CFNAI monthly index down, 3 month average up

The Chicago Fed National Activity Index (CFNAI) is one of the reports I favor with significant weight. It is a very broad measure of economic activity.

The October report was released today.

From the report:

"Thirty-two of the 85 individual indicators made positive contributions to the index in September, while 53 made negative contributions. Thirty-nine indicators improved from August to September, while 46 indicators deteriorated."

This looks like a very weak report to me. The monthly index has been down the last two out of three months. The second derivative is negative. The 3-month moving average (MA3) only broke -0.7 because of the very strong reading in July, probably influenced by cash 4 clunkers.

Without an improved number in October, the MA3 is likely to move back below -0.7 again next month.

Mass layoffs return

Mass layoffs announced in the last week:

Sun Microsystems - 3,000
Sun Announces 3,000 Layoffs, 10 Percent of Workforce

NCR - 2,200
NCR Corp. Q3 profit dives, will cut 2,200 jobs

International Paper - 1,600
International Paper - 1,600

Oak Forest Hospital - 200
Oak Forest Hospital eliminates 200 jobs

Georgia Pacific - 300
Georgia-Pacific Mill In Fordyce Laying Off Workforce

Obama and the Fed better start saving or creating some jobs soon. I am also starting to smell whiffs of credit stress in some other blogs, but not seeing it in any credit indicators yet. Could be one hell of a winter.

Hoisington 3rd quarter review and outlook

Van R. Hoisington and Lacy H. Hunt, Ph.D. of the Hoisington Investment Management Company have published their 3rd quarter review and outlook.

The major theme is deflation, followed by more deflation.

They make persuasive arguments of what is to come following our enormous housing bubble bust, and address the current dollar weakness.

Frontline: The Warning

PBS Frontline has the story of Brooksley Born, the CFTC regulator who tried to stop the explosion of reckless derivatives.

The Warning airs this week.

The heroes in this entire episode have been women: Brooksley Born, Elizabeth Warren, and to a lesser extent, Sheila Bair.

The villains have been, and continue to be, men.

Kitco Gold Index (KGX)

Kitco, one of the largest bullion dealers in North America, recently launched a gold index that prices gold in the same basket of currencies as those used to price the dollar index.

Those currencies are the Yen, Euro, Pound, Canadian dollar, Swedish krona, and Swiss franc. The new chart lets you see the change in gold price in the basket vs. the change due to dollar fluctuations.

I've added a link to it in the blog roll and in this post.

Kitco Gold Index (KGX)

Gold Charts 10/1/2009

In all charts, money stock values come from the St. Louis Fed. Gold stocks come from the Gold Council and gold prices from Kitco. These comparisons are for US money stock vs. World gold supply.

All charts start from a number greater than zero to better show monthly changes.

M2/World Gold Supply (oz) in 2009

MZM/World Gold Supply (oz) in 2009

M2/Gold Price in 2009

MZM/Gold Price in 2009

Gold was over $1000/oz on October 1 and has continued to rally to nominal records. Despite the high nominal price, the M2/price (8.23) and MZM/price (9.43) ratios are still at moderate levels. While the ratios are at their highest levels of the year, they have ranged from 2.40 to 19.33 going back to 1959. The inflation adjusted price is only about half of the peak in 1980.

If you think inflationary forces will win the day, then prices have plenty of room to rise from here. If you think deflationary forces will win the day, then prices are likely to drop by the end of the year. Both M2 and MZM have been shrinking slightly since July. Bank credit has been shrinking dramatically.

My guess is that high and growing unemployment along with negative real estate shocks will lead to somewhat lower prices by the end of the year. I am delaying additional purchases for now.

Added Jesse's Café Américain

Added Jesse's Café Américain to the blog.

Dropped Zero Hedge from the blog roll.

I've been getting better analysis from Jesse than Zero Hedge on a consistent basis. Zero Hedge does have some good posts, but the noise to signal ratio is a bit too high.

Ben

Ben, the two of us need work no more
We both found what we were looking for
With a Fed to call my own
I'll use non-recourse loans
And you, my friend, will see
we'll bail out AIG
(we'll bail out AIG)

Ben, you're monetizing here and there
You're not earning points with Sheila Bair
If you ever look behind
Reflation on your mind
There's one thing you should know
New bubbles you can blow
(new bubbles you can blow)

I used to buy, only "T"s
Now I gorge, on "GSE"s
I used to loan, to Jimmy Cayne
Billions lost, in Maiden Lane

Ben, most people would turn you away
Larry Summers wants your job today
They don't see you as I do
I wish they would try to
They'll buy on credit again
If they had a Fed with Ben
(a Fed) With Ben
(with Ben) With Ben

http://www.youtube.com/watch?v=U36DO_nrJeA

I owe you (Barney)

I owe you
you owe me
we're an oligopoly
with a great big hug, payments missed from me to you
wont you say you owe me too!

I owe you
you owe me
we're best friends as friends should be
with a great big hug, payments missed from me to you
wont you say you owe me too!