and science fiction.

Sci-Fi vs. Reality

The Science Friday video was from 1998.  The video mentioned among other things, artificial hands and transplanting fish genes into tomatoes to make them more resistible to frost.

Artificial hands are here. Fish genes in tomatoes?

Let's investigate hand transplants and "fish tomatoes" in more detail.

Hand Transplants

Hand transplants are a success. The March 27 issue of BBC Future has the story of Rose Eveleth who says "I had a double hand transplant".

Rose considers the operation a success although it required much intensive therapy.

Genetically modified tomatoes were not a success to say the least. A couple of stories will explain.

Does Your Tomato Have Sole?

UC Santa Barbara asks Does Your Tomato Have Sole? If So, Is It Still a Veggie?

“Fish tomatoes,” are transgenic tomatoes that have been genetically engineered with a gene from winter flounder, which are also known as lemon sole. Fish tomatoes have become an icon in the debate over Genetically Modified Foods, especially in relation to the perceived ethical dilemma of combining genes from different species.

Killer Tomatoes

The above article explains the intent. The following article will explain the success or failure of the experiment.

Please consider Throwing Biotech Lies at Tomatoes

Remember the pictures of the fish tomatoes? For years they were an unofficial emblem of the anti-GMO movement. They depicted how anti-freeze genes from an Arctic fish were forced into tomato DNA, allowing the plants to survive frost. Scientists really did create those Frankentomatoes, but they were never put on the market. (Breyers low-fat ice cream, however, does contain anti-freeze proteins from Arctic fish genes, but that's another story.)

The tomato that did make it to market was called the Flavr Savr, engineered for longer shelf life. Fortunately, it was removed from the shelves soon after it was introduced.

Although there are no longer any genetically modified (GM) tomatoes being sold today, the FDA's shady approval process of the Flavr Savr provides a lesson in food safety—or rather, the lack of it—as far as gene-spliced foods are concerned. We know what really went on during the FDA's voluntary review process of the Flavr Savr in 1993, because a lawsuit forced the release of 44,000 agency memos.

Bleeding stomachs

Calgene, the tomatoes' creator-in-chief (now a part of Monsanto), voluntarily conducted three 28-day rat feeding studies.

The rats that ate one of these Flavr Savr varieties probably wished they were in a different test group. Out of 20 female rats, 7 developed stomach lesions—bleeding stomachs. The rats eating the other Flavr Savr, or the natural tomatoes, or no tomatoes at all, had no lesions.

If we humans had such effects in our stomachs, according to Dr. Arpad Pusztai, a top GMO safety and animal feeding expert, it "could lead to life-endangering hemorrhage, particularly in the elderly who use aspirin to prevent thrombosis."

Oh yeah, some rats died

The team that had obtained the formerly secret FDA documents sent the full Flavr Savr studies to Dr. Pusztai for review and comment. While reading them, he happened across an endnote that apparently the FDA scientists either did not see or chose to ignore. The text nonchalantly indicated that 7 of the 40 rats fed the Flavr Savr tomato died within two weeks.

But the endnote summarily dismissed the cause of death as husbandry error, and no additional data or explanation was provided. The dead rats were simply replaced with new ones.

When I discussed this finding with Dr. Pusztai over the phone, he was beside himself. He told me emphatically that in proper studies, you never just dismiss the cause of death with an unsupported footnote. He said that the details of the post mortem analysis must be included in order to rule out possible causes or to raise questions for additional research. Furthermore, you simply never replace test animals once the research begins.

Questionable follow-up study

Calgene repeated the rat study. This time, one male rat from the non-GM group of 20, and two females from the GM-fed group of 15, showed stomach lesions. Calgene claimed success. They said that the necrosis (dead tissue) and erosions (inflammation and bleeding) were "incidental" and not tomato-related.

In reality, the new study was not actually a "repeat." They used tomatoes from a different batch and used a freeze-dried concentrate rather then the frozen concentrate used in the previous trial. Dr. Martineau explained to me that by freeze-drying, it allowed them to put more of the concentrated tomato into each rat.

In spite of the outstanding issues, the political appointees at the FDA concluded that the lesions were not related to the GM tomatoes. To be on the safe side, however, Calgene on its own chose not to commercialize the tomato line that was associated with the high rate of stomach lesions and deaths. The other line went onto supermarket shelves in 1994.

Faulty science rules the day

This was the very first GM food crop to be consumed in the US. It was arguably the most radical change in our food in all of human history. It was the product of an infant science that was prone to side-effects. Yet it was placed on the market without required labels, warnings, or post-marketing surveillance. One hopes that the FDA would have been exhaustive in their approval process, holding back approvals until all doubts were extinguished. But the agency was officially mandated with promoting biotechnology and bent over backwards to push GMOs onto the market. As a result, their evaluation was woefully inadequate.

Federal Death Agency

I was at a Casey conference last September and Doug Casey commented the FDA (Food and Drug Administration) ought to be reclassified as the Federal Death Agency.

Those articles help explain why.

I conclude "Live long and prosper" ... and don't eat "fish tomatoes".

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Greece Negotiations Resume Again; "Constructive Ambiguity"; Schäuble Outmaneuvered!

On Friday, the German Bundestag Backed the Greek Bailout Extension. Ahead of the vote, many commented that Greece collapsed.

It's not all that simple as I have explained.

The likely explanation for the alleged collapse of Syriza is Greece did not have a primary account surplus. Had it left now, it would have been forced off the euro, violating a campaign promise of Syriza.

Caving in required temporary caving in of other campaign promises.

Both Sides Got Something

The four-month extension gave Greece a better chance to prepare for default while allowing Greece to stay on the euro. The extension also gave the ECB four more months to prepare for Grexit or default.

Properly analyzed, both sides got something. Isn't that what usually happens in complex negotiations?

Third Bailout Needed

Meanwhile, it's pretty clear that Greece needs yet another bailout.

I wrote about the bailout issues and the primary surplus issues on February 11 in Third Greek Bailout? Another €53.8 Billion Needed? Primary Account Surplus Revisited.

"Real" Negotiations Begin

Given that Greece does indeed need a third bailout, today's headline story should not be at all surprising: Greece Seeks Negotiations on ECB Bond Repayment.

Greece called into question on Saturday a major debt repayment it must make to the European Central Bank this summer, after acknowledging it faces problems in meeting its obligations to international creditors.

Finance Minister Yanis Varoufakis said Athens should negotiate with the ECB on 6.7 billion euros ($7.5 billion) in Greek government bonds held by the Frankfurt-based bank that mature in July and August.

Varoufakis did not say what he hoped to achieve in any talks, but he accused the ECB of making a mistake in buying the bonds around the time Greece had to take an EU/IMF bailout in 2010.

"Shouldn't we negotiate this? We will fight it," he said in an interview with Skai television. "If we had the money we would pay ... They know we don't have it."

With tax revenue falling far short of target last month and an economic recovery faltering, the state must repay an IMF loan of around 1.6 billion euros in March and find 800 million in interest payments in April. It then needs about 7.5 billion in July and August to repay the bonds held by the ECB and make other interest payments.

Varoufakis, who has staged a media blitz in recent days to sell the euro zone deal to the Greek people, singled out former ECB President Jean-Claude Trichet for criticism.

"One part of the negotiations will be on what will happen to these bonds which unfortunately and wrongly Mr Trichet bought," he said. "I see it as a mistake - but the ECB did this with the aim of keeping us in the markets in 2010. They failed."

Varoufakis argued that if the bonds had remained in investors' hands, their value would have been cut by 90 percent under a restructuring of Greece's privately held debt in 2012, reducing the burden on the state.

The ECB bought the bonds at a deep discount and made large profits because their value rose as the euro zone debt crisis eased. Under Greece's second bailout deal, these profits were due to be returned to Athens to help it repay debt.

Athens received a partial payment in 2013 but euro zone countries are withholding a further 1.9 billion euros pending the review of Greece's economic plans. Varoufakis wants this money sent directly to the IMF to meet the March payment.

Curious Timing

Although the above headline and details are not surprising, the timing may appear somewhat curious. Even though the Bundestag signed off, the eurogroup as a whole has not ratified the extension.

Today's call for further negotiations ahead of that vote are sure to raise more than a few eyebrows.

Why now?

I have two possible game theory explanations

1. Varoufakis wants to quell Greek parliament sentiment that Syriza collapsed, and he feels the need to do that right away
2. Syriza really does not care if it is forced out of the eurozone as long as Greece can 100% without a doubt place the blame elsewhere

Advocates of position number two may argue that by caving into the demands and getting Germany to go along, it will not appear to anyone as if Syriza was responsible for Grexit, should the eurogroup parliament reject the extension.

Which is more reasonable?

As a fan of Occam's Razor (the rationale that requires the fewest assumptions is most often the correct explanation), I vote for number one.

Option 1 is self-explanatory. Option 2 requires a lie by Syriza (that it does not really want to stay on the euro), and a complex way to make that happen, absolving themselves of blame because the Greek population as a whole does want to keep the euro.

Constructive Ambiguity

As a result of the timing, I expect still more bickering accompanied by still more warnings. Nonetheless, the extension will be approved.

Also in support of theory number one is Intentional Vagueness.

Greece's finance minister says the country's agreement with its European creditors to extend its international loan agreement by four months was intentionally vague to ensure the European countries that need to have it ratified by their parliaments would be able to do so.

Greece was granted the extension by its European creditors last week in exchange for a commitment to budget reforms Varoufakis laid out in a document sent to Brussels. The list is a policy plan but does not contain specific measures or figures.

Varoufakis said that "we are very proud of the degree of ambiguity. And I use a term, constructive ambiguity."

Using Time Wisely

In the next four months, the real negotiations begin. Expect Syriza to announce it really did not cave in at all, because the document is purposely vague.

Let's revisit a couple of statements from my February 22 article Tspiras Claims to have "Won a Battle, Not the War"; Greece to Combat Tax Evasion; Illusion Shattered; Another Bailout?

1. "Once you get them into the safe space for the next four months, there'll be another set of discussions which will effectively involve the negotiation of a third program for Greece," said Irish Finance Minister Michael Noonan.
 
2. German finance minister Wolfgang Schäuble rubbed Greek capitulation in Tsipras' face with his comment "The Greeks certainly will have a difficult time to explain the deal to their voters. As long as the programme isn’t successfully completed, there will be no payout."

Schäuble Outmaneuvered 

In retrospect, number two is rather amusing. How will Syriza explain this to the Greeks?

Like this: We got a four-month extension in return for vague promises at our discretion. Essentially we got the extension for free. Now we can negotiate payments to the ECB and IMF! 

I suggest Schäuble was outmaneuvered by game theory book author Varoufakis. (See Mish's Game Theory Math)

If Syriza uses that time wisely, it can get back to a state of primary account surplus. And if it does, Greece will be in a far better position to tell the much hated Troika where to go.

I still have odds of default (with or without Grexit), well over 50% by June. Which one depends on the state of primary account surplus in June when this extension ends.

All that happened in February was approval of a four month extension giving both sides time to prepare for the inevitable.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

LAST CALL The Row (Mary Kate & Ashley Olsen) Cream Loose Knit Sweater

LAST CALL

Open Knit Sweater by The Row (Mary Kate & Ashley Olsen's high fashion line).  I can't find the style name of this, but it is a long sleeve crew neck with a loose knit and pearlescent thread (see the close-up pics for best details).  Worn only a few times so is in great condition!  Perfect year-round sweater because it is a bit heavy but still has an airy feel to it because of the knit.  Only tag on this is The Row Made in USA gold chain at neck so go by measurements - The Row items are meant to be worn loose and relaxed so keep that in mind.  No fabric tag but feels like maybe a substantial linen or cotton.  Coming to you clean and ready to wear (I machine washed in a lingerie bag and lay flat to dry and that works perfectly).  The Row is super expensive so get a deal here on a minimally worn sweater!

Measures: 23.5" armpit to armpit (laying flat but not stretched) and 22" should to bottom.

BUY HERE FOR $165 $150 (US Shipping Included)

Listing ends in one week.  Buyer must pay Paypal fees.  Please email themchenryoutdoor at gmail with any questions.  Thanks!  If you are an international buyer, please let me know what country in the description so you can be quoted a shipping rate.

LAST CALL Theory Heather Gray Speckled Wool / Cashmere Scarf

LAST CALL

Theory Scarf.  Heather Gray Mixed With Darker & Lighter To Make A Speckled Appearance.  65% Wool, 35% Cashmere.  Purchased Years Ago & Has Not Been Worn For At Least Two Years So Off It Goes.  Super Soft With Slouchy, Rolled Ends To Give It A Nice, Relaxed Look.  Slight Pilling, But Overall In Great Condition With Tons Of Wear Left.  Doesn't Photograph Great, But Really Beautiful On.

Measures: 80" Total Length / 9" Width

BUY HERE FOR $38 $32 $27 (US Shipping Included)

Listing ends one week from today.  Buyer must pay Paypal fees.  Please email themchenryoutdoor at gmail with any questions.  Thanks!  If you are an international buyer, please let me know what country in the description so you can be quoted a shipping rate.

LAST CALL Clarks Originals Crepe-Sole Slip Ons - SIZE 7

LAST CALL

Clarks Originals Crepe-Sole Slip On Shoes.  Sand Colored Suede.  I've Had These For Years But Have Not Worn Them In A While So Hopefully Someone Else Will Enjoy Them.  If You've Worn Clarks Originals, You Know That They Are Crazy Comfortable, Especially With The Crepe Sole And Are Perfect For Completing Your Tomboy Chic Fall Ensemble (i always wore these with a wool sweater and jeans).

These Are Well-Loved (thus the cheaper price) But Have Lots Of Life Left In Them.  Clarks Doesn't Make This Style Anymore So Might Be Your Last Chance To Buy. 

SIZE: Women's Size 7

BUY HERE FOR $40 $34 $30 (US Shipping Included)

Listing ends one week from today.  Buyer must pay Paypal fees.  Please email themchenryoutdoor at gmail with any questions.  Thanks!  If you are an international buyer, please let me know what country in the description so you can be quoted a shipping rate.

On Dynamic Scoring

Click here to read my column in Sunday's New York Times.

Ace & Jig Dress

Sorbet Mini Dress by Ace & Jig. Fabric is Pacifico, a navy blue with white stripes. It is a loose fitting and easy pull-over-the-head dress. 100% cotton, 3/4 sleeve, elastic scoop neckline and gentle smocked elastic waist. Can also be worn as an off the shoulder style. I've tried it on several times to try and make it work, but it is too big for me. This is a size small, but it runs large. Because of the loose style, it is difficult to measure. It is 35' from shoulder to bottom hem and the smocked waist is 16" measured flat on one side (unstretched).

Paid: $179

Asking: $100 + shipping
Listing ends: one week from today

Please leave your email in the comments section if interested. Thanks for looking!

Panic in Ukraine Over Food, Empty Stores and Protests; Strategic Food Reserve Empty

Here's a brief update from "Ellen" who lives in Lviv, a city in Western Ukraine.

Hello Mish

We have quite a panic over the collapse of currency. People buy any food product that can be stored. Everyone wants to rid of Hryvnia. We haven't seen anything like this since 1991 when the Soviet Union collapsed. Stores are empty.

It is hard to say what exchange rate this days, somewhere between 34 and 42

There were riots in downtown today. A group of protesters was beaten up by police. They marched through downtown and gave a last warning to government officials. Next time they said they will shoot some officials.

Ukraine is on a brink, but the West is not in a hurry to give us money. Perhaps they want something.  Maybe they know the money will end up with corrupt officials who will steal it.

Either way, the few billion dollars they promised in March won't save our economy, not after this panic started.

Best wishes
Ellen

Strategic Food Reserve Empty

A curious thing happened today. To quiet protests over food, president Petro Poroshenko ordered the minister of the food reserve to fill the shelves of stores with flour, sugar, canned meat, and buckwheat from the reserve.

Well guess what? There was no food in the reserve. It has either been looted (like the vanishing gold), or it was fed to the army.

Here is a nice translation from Russian by J. Hawk: Ukraine's Strategic Food Reserve...Runs Out Of Food.

Ukrainian food prices are rising at a rate faster than in the ‘90s. But the Yatsenyuk government is still blaming the situation on the ignorance of the population and speculation by supermarket chains.

They used to blame currency exchangers, now they are blaming supermarket directors. However, you can’t feed the people with such tales.

The government’s “economy block” hastily summoned the director of the Ukrainian State Reserve Vladimir Zhukov. They demanded that he open the storehouses and fill the shelves with flour, sugar, canned meat, and buckwheat from its stores. In response the keeper of Motherland’s strategic stores revealed a terrible military secret to Yatsenyuk and Poroshenko: the storehouses are empty.

It would seem Ukraine’s Black Hour is here.

J.Hawk's Comment: There indeed were earlier reports that the strategic reserve was being "unsealed" to support military operations on the Donbass. The army has to eat, after all, and maintaining several tens of thousands of soldiers for nearly a year is likely to make a dent. The second factor was the junta's desperate need to earn hard currency to somehow plug up the many budget holes opened up by its adoption of "European Choice" neoliberal economic policies. Therefore anything that could be sold, was sold, including Mariupol's huge grain reserves. Finally, there's the small matter of corruption. One gets the impression Ukraine is a giant organized style "bust-out" operation, whose objective is to stash as much loot in foreign accounts and then leave the mess for someone else to clean up. To say that the Kiev junta has some kind of a strategy would be giving them entirely too much credit. It's a collection of loosely coordinated individuals pursuing their own venal agendas and living hand-to-mouth, without any thought given to Ukraine's long-term prospects.

Here is a link to the original article that J. Hawk translated: Ukraine State Reserve Doesn’t Even Have Buckwheat. Everything was Stolen.

Buckwheat is a Russian staple. I believe, "out of buckwheat" would be the equivalent of Japan being out of rice.

Mish note: One person accused me of bias over the word "junta". I did not choose the word. I quoted someone, just as I quote Colonel Cassad.

In context, it certainly appears J. Hawk went out of his way to not just translate, but to mention the possibility reserves were unsealed to feed the army.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

"NowCast" - The Evolution of GDP Forecasting

In the wake of existing home sales reports on Monday, and new home sales yesterday, GDP and residential investment forecasts came tumbling down.

Check out the latest "GDP Nowcast" from the Atlanta Fed.



"The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the first quarter of 2015 was 1.7 percent on February 26, down from 1.9 percent on February 18. The first-quarter nowcast for real residential investment growth fell from 11.1 percent to 2.3 percent following Monday's existing-home sales release from the National Association of Realtors and yesterday morning's releases on sales and construction costs of single-family homes by the U.S. Census Bureau."

Please note that the "NowCast" does not factor in this: Chicago PMI Crashes to 5 1/2 Year Low: Production, New Orders, Backlogs Suffer Double Digit Declines.

Expect another revision soon.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Chicago PMI Crashes to 5 1/2 Year Low: Production, New Orders, Backlogs Suffer Double Digit Declines

Fourth quarter GDP was revised lower today to 2.2 percent from 2.6 percent previously estimated.

Looking ahead, I think we are going to see some shocking downward estimates in the months to come. Meanwhile, a shocking PMI report came out today.

Chicago PMI Crashes to 5 1/2 Year Low

ISM Chicago reports Chicago Business Barometer At 5½-Year Low

The Chicago Business Barometer plunged 13.6 points to 45.8 in February, the lowest level since July 2009 and the first time in contraction since April 2013. The sharp fall in business activity in February came as Production, New Orders, Order Backlogs and Employment all suffered double digit losses, leaving them below the 50 level which separates contraction from expansion.

New Orders suffered the largest monthly decline on record, leaving them at the lowest since June 2009. Lower order intake and output levels led to a double digit decline in Employment which last month increased markedly to a 14-month high.

Disinflationary pressures were still in evidence in February, although the slight bounceback in energy costs pushed Prices Paid to the highest since December – although still below the breakeven 50 level. Some purchasers cited weakness in some metals prices including copper and brass, but others said suppliers were slow to pass along lower prices to customers.

Commenting on the Chicago Report, Philip Uglow, Chief Economist of MNI Indicators said, “It’s difficult to reconcile the very sharp drop in the Barometer with the recent firm tone of the survey. There’s some evidence to point to special factors such as the port strike and the weather, although we’ll need to see the March data to get a better picture of underlying growth.“

Blame it on the Ports

Everyone was quick to blame this on the ports and bad weather.

But the LA port issue has been festering for months. Weren't economists aware of the ports? Of bad weather?

The reason I ask is the Bloomberg Consensus Estimate was 58.7. The range was 55.5 to 59.6. Who predicted 59.6?

Regardless, the actual number came in nearly 10 points lower than any forecast!

Surprise! Surprise! Surprise!



Link if video does not play: Gomer Pyle on Surprises.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Recession is On the Way: Questioning One's Sanity; Beat the Crowd, Panic Now!

In 2006-2007 I called for a recession. We got a big one. I called for another one in 2011, as did the ECRI. That recession never happened.

50% is not a very good recession predicting track record except in comparison to consensus economic opinions that have never once in history predicted a recession. Consensus opinion is batting a perfect 0.00%

Investigating the Record

By the way, the ECRI was late in calling the recession of 2007. They still deny it. And questions regarding the 2001 recession and ECRI have still not been answered.

I have talked about all of this before, and it's worth a recap, if for no other reason than to note the difficulty of calling recessions in real time.

February 24, 2012: ECRI Sticks with Recession Call on CNBC; More than a Bit of an Exaggeration by Achuthan to Make His Call?

November 29, 2012: ECRI Sticks With Recession Call

October 13, 2009: A Look at ECRI's Recession Predicting Track Record

That third link above seriously calls into question the ECRI's recession calling capabilities.

I am not calling out just the ECRI. Open up the middle link and you will find this statement by me:

"The ECRI is sticking with its 'US is already in recession' call based on four coincident indicators. Very few agree, but for what it's worth (perhaps nothing) I am one of those in agreement."

I have already admitted my error. It's been silence from the ECRI, which has been my biggest objection to them over the years.

The moral of this story is: "If you cannot admit your mistakes, someone else is sure to admit them for you."

Word About Predictions

Yogi Berra said it best: "It's tough to make predictions, especially about the future."

Nonetheless, and throwing caution to the wind, on January 31, I stated Canada in Recession, US Will Follow in 2015.

Also on January 31, I went Diving Into the GDP Report and noticed "Some Ominous Trends" on imports and exports.

This was my call...

US Recession

The US won't decouple, just as China did not decouple from the global economy in 2008-2009 (a widely-held thesis I also knocked at the time).

Indeed, now that virtually no economist expects a US recession, I believe we are finally on the cusp of one, just as the Fed seems committed to hike.

Contemplating My Own Insanity - Again

With the above backdrop, Albert Edwards at Society General had me laughing at his own personal assessment in his Global Strategy Weekly Email Update (no link available).

He titled his research "Contemplating My Own Insanity - Again". Here are a few snips.

With equity markets galore hitting record high s clearly I must be missing something big! We are at that stage in the cycle where I begin to doubt my own sanity. I’ve been here before though and know full well how this story ends and it doesn’t involve me being detained in a mental health establishment (usually). The downturn in US profits is accelerating and it is not just an energy or US dollar phenomenon – a broad swathe of US economic data has disappointed in February. One of the positive surprises, payrolls, is a lagging indicator. The $64,000 question is not if, but rather when will investors realize what is going on?

My colleague Kit Juke summed it up nicely in his morning note "Whatever the Fed does, they will not risk the economic recovery. That bias is why rates won't get anywhere near ‘neutral' before they peak. The economic cycle will be brought down by asset bubbles bursting long before ‘tight' policy has any effect. Lessons were learned from the Global Financial Crisis, but not that one.”

Investors are transfixed instead by the Fed and when it will tighten rates and can't see the wood for the trees. The Fed's focus on payrolls, a lagging indicator, is most perplexing but not unusual at this stage in the cycle. The reality is that the vast bulk of economic, as well as earnings, data (even outside the energy sector), has been simply dreadful.

Current Rate of Profit Deterioration



click on any chart for sharper image

February US Data Above and Below Expectations

If you believe profit deterioration is a solely or even mostly related to the collapse in oil prices you are mistaken.



Fed Study Shows "Persistent Fed Overoptimism" 

The Society General report is all the more amusing because nearly every Fed economic forecast has been on the optimistic side since 2007.

I commented on this phenomenon  on February 2 in Fed Study Shows "Persistent Fed Overoptimism about Economic Growth"; What Will They Do About It?


US GDP Slow-Down

File this one in the "If I am wrong, I am at least in good company category".

Via email on Thursday, Steen Jakobsen pinged me with his thoughts.

US Q4 GDP revisions are out tomorrow and will most likely show a slow-down from 2.6% to 2.0%: (Source: Bloomberg – WECO US)

This makes Q3(2014) the peak in this cycle and I expect QoQ growth in the US will hit ZERO by Q3 or Q4 – there are several factors for this including rising real rates, malinvestment into energy but most importantly is the falling earnings in the US.

[Also referring to the society general chart] ... The point however is US data been worsening for a long time – I personally think we are in period where we yet again hand-over the growth engine from the US to emerging market but via a significant new low in growth which will make Europe looks good.

The expected path for me is: Slow down confirmation in the US over the next two months – that will kill the improvement in Europe by end of Q2 and leave it stable - not growing for the year.

Meanwhile emerging market will come back as market realize the FOMC is years away from ‘talking up’ rates. The June or September initial hike (if it comes) still leaves the FOMC 100 bps above Wall Street on its projected long-term path for growth – a Wall Street who on their own is also too optimistic about future growth. The Fed sees 3.0-3.5% growth while Wall Street sees 2.5-3.0% on average. In other words there is room for a +100 bps correction to the sustainable long-term growth which will render 10-year rates a 1.0-1.5% before we over with this part of the cycle. I label this: Restarting the business cycle.

QE and targeted “help” for banks is running out of time, if not already out of time. The inequality and low salary to GDP base simply can’t produce enough domestic consumption anywhere for the middle class to be able to afford the products the stock market listed companies produce.

Macro Conclusion

We are in an “in between period” where the US will slow down and ultimately hand over the growth engine to emerging market by the earliest Q4-2015 but firmly in 2016.

The problem is emerging market are not ready due to high US dollar debt, waning commodity prices, and Europe is still too weak to contribute net to world growth leaving a growth vacuum for new growth.

Europe will show one more month of improving data, then global slowdown of EM and US will drag down the data to flat performance.

Fixed Income

I still only have one very strong view and that’s 10 YR fixed income will trade at 1.5%, possibly even potentially 1.0% this year. Everything else will lag this move by 9 month or so. In other words, if the low in yields comes in Q3 (as I expect) then the summer of 2016 will be the lift-off we all have talked about.

The US Dollar will peak this quarter and probably has peaked for this cycle. The weaker US Dollar will stabilize commodities and emerging markets, creating the conditions for a hand-over at the end of this year. The US dollar should be very sensitive to this relative slow-down in the US, especially as Europe is anachronistically improving.

Gold remains top of my list for new investment. I’m long and adding. I have also re-sold Brent/Crude as the marginal cost of producing oil is still rising, meaning global impact still is negative net-net.

Jeremy Grantham excellently argues that for world to benefit from falling energy prices, it has to come with falling marginal cost. The opposite is the case now: lower prices and higher production/extraction costs.

Stock Market

It's not time yet to call the top, but preparing special report on valuations and models, or the lack of it. Conclusion will be: There is potential for a 5-10% gain this year but also for a 25% correction.

The problem of course being that the market is very expensive by traditional standards, but these are hardly normal times.



The expected return for reference over 1, 3 and 10 years can be seen above – the upside is the first year still can carry market higher. The downside is a possible drop for the next 9-10 years!

CAPE Notes

CAPE stands for "cyclically adjusted price earnings ratio".

CAPE started the year over 25.

Business Insider writer Sam Ro commented on CAPE yesterday in Robert Shiller's Revered Stock Market Valuation Ratio is Crappy at Predicting 12-Month Returns.

I laughed at that headline because CAPE was never meant to be a timing signal. Rather it's a medium-to-long term warning signal.

"In other words, don't dump stocks and hide in cash because the CAPE is at 26. Rather, just be prepared [for] lower average returns for years to come," said Ro.

Lower or Negative?

Ro totally misses the boat. The warning is not about "lower" returns; it's about likely "negative" returns.

A Word About "Panic"

It's fitting to see such articles at this time, especially with earnings plummeting and everyone latching on to lagging indicators like jobs.

Yes, I have said this for a couple years. But CAPE has been stretched for a couple years.

CAPE was stretched in 1998 too. Yet, one could have had big gains through March 2000, if one held on, then cashed out at the top.

With that in mind, I have three questions for those who think like Ro.

1. How many held on, then cashed out at the right time? 
2. How many panicked and cashed out at or near the bottom?
3. How many held stocks that never recovered at all?

Here's a bonus question: Did anyone buy a basket of stock in 1999, ride them up and down for 15 years, only to find themselves once again at the break even point?

I ask that bonus question because the Nasdaq 100 Index is just below the March 24, 2000 peak.

In spite of the above, we see the same perennial advice today that we saw in January of 2000 "don't dump stocks".

If one has a dedicated, no-panic investment commitment with a time horizon of 15 years or longer, such advice, coupled with dollar cost averaging, may make sense.

Four Evaluation Metrics

Doug Short at Advisors perspectives has an even more interesting chart of valuations in his post Equity Valuations, Recessions and Stock Market Declines.




click on any chart for sharper image

Using an average of four popular valuations metrics, the only higher blowoff tops in history were 1929 and the dotcom bust in 2000.

However, ahead of and during the dotcom bust, many market segments were very attractively priced. The same cannot be said now.

Panic Now!

If one doesn't have a dedicated, no-panic investment commitment (that they will realistically stick with), "Don't dump stocks and hide in cash because the CAPE is at 26", is not a good philosophy.

"Panic before everyone else does" is far more appropriate.

Given massive baby boomer retirements, coupled with strong doubts that people can and will have a dedicated time horizon long enough to matter, I offer simple advice: Beat the Crowd, Panic Now!

Outside the Box

For those willing to think outside the box, I echo this sentiment of Steen Jakobsen "Gold remains top of my list for new investment. I’m long and adding."

I also like "perennially despised" US treasuries along with Steen, and I am a big proponent of yen-hedged Japanese equities (a position I believe different than his).

Finally, and also of a contrarian nature, Russia looks quite attractive to me at this time. It's beaten up, off everyone's investment radar, and will do well if the ruble or oil rallies. Typically stocks turn before currencies.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Acne Ruth sweater

Acne Ruth sweater

Acne Ruth twist sweater, size Small, 100% wool. Bust measures 44”, waist 50”, length is 26". Gently worn in excellent condition. Paid full price, asking $160.00 shipped. Image is from the Steven Alan website. I can provide pictures if you're interested, though there might be a slight delay since my camera recently broke. Please leave a comment if interested.

e-mail: dncvlss at hotmail.com

Rachel Comey Lapis boots

Rachel Comey Lapis boots 

RC Lapis boots in black, size 9. Heel measures 3.5". Gently worn, 3-5 times. Asking $180.00 shipped within the U.S. I can provide pictures if you're interested, though there might be a slight delay since my camera recently broke. Image from Totokaelo: http://totokaelo.com/rachel-comey/lapis/black-grain/ML9961 . Please leave a comment if interested.

e-mail: dncvlss at hotmail.com

A.P.C. Yvonne blouse

A.P.C. Yvonne blouse

Cream/maroon, size Small. 100% viscose. Gently worn, 2-3 times, in excellent condition. Paid about $150.00 on sale, asking $70.00 shipped within the US. Image from the A.P.C. site. Will provide pictures if you're interested, though there might be a slight delay since my camera recently broke. Please leave a comment if interested.

e-mail: dncvlss at hotmail.com

Escaping Decay: Japan Inc's Overseas Shopping Spree

People used to fear Japan not so long ago, but now we have another situation.

There is perhaps no better indication of limited prospects for Japan going forward than its firms investing everywhere but Japan. It is not exactly cheap to make foreign acquisitions at this point in time with the yen at a weak level, but then again, things may get worse as the government tries even harder to pump-prime the local economy. Caught between weak domestic demand and better prospects outside of Japan, many have opted to go abroad despite the rising costs of doing so:

With shrinking prospects at home and the threat of further yen weakness, Japanese companies are rushing to buy overseas and seem willing to pay top dollar, as shown by Japan Post's $5 billion bid for Australia's Toll Holdings (TOL.AX).

Over the long term, Japan's demographics give a bleak prognosis for domestic demand; the population has been falling for a decade and is projected to drop from 127 million to 87 million by 2060, 40 percent of whom will be over 65.

But bankers and analysts say a more immediate impetus to the dash for overseas growth is the fear, in an era of deflationary pressure and huge monetary stimulus from Japan's central bank, that the weak yen will fall still further, making overseas targets more expensive if buyers don't strike now.

All of which demonstrates the counterweight to Prime Minister Shinzo Abe's efforts to kickstart the stagnant economy after decades of deflation and insipid growth.
The value of outbound Japanese acquisitions so far in 2015 is already at $27 billion, nearly half of the $56 billion total for all of last year, Thomson Reuters data show. By contrast, the value of domestic deals has more than halved since 2011, last year hitting a 16-year low of $36 billion [my emphasis].

Actually, the unintended effect of all the easy money being unleashed by the Bank of Japan is for firms to spend not at home but abroad:

After two years of stimulus from the central bank to boost inflation, consumption and investment, Japanese companies, excluding financials, have amassed record holdings of cash, reaching 233 trillion yen ($1.96 trillion), or 24 percent of their total assets.

Some of that money is now being put to use in overseas acquisitions. "This trend is set to continue," said Kengo Nishiyama, senior strategist at Nomura Securities.

Remember back in the 1980s when the widespread fear was that Japan was going to buy up the West? Sure the Japanese are again investing large sums of money abroad, but now they are doing so not because of overconfidence in Japan's future prospects but a lack of confidence. Things change, my dear, as flights out of Japan are becoming more crowded than those coming in.

Ukraine Rations Food; Interbank Rate New Record Low; Monetization of Bonds; "Devaluation Kerosene"; Electronics a Store of Value

A chart of Ukraine's currency is nonsensical once again today.



Supposedly the hryvnia rallied again today, if only by a miniscule amount 0.15%. Yet, once again the chart is complete nonsense.

Black Market Rate

The Black Market Rate today is a bit improved, with a bid/ask spread of 29.45 to 34.55. How long that rally lasts is questionable. I presume not long.



If one could exchange at the official rate, one would immediately have an arbitrage on the black market.

Translation: The alleged official rate is "for show". No one can get it, except perhaps favored politicians and bankers taking advantage of their position of authority.

Reader John, whose father was a key figure in the Ukrainian Resistance in WWII, and whose sister currently lives in Lviv in Western Ukraine sent the following link that shows what's really happening.

Interbank Rate Fell Sharply to New Record Low

Dateline February 26, ZN-UA reports Interbank Hryvnia Fell Sharply to New Low.

Interbank Hryvnia, despite yesterday's statement heads the National Bank and the Finance Ministry to take measures to stabilize the currency as of February 26, the hryvnia plunged to a new record low, reaching a figure of 34.5 per US dollar.

Thursday morning the interbank rate opened at 22-27 UAH per US dollar.

The collapse of the hryvnia this afternoon was associated with the cancellation of the February 25 ban on bank's ability to buy foreign currency on behalf of customers.

Central Bank Reversals

In the past week, the Ukrainian National Bank (UNB) suspended foreign currency trading, cancelled the suspension, then resumed the suspension, then cancelled the suspension.

Wording and back-references are so confusing, I am not precisely sure of the current state of affairs. Do they know either?

Today's Wall Street Journal reports Ukraine Dials Back on Latest Attempt to Halt Currency Free Fall.

Yesterday, the Journal reported, Ukraine’s Central Bank Limits Access to Foreign Currency.

I believe the Journal missed one intraday flip-flop that I caught, or perhaps I caught an announced reversal that never happened.

It's all meaningless anyway. The black market is where it's at.

Monetization of Ukraine Bonds Fueling Currency Crash

Let's get to the heart of the matter. Ukraine is bankrupt. Please consider National Bank Adds Fuel to the Devaluation Fire.

The NBU continues to give the banks billions of dollars of loans, increasing devaluation of the hryvnia with one hand while imposing administrative restrictions on the other, adding fuel to the devaluation fire.

The refinancing is one of the catalysts of the present fall of the hryvnia:

• Direct (speculation by banks, including fictitious imports)
• Indirect (in which bank customers can use deposits in hryvnia to buy foreign currency)

It should be noted there are other factors:

1. There is also unsecured NBU monetization of government bonds to cover the state budget deficit. (The NBU dare not cutoff the government - editor) [Mish comment - if that editor lives in Ukraine, he will soon be charged with treason]

2. Quasi-fiscal payments of the Central Bank in the state Treasury (article an excess of income over expenditure in the previous year)

3. The decline of the economy on the background of the war in the Donbass

4. Reduction of inflow of foreign currency earnings of exporters; previously generated demand importers for currency; a withdrawal of currency abroad by using fictitious import contracts

5. Panic in the market and so on

Thus, with one hand imposing administrative restrictions on the market, another national Bank adds fuel to the fire devaluation.

It is also worth noting that since the beginning of the year up to February 24, the portfolio of internal government bonds (t-bills) in the NBU increased by 20.2 billion UAH for the period 2014 - 14.5 billion USD). In January, the figure was 9.6 billion UAH.

For more, see Devaluation Kerosene

Devaluation Kerosene

I have to say "Devaluation Kerosene" is an interesting title so I looked it up. The above article is a synopsis with a few more details, so there is no need to dive in further.

Ukraine Rations Cooking Oil, Flour, Sugar, Buckwheat

Let's conclude our Ukraine roundup of the day with this report in English: Kiev Introduces Rationing, as Falling Hryvnia Causes Shopping Binge.

Ukrainian supermarkets have imposed rationing of basic products after the drastic fall in the value of the hryvnia. The currency has lost 70 percent of its value causing people to stockpile food and buy electronics as a hedge.

Restrictions apply for goods such as cooking oil, flour and sugar, Ukraine’s news agency UNN reports Wednesday. Retailers may sell no more than two bottles of sunflower oil, and two packs of buckwheat per customer and, depending on the store, from 3 to 5 kilograms of flour and sugar.

Bread, rice, potatoes, meat and milk are not yet rationed, but are not so plentiful on supermarket shelves.

Stores have also see higher demand for household appliances, as people consider consumer electronics an investment as prices increase on a daily basis, RIA reports. Inflation in Ukraine is expected to reach 27 percent by the end of 2015.

27% Percent? How about 50 Percent, Already

This article is a couple days behind my report from "Ellen" who said "People buy anything just to get rid of hryvnias" (See Emails From Kiev: Free Speech Vanishes, Total Media Thought Control; US Radar System Falls Into Rebel Hands?).

Inflation is easily up 50% this year. And it's rather telling that people consider consumer electronics as a store of value.

We are not talking about inflation here, we are talking about hyperinflation as noted yesterday in
Ukraine Hyperinflation; Currency Plunges 44% in One Week! Actual Black Market Rates; Poroshenko Gives "Ultimatum" to Central Bank to Fix Exchange Rate.

Panic is in the air. And rightfully so.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Étoile Isabel Marant Skirt Size S

On Offer: beautiful skirt by Isabel Marant Etoile in a size 1, fits like an S. 100% wool. Hardly worn, the skirt is in perfect condition.

New, it was around $300
Asking $50 incl. shipping costs

If you are interested or have any questions, please leave your e-mail address in the comments below. This listing will end March 5th.

Right-to-Work Sweeps Midwest, Heads for Passage in Wisconsin

Right-to-Work legislation is sweeping the Midwest. It's one of many reforms needed to makes states more competitive, reduce cost pressures on infrastructure projects, and hold down the necessity of tax hikes.

Today the Wisconsin Senate Passed 'Right to Work' Legislation.

The proposal would let workers opt out of paying mandatory dues. Many would do just that, preferring to keep money for themselves rather than for the priorities of union officials, including corruption, graft, and various political goals that workers may not at all agree with.

The Wisconsin House of representatives is expected to approve the legislation making passage all but certain.

His staff issued this statement "Governor Walker continues to focus on budget priorities to grow our economy and to streamline state government. Governor Walker co-sponsored right-to-work legislation as a lawmaker and supports the policy. If this bill makes it to his desk, Governor Walker will sign it into law."

Illinois Again Lags Neighboring States

Unfortunately, and as typical, Illinois lags other Midwest states in passing much-needed legislation.

I wrote about that on Febuary 11, in my first article for the Illinois Policy Institute. Let's recap Missing the Boat on Right-to-Work.

Illinois Chamber Misses the Boat on Right-to-Work

The Illinois Chamber of Commerce recently took interesting, as well as contradictory, positions regarding the minimum wage and Right-to-Work legislation.

On one hand, the chamber is not in favor of minimum-wage hikes for Illinois. On the other, the chamber says “Illinois doesn’t need right to work (laws) to compete with its neighbors.”

At the root of both of these policy issues is the state’s ability to compete and attract job creators. If the chamber acknowledges that a minimum-wage increase is a jobs killer, how can it oppose Right to Work, which is proven to attract new businesses?

Contradictory Positions

Illinois Chamber of Commerce Chief Executive Todd Maisch says that minimum-wage increases put employers at a competitive disadvantage. Maisch also contended “Illinois doesn’t need right to work (laws) to compete with its neighbors.”

Those positions are contradictory. To understand why, one must investigate the tie between “prevailing wage” laws, Right-to-Work laws and collective bargaining.

Prevailing Wage

Illinois’ Prevailing Wage Act governs the wages a contractor or subcontractor is required to pay to all “laborers, workers and mechanics” who perform work on public projects. This wage is to be “no less than the general prevailing hourly rate as paid for work of a similar character in the locality in which the work is performed.”

As the Illinois Policy Institute noted in Unions take advantage of Illinois’ prevailing wage law, “This almost always is taken to mean the union rate, even though union workers make up less than 40 percent of the construction workforce and union wages are often 50 percent higher than those of nonunion workers.”

Want to repair roads? Add another wing onto a public school? Fund a bond for any public project? Cities have to pay the “prevailing rate.” Those prevailing rates apply to every imaginable public project, spilling over into many private projects as well.

Prevailing rates are in direct opposition to the idea behind Right-to-Work laws. Under properly formed Right-to-Work legislation, any contractor should be able to bid on any project, regardless of a government-mandated prevailing wage.

Preferably, the needed legislation on these two issues should be accomplished in one fell swoop. If it takes two acts, one for Right to Work and another to repeal prevailing wages, so be it.

The third piece of the puzzle is collective bargaining.

Wisconsin Offers Example on Collective Bargaining

Wisconsin Gov. Scott Walker passed legislation in 2011 to eliminate collective bargaining for most public workers in the Badger State.

Then a curious thing happened, as reported by the Washington Examiner:

“The Kaukauna School District, in the Fox River Valley of Wisconsin near Appleton, has about 4,200 students and about 400 employees. It has struggled in recent times and this year faced a deficit of $400,000. But after the law went into effect, at 12:01 a.m. Wednesday, school officials put in place new policies they estimate will turn that $400,000 deficit into a $1.5 million surplus. And it’s all because of the very provisions that union leaders predicted would be disastrous.

Some of the most important improvements in Kaukauna’s outlook are because of the new limits on collective bargaining.

Overnight, the Kaukauna, Wisconsin, school district turned a $400,000 deficit into a $1.5 million surplus. In essence, Illinois needs to do the same.

Specifically, Illinois desperately needs to do three things, all of them related:

1. Eliminate collective bargaining of public unions
2. Pass Right-to-Work legislation
3. Scrap prevailing-wage legislation

Whether this is done in one fell swoop or in three separate acts does not matter except in terms of time, and Illinoisans have little time to spare.

Businesses and private citizens are fleeing the state at record rates in search of a healthier business climate and to avoid enormous property taxes. Illinois cannot afford for these losses to continue much longer, especially if another national recession should occur. Illinois fared poorly in the last recovery, and another recession may very well do in the state – especially state pension plans – unless appropriate measures are enacted soon.

See The Light

The Illinois Chamber of Commerce, and others coming out against Right to Work in the Land of Lincoln, would be wise to reconsider their position.

One by one, neighboring states have seen the light. Illinois needs to join the right-to-work party or be left behind, lagging in job growth, while paying more in taxes for infrastructure improvements.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Sentence of the Day

"genetic differences explained roughly 33% of the variations in individual savings rates."

Read more here.

Creatures of Comfort 100% Cashmere black slouchy hat

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Paid: over $100

Asking: $30 + shipping

Repetto Mec Ankle Boots

Repetto Mec Ankle Boots

Size: 38 1/2 (run SMALL!)

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Asking: $90 including shipping in the U.S.