Relevant and even prescient commentary on news, politics and the economy.

Housing: BOOM!

Housing: BOOM!

Well, this is an easy post. This morning’s report (Wed.) on housing permits and starts showed new expansion highs in both overall permits and starts. The less volatile single family segment also recovered, with both single family permits and starts at one year highs, although slightly below their expansion peaks.

Here are total and single family permits:

And here are total and single family starts:

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The Strike On Saudi Oil Facilities

The Strike On Saudi Oil Facilities

This is going to be a tentative post because there is much that remains unclear. What I am going to do is to make it clear that stories that are being told by US authorities and largely repeated by the MSM with little critical commentary is highly questionable.

As it is, it looks like the economic impact of the knocking out of about 60 percent of Saudi oil processing capacity by an attack by 20 drones will not amount to too much. The Saudis have now announced that they should have 70 percent of their damaged production capacity back in operation within a week or two. While crude oil prices initially surged 20 percent up, they have largely fallen back toward where they were before the attack. This is a massive contrast with how all this used to be back in the 1970s when, for example, crude prices would triple or even quadruple with a supply disruption from the Persian Gulf, with dramatic stagflationary effects on all the oil importing national economies. This does not look remotely likely to happen.

The matter that remains very much in the air, with a threat of war breaking out worse than it is already happening, involves the source of the attack on the facilities in Khurais and Abqaiq. SecState Pompeo outright said the attack came from Iran. Supposedly US intelligence agencies are supporting this, although there seem to be doubts. Buried deep in the press reports are caveats suggesting that maybe not quite all the attacks came from there. Of course, it is essentially impossible to evaluate these claims as we know these agencies have their secret methods and sources they are not leaking. But then we see both the Saudis and President Trump holding back from fully going along with this report.

So why might this be wrong? Well, at least one alternative version appears to have been decisively repudiated. That is that the attack came from Shia militias in Iraq. This theory was put forth by Bibi Netanyahu of Israel, perhaps as a desperate part of his reelection campaign, with it looking like he has not done well in that election, although the full outcome is still not known. But this apparently blatantly ridiculous report may be the beginning of the end of people taking publicly announced Israeli intelligence reports as things to be taken seriously.

However, the more serious alternative to Iran as a source is the Yemeni Houthis. Almost certainly the drones were from Iran, although even that is not definitely certain. In any case several statements have come supposedly from US intel agencies that the Yemeni Houthis could not have done this, even though they themselves have been loudly claiming that they did it, while the Iranians are loudly denying that they did it. Supposedly this all distraction from the role of the Iranians. But Juan Cole has pointed out things that the media are simply not reporting things that suggest that indeed the Yemeni Houthis appear to have the capability. In particular in May the Houthis launched a drone attack on an oil pumping station at al-Duadimi, well over 800 miles from Sana’a. The sites struck in this attack are only another 100 miles further, and the Shehad 129 Iranian drone supposedly can travel a full 1100 miles. Why are we seeing no reports of this in the media?

As it is, it may be that both the Saudis and even Trump may be aware of this matter that has not been well publicized. If so, no wonder they are not fully signing on to saying it was Iran, quite aside from a reluctance to get into a new war there. Whatever has really gone down, let us hope at least there will be no new war.

Barkley Rosser

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Industrial production rebounds; another message of slowdown, no recession

Industrial production rebounds; another message of slowdown, no recession

 Industrial Production is the King of Coincident Indicators.  When industrial production peaks and troughs coincides more often than any other indicator to NBER’s recession dating. Let’s take a look at the report for August, which was pretty darn good, which was released this morning.

Production as a whole increased 0.6%, and last month’s report was revised upward by +0.1%. The manufacturing component also increased, by 0.5%. Both, however, are still below their peaks set last December (left scale in the graphs below). The other important component, mining (which includes oil production) increased 1.4%, reversing July’s decline, missing a new high by less than 0.1% (right scale):

Stepping back for a longer term look, here is the same graph including the “shallow industrial recession” of 2015-16:

 

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“Great Drug Companies Out There”

About the time I finished up my post on Biden, I get this article from Dan discussing how Biden is kissing the butts of drug companies to more-than-likely get campaign donations. Everyone else has been concentrating on individual (you know people of lesser means) donations and many candidates have refused to take corporate donations. Biden is not ashamed to take money from corporations. Gee, whata surprise!

Candidate Joe Biden: “By the way, great drug companies out there — except a couple of opioid outfits,” the former vice president told donors at the Dallas home of David Genecov, a craniofacial surgeon.

Biden’s comment came during a discussion of medical research and the cancer “moonshot” initiative he launched during the Obama administration following the death of his son, Beau Biden, in 2015. That effort included his push for companies to collaborate more on research.

While praising the research of pharmaceutical companies, Biden also complained, complained about the high drug prices being experienced by people. Such issues had not stopped him before in supporting Republican candidates for Congress in the last election.

In 2018, Joe Biden came to Michigan’s 6th Congressional District to give a speech to the Economic Club of Southwestern Michigan and pivoted to the topic of Republican Fred Upton at the expense of the Democrat candidate Matt Longjohn. Matt came the closest to beating Upton and Biden gave Fred the boost he needed. Upton had won the district by 20% in previous elections and won it this time by less than 5%.

Biden was paid $200,000 to give a speech to a Republican business crowd supported by Fred Upton in Benton Harbor, Michigan during which he praised GOP Congressman Fred Upton even as Democrats were close to winning Upton’s seat in the gerrymandered Michigan 6th District during the midterms.

It was said Biden came to the 6th District to campaign for Fred Upton because Fred helped to push the 21st Century Cures Act through Congress in support of Biden’s moonshot plan. There is no confirmation of this. The Economic Club of Southwestern Michigan is heavily sponsored by Republican interests and also in one form or another by the Uptons. You would think with Repubs owning the House and the Senate back then, there would be a few issues of making this happen?

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Weekly Indicators for September 9 – 13 at Seeking Alpha

by New Deal democrat

Weekly Indicators for September 9 – 13 at Seeking Alpha

I realized that I neglected to post a link to this Saturday’s Weekly Indicators post, which was up at Seeking Alpha.  So here it is.

The theme over the past few months has been that, despite worsening conditions in manufacturing, and almost singular forecaster attention to the yield curve, many of the short and long term indicators have been improving, or are starting to improve.

As always, clicking over and reading helps reward me a little bit for the efforts I put in.

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Would Trump Try to Manipulate Economic Data Before the Election?

Dean Baker considers whether Trump’s group of supporters would be able to manipulate the bureacracies of the federal government to alter the economic outlook of the nation in a more expansive way than Larry Kudlow and others, but the data itself ( if that is even needed?)  He says not likely, but how creative would one need to be?

Dean Baker wonders out loud…

Would Trump Try to Manipulate Economic Data Before the Election?

I talked to a reporter last week who wanted to know if Donald Trump could manipulate economic data for political advantage. For example, could Trump make the Bureau of Labor Statistics (BLS) show a lower rate of unemployment or the Bureau of Economic Analysis show a higher rate of GDP growth, just before the election next fall?

…First, the people at these and other statistical agencies are dedicated professionals.

…Furthermore, since so much of the data are publicly available, it would be very hard to do this without being detected.

…Theoretically, someone could do something like this, but it would have to be a person who was very knowledgeable about the data. And, they would almost certainly need the cooperation of at least 20 or 30 people at the BLS.

 

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Affordable Housing

The other night, ten Democratic presidential, hopeful, nominees took stage and debated their plans for America’s future. There never was a mention beyond a few garbled words hastily thrown together about an issue which is plaguing many young voters ing to raise families and one which has surfaced in my community, the shortage of affordable homes. Senator Elizabeth Warren knows of the issue as she has discussed it in one of her talks, “The Two Income Family.”

Moderators have bypassed the issue and not asked the question of a candidate’s plan for Affordable Housing which is a growing problem for many people in the US especially young people. In lieu of their not asking, here is a site 2020 Because Housing is Built with Ballots from which you can read each of the candidate’s plans.

The housing crisis has hit urban, suburban, and rural areas with some states being worst(see chart above) than others with regard to supply. Nationally, there is a shortage of 7 million homes affordable and available to the lowest-income renters. Rents have risen faster than renters’ incomes over the last two decades, more people are renting than ever, and the supply of apartments they can afford has lagged. Fewer than four affordable and available rental homes exist for every 10 of the lowest-income renter households nationwide. People of color are disproportionately impacted. Racial segregation persists and concentrated poverty is growing.

Meanwhile, policy makers have disinvested in the nation’s public housing infrastructure, leaving families living in unsafe, unhealthy, and unacceptable conditions. After almost a decade of decline, homelessness is back on the rise, and is in the news in an adversarial manner. The same as with immigrants, people do not want to provide solutions and they want the homeless to disappear. Where they should go has not been determined.

Jumping on this bandwagon pre – election, the one man who has a history of discrimination as learned from a father who was depicted by in song by Woodie Guthrie, President Donald Trump has signaled his intentions to address California’s homeless crisis in a harmful, unjust, and unlawful manner. Involving criminalization, sweeps of unsheltered people living on the streets, they will (potentially?) be moved to federal homeless camps.

Affordable housing and homelessness has been in the news across the country and debate moderators have yet to ask the question of what can be done or what are your solutions to the crisis.

While providing good and affordable healthcare is important; housing, besides a cardboard box, is one of the prerequisites to having good health. One way or another, we will be paying for it.

The Question the Presidential Candidates Don’t Get Asked, City Lab, Diane Yentel

The GAP, A Shortage of Affordable Homes March 2018

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Economic and Market Risk

The use of drones against Saudi Arabian oil facilities changes the economic-market risk significantly.

Until now the oil producers have done an excellent job of preventing terrorist attacks from disrupting oil supplies. But the use of drones significantly changes the risk of future oil disruptions.   How do we prevent future drone attacks on the choke points in the oil supply line?

I, for one, am surprised that the stock market reaction has been so muted.

Am I wrong in believing that the game has changed?

 

 

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August retail sales confirm healthy consumer sector

August retail sales confirm healthy consumer sector

Retail sales are one of my favorite indicators, because in real terms they can tell us so much about the present, near term forecast, and longer term forecast for the economy.

This morning retail sales for August were reported up +0.4%, and July, which was already very good at +0.7%,  was revised upward by another +0.1% as well. Since consumer inflation increased by +0.4% over that two month period, real retail sales have risen +0.7% in the past two months. As a result, YoY real retail sales, which had been faltering earlier this year, are  now up +2.3%.

Here is what the last five years look like:

Others may use other deflators. I use overall CPI because:

 

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