Shock and Awe From Larry Kudlow

After a small hiatus of worrying about lagging inflation indicators, my favorite business talk show host has come back around on the need for further and more dramatic rate cuts. He makes some poignant arguments noting credit risk spreads increasing to August crisis levels recently. What took you so long Larry? Excerpts from his blog below..............................


Kudlow 101: More Shock and Awe


I have changed my mind.Until recently, I thought the Fed could stand pat at their December 11th meeting. However, I have completely changed my mind in light of the continuing credit market turbulence.Take a look at the commercial paper market (90-day asset-backed CP minus 90-day T-bill). Think mortgages, credit cards, auto loans, etc:






We’re back to almost 250 basis points. The spreads have widened so much that they’re close to where we were last August. The key here is that short-term money markets are not funding properly. This deterioration is what Mr. Bernanke and Mr. Kohn are looking at. It is of grave concern. It means businesses cannot function properly. And that could mean job losses.


Rest of Blog Post Here

Fed Backtracks on Hawkish Stance

Previously I posted how absurd the Fed's statements were weeks ago that growth and inflation risks were relatively equal. Now Donald Kohn is helping the Fed to backtrack and setting the stage for a much needed rate cut in December.........

Rate-Cut Hopes Lift Stocks

Stocks took a bull run on Wednesday, spurred by non-stop good news, including rising hopes for a Fed rate cut, signs of recovery in the battered financial sector and a stabilizing dollar.....

.......There was at least one spark for the day's gains, however: rekindled hopes for a further rate cut by the Federal Reserve. Fed Vice Chairman Donald Kohn said credit conditions had deteriorated again in previous weeks, and suggested the Fed could step in to bolster the economy. The remarks seemed less hawkish than those of other Fed speakers recently, implying the Fed might be more inclined to cut rates at its next policy meeting on Dec. 11.

"The Fed is giving the market hope for rate cuts…while financials are going through some self-help," said Alan Gayle, senior investment strategist.......

By CAROLYN CUI - WSJ

WSJ link here

Inflation? Bond Market Doesn't Think So

10-Year Treasury Yield at 2 1/2 Year Low

Treasurys Rally on Credit Market Fears; 10-Year Yield Drops to Lowest Point Since June 2005

NEW YORK (AP) -- Treasury prices rallied dramatically Monday on more credit concerns, pushing the benchmark 10-year note's yield down to its lowest level in two and a half years.

Trading was dominated by a fresh set of worries about the impact of deteriorating below prime home loans on the credit and housing sectors; those concerns led investors away from risk and to again seek the safety of government bonds.....

........The benchmark 10-year Treasury note rose 1 17/32 to 103 20/32 with a yield of 3.85 percent, down from 4.00 percent late Friday. The 10-year yield has not been this low since June 2005.

The 30-year long bond advanced 2 27/32 to 112 1/32 with a yield of 4.25 percent, down from 4.43 percent late Friday. ..........


Full Story Link Here

Growth and Inflation Equal Risk? I Don't Think So

I apologize for the infrequent post as of late, hasn't been too much that has riled me up lately, until now. With the Fed releasing it's short and long term forecast and minutes from it's last meeting, obviously they are posturing big time on the threat of inflation. Let me say this for the umpteenth time, inflation is not our problem. Inflation is 2-3 year lagging indicator that has been contained. The Fed needs to be concerned with growth which apparently they are internally by their minutes and externally by their somber forecast. I think they need to continue to cut 25 basis points or more at each of the next 4 meetings and see what happens..............

Squaring the circle over Fed's stance on cuts

Information in the minutes of the last Federal Reserve meeting and the new economic projections by the US central bank provide ammunition for both sides in the rate-cut debate.

On the one hand the minutes devoted greater attention to the risks to growth than the risks to inflation - unlike the statement issued after the meeting, which declared that the risks were "roughly balanced" following the rate cut.

On the other, the economic projections revealed that the Fed has a low assessment of the potential growth rate of the US economy - a view that would make it less inclined to cut interest rates when growth is sluggish for fear of igniting inflation.

The discussion in the minutes is hard to square with the notion that the central bank sees the growth and inflation risks as completely balanced.

"It was a little bit of a stretch for them to get to neutral, given the preponderance of downside risks in the minutes," says Peter Hooper, chief economist at Deutsche Bank Securities..............

Excerpts From Financial Times

For rest of story click here

A Shot in the Arm for Jumbo Mortgages

Bernanke sets out jumbo mortgage plan


Ben Bernanke, Federal Reserve chairman, on Thursday put forward a plan to help revive the secondary market for jumbo (large denomination) mortgages that would involve Fannie Mae and Freddie Mac, as well as credit guarantees from the federal government.

Mr Bernanke told Congress he would support raising the limit on the size of the individual loans eligible for securitisation by the government-sponsored mortgage finance entities from $417,000 to $1m (€680,000, £475,000) on a temporary basis.

He suggested that Fannie and Freddie could pay insurance premiums on these loans to the federal government, which would "act as guarantor" by taking on some of the credit risk.

Charles Schumer, the Democratic chairman of the Joint Economic Committee, enthusiastically welcomed the idea and said he would try to insert it into legislation already before Congress.

The unusually specific proposal by Mr Bernanke reflects his disappointment at the continued problems in the jumbo market, and concern that this will aggravate the US housing downturn.

By Krishna Guha - Financial Times

Full Story Link Here

Silicon Valley Q3 Venture Capital Still Rolling

Start-ups fatten up: Venture capital spigot flows freely in Q3

MERCURY NEWS SPECIAL REPORT: VENTURE CAPITAL

With investments in the emerging "clean tech" industry continuing to soar, Silicon Valley companies received more than $2.48 billion in venture capital in the third quarter of 2007 - a sign that the valley's entrepreneurial culture is thriving despite broader economic worries.

The quarterly MoneyTree Report found that the valley's total venture investments, while dipping slightly from the previous quarter, represented robust 9 percent year-over-year growth. As usual, Silicon Valley and the broader Bay Area outpaced other tech hubs by a wide margin, reaping 35 percent of the $7.1 billion in venture investments in the United States........

For the venture capital industry, the upbeat quarter came at a time the U.S. economy quivered from the rippling effects of the subprime mortgage meltdown. The ensuing credit crunch as well as rising fuel prices have economists warning of a marked slowdown and a potential recession.

But the valley's tech-driven economy seems cushioned from the domestic worries as it relies increasingly on expanding global markets. VCs, in particular, exhibit a buoyant mood, according to a quarterly survey by University of San Francisco Professor Mark Cannice that is compiled in the university's Silicon Valley VC Confidence Index........

By Scott Duke HarrisMercury News

For Full Story Click Here

With Productivity Up Sharply Fed Can Cut More

Productivity Rises, Easing Inflation Fears

WASHINGTON -- U.S. productivity jumped last quarter at its fastest pace in four years while labor costs fell, a welcome relief for Federal Reserve officials worried about the inflationary effect of rising energy and commodity prices.

Still, the productivity rebound may prove temporary if the economy slows as expected in the fourth quarter and in early 2008.

Nonfarm business productivity swelled at a 4.9% annualized rate between July and September, the Labor Department said Tuesday. That is more than double the 2.2% rate in the second quarter, which was revised down from a previous estimate of 2.6%. Productivity is defined as output per unit of labor.

The third quarter productivity gain was well above Wall Street expectations of a 3.4% rise. The increase reflects the recent mix of strong economic growth data with slower gains in payrolls.

Unit labor costs -- a key gauge of inflationary pressures -- fell 0.2% last quarter, the biggest drop since the second quarter of 2006. Economists had expected a 0.8% rise. Still, labor costs were up 4.3% from a year ago, suggesting some pressures linger.......

By BRIAN BLACKSTONE - WSJ

For WSJ Article Click Here

Keep Cutting

Excerpts from James C. Cooper - Businessweek - Business Outlook

On Guard Against Recession
All signs suggest meager growth—if that—in the fourth quarter, with little improvement in early 2008. So the Fed is taking preemptive action

The goods news: The government says the economy grew 3.9% in the third quarter. The bad news: That's the last of the good news on growth. In the fourth quarter, look for the full brunt of the credit crunch, the latest downturn in the housing slump, $90-a-barrel oil, and growing caution by consumers and businesses to take their tolls. Most economists expect growth of only 1% to 2% this quarter, with little improvement in early 2008, and many of those folks have their fingers crossed. The risks to that somber forecast are almost all to the downside.

It is the unknowns that prompted the Federal Reserve to take out some more recession insurance on Oct. 31 by lopping a quarter-point off its target interest rate, bringing it to 4.5%. Whether the economy will be derailed by the tighter financial conditions caused by the mortgage-related turmoil in the credit markets remains the biggest unknown. Federal Reserve Chairman Ben S. Bernanke and other influential policymakers have noted recently that in times of high uncertainty, strong, preemptive action may be the right policy to prevent broad damage to the economy.......

........The problem is that the third quarter started strong but finished much weaker, with manufacturing, hiring, and confidence on the wane. The Conference Board's October index of consumer confidence dropped for the third month in a row, to a two-year low, partly reflecting job worries.....

......Business confidence is also slipping, which puts capital spending and payroll gains at risk. Companies are hesitant to commit money to new projects. Orders for capital goods other than aircraft have stagnated since April, and production of business equipment has made no progress since July. A credit squeeze could be one reason. Yield spreads between investment-grade corporate bonds and riskless Treasury notes, a gauge of investors' risk aversion, remain wide, even for AAA-rated companies.........

Full Story Link Here

Housing Bottom?

Is the Bottom Near for Housing?


.......There's a lot of money to be made in picking the tops and bottoms of cycles. But it's an extremely difficult exercise, and even a minor error in timing can lead to severe losses.

With that said, I'd like to examine some possible events that could signal that the bottom of the housing and credit cycle is near.

Off with their heads!During a crisis, the public needs someone to blame. Ivan Boesky, Ken Lay, and Bernie Ebbers are some of the toppled titans who have been the focus of public ire. It's part of the cathartic experience to dispatch those deemed responsible and to start fresh with a new era.

At many major banks, we can see that the catharsis has begun. The CEOs of Citigroup, Bear Stearns, and Merrill Lynch have fired underlings they deemed accountable for the crises. And in the case of Merrill Lynch, CEO Stan O'Neal politely retired today, leaving a big void.

However, analysts, shareholders, and the general public don't seem satisfied. They seem to want to fry bigger fish in an attempt to close the books on the current era of the housing bubble.

Berkshire Hathaway enters the frayIn an interview with Fox Business News, Berkshire Hathaway (NYSE: BRK-A) (NYSE: BRK-B) Chairman Warren Buffett said he hasn't bought any homebuilder shares yet because he doesn't think they're underpriced. No doubt Buffett is paying very close attention to the industry and may be simply waiting for his price.

In fact, the four largest homebuilders -- D.R. Horton (NYSE: DHI), Pulte (NYSE: PHM), Centex (NYSE: CTX), and Lennar (NYSE: LEN) -- sport a combined $15 billion market cap. If you assume the shares of those homebuilders will slide another 20%, then the price tag would fall to $12 billion, plus a takeout premium. That's very doable for Berkshire and its $40 billion cash hoard.

In addition, if Berkshire were to buy several major homebuilders, it could be taken as a self-fulfilling prophecy that the end of the housing slump is near. Although the top 10 homebuilders have only a combined 23% market share, according to an article by the Dallas Morning News, markets are extremely local.......

By Emil Lee - Motley Fool

Could This Be The Bottom?

Despite getting caught in the cross hairs of the mortgage and credit debacle of September new homes sales were up month over month. Sales in the west were up a remarkable 38% in September. Since the west led this housing recesssion, possibly it will soon lead the U.S. out...............

excerpts from WSJ

New-Home Sales Rose Last Month,But August Drop Revised Lower

........Overall, the median price of a new home increased by 5.0% to $238,000 in September, compared with September 2006. But the average price declined by 2.8% to $288,000 from a year earlier.

The ratio of new houses for sale to houses sold, an indicator of supply, fell during September, going to 8.3 from 9.0 in August. There were an estimated 523,000 homes for sale at the end of September, down from August's 531,000.

Regionally last month, new-home sales increased 37.7% in the West and 0.5% in the South. Sales decreased 6.6% in the Northeast and 19.5% in the Midwest.

By ELIZABETH PRICE - WSJ

Venture Capital Best since 2001

Venture Capital is the main leading indicator of job growth and strengh in the bay area economy. Also note that 2.52 billion dollars flowed into bay area companies last quarter which represents over 31% of all venture capital in the united states. California accounted for 44% of U.S. venture capital..........

U.S. Venture Capital Investment Reaches Highest Level Since Q1 2001, Rises 8% to $8.07 Billion in Third Quarter of 2007

Venture capitalists continued to put more money to work with entrepreneurial companies, as overall U.S. venture capital investment climbed 8% in the third quarter of 2007 compared to the same period last year to reach $8.07 billion, according to the Quarterly Venture Capital Report released today by Dow Jones VentureOne and Ernst & Young LLP. This marked the ninth consecutive quarter of gradual year- over-year growth in dollars invested and is the highest quarterly investment total since the first quarter of 2001.......

.......Two-thirds of all capital invested in the third quarter -- some $3.81 billion -- was put to work in 224 later rounds, the most invested in late- stage companies since 2001, while combined seed and first round investment remained steady year-on-year at $1.74 billion. These sizable later rounds helped to push the overall median for a venture capital deal in the third quarter to $7.92 million, a new record.

......California dominated the venture capital activity in the third quarter, representing 44% of both the nation's deal flow and its capital invested. ...........................

-AP Newswire

Full Story Link Here

More Jobs for Bay Area

Bay area is definitely on a roll with new job announcements....

One of the world's largest manufacturers of solar power systems has chosen San Francisco for its North American headquarters, a move that could bring hundreds of jobs and solidify the city's place at the forefront of clean energy.

Suntech Power Holdings Co. has subleased half of the eighth floor at 188 Embarcadero, said Roger Efird, president of Suntech America, its U.S. subsidiary. Up to 15 senior employees are expected to be working there within 30 days and more than 50 by the end of 2008. The company is "in merger and acquisition mode," Efird said, and depending on its success with that in the months to come, could easily employ "four, five, six times that many."

Based in Wuxi, China, Suntech rocketed to the top of the solar industry in a short time. Founded in 2001 by Zhengrong Shi, it employs 4,000 worldwide and maintains four factories in China. It listed on the New York Stock Exchange in 2005 and now has a market cap of $6.45 billion. Shi, Suntech's 44-year-old CEO and chairman, made Forbes' list of the world's billionaires this year with an estimated net worth of $2.2 billion.

Suntech America has been operating out of Olney, Md., and was heavily recruited by cities and states around the country, including Oakland. An announcement of its move to San Francisco is expected within days.......

-Excerpt from San Francisco Business Times - by Elizabeth Browne

MySpace Adding Jobs in Bay Area

Story from San Francisco Chronicle........


MySpace, the popular social-networking destination, is opening an office this week in San Francisco and plans to hire as many as 200 employees as it moves to redesign its site, introduce features and fend off rivals such as Facebook.

The San Francisco office, in the SoMa neighborhood near AT&T Park, will focus on enhancing MySpace's infrastructure, creating products and forging strategic partnerships - some of which are expected to be announced this week.

The move is the latest sign of growth for the Los Angeles company, which was acquired two years ago by Rupert Murdoch's News Corp.

Most of the new hires will be engineers.

"We literally planned out all the products we're going to build in the next year or two. We don't have enough engineers to do what we want to do," MySpace Chief Executive Officer Chris DeWolfe said. "Clearly, San Francisco and Silicon Valley attract the top engineering talent in the world. ... It's going to allow us to develop incredibly rapidly."

By Ellen Lee, San Francisco Chronicle

For Full Story Link Here

Bright Spots in Real Estate

It's not all bad out there in the residential real estate world. Areas with less for sale inventory and lower supplies of land have faired quite well this last year despite national woes. Areas such as Portland, Seattle, and some trophy areas of California. I was especially intrigued by this relatively recent article in Wall Street Journal regarding America's Riviera, Santa Barbara, and the strength of its housing market..............

The New Gold Coast
One Stretch of California Defies Housing Slump;
Median Sale, $1 Million

CARPINTERIA, Calif. -- Other than an 18-foot-tall rooftop Santa Claus visible from the highway, this middle-class beach town used to be but a blur for wealthy vacationers speeding toward tony Montecito and Santa Barbara, about 10 miles up the road. Today, the statue is gone, and a clutch of the megarich have made Carpinteria an unlikely stop for buyers who can afford any ocean view in the world.

Public records show that New York billionaire hedge-fund manager Bruce Kovner spent $83.3 million this year to amass 15 bluff-top acres, including a luxury villa, near the end of a highway exit ramp. He also has agreed to buy part of Kevin Costner's field of dreams next door: Last year, the actor acquired 17 grassy acres dominated by a polo field for $28.5 million. Just down the road, a beachfront house on a mere quarter-acre is listed for sale at $24 million.

Carpinteria's arrival on the luxury-estate scene illustrates how California's gold coast is defying the downdraft in the national housing market. Eye-popping sales are spreading along a 40-mile stretch of southern Santa Barbara County, through sprawling ranch lands and past hillside homes, to the enclave of Carpinteria. In July, when existing-home sales slumped by 9.3% nationally and plummeted 23% in California compared with a year ago, sales along the county's southern coast soared nearly 28%, according to the California Association of Realtors. It also was the only region of California where the median sales price surpassed $1 million.

Estates in the exclusive Hope Ranch and Montecito communities set the standard in an area long prized by tycoons and Hollywood players for its mild climate, natural beauty and low-key sophistication. Indeed, at Oprah Winfrey's Montecito fund-raiser tomorrow for Democratic presidential candidate Sen. Barack Obama, more than her political firepower will be on display. Ms. Winfrey's 40-acre hillside estate, bought six years ago for around $50 million, has swelled in value to $84.7 million, according to public county-assessor records.

Santa Barbara's high-end housing market is set for its best year ever, according to Wendy Gragg, chief executive of the Distinctive Real Estate agency. Just counting properties with a value of at least $10 million, the area notched more than $195 million in sales so far this year, putting it on track to beat last year's local record of $219 million............

By JONATHAN KARP - WSJ

For rest of article click here

Keep Cutting

Below are some excerpts from and excellent article by James C. Coooper from the October 1 issue of Businessweek. He makes a strong case (and I concur) that the Fed definitely has further to go on rate cuts......

Rate Cuts: The Fed May Just Be Warming Up
The half-point reduction isn't enough to erase the risk of recession Score one for the Fed.

Facing both deteriorating financial conditions and new risks to economic growth, the Federal Reserve stepped up to the plate on Sept. 18 and hit more than just a solid single. This one went for extra bases. The Fed's half-point cut in its target interest rate, to 4.75%, was well beyond the quarter-point reduction most Wall Streeters were expecting. And the policymakers left the door cracked for further trimming "as needed." The question now: Will more be necessary?

Probably. The big cut lessens, but does not eliminate, the chance the Fed will cut again at its Oct. 30-31 meeting. The Fed sounded as uncertain about how the recent credit turmoil will play out as anyone, so much so that it avoided offering its usual assessment of whether economic growth or inflation was its primary concern.Nevertheless, as long as uncertainty and fear continue to prevent the proper functioning of the credit markets, economies in the U.S. and abroad will be at risk. The Fed's action will go a long way toward restoring confidence in businesses' access to the funding they need to operate, but even a half-point decrease won't quickly thaw out frozen markets or reverse the downdraft already hitting economic activity........

Full Story Article Link Here

Green is Good: In Silicon Valley

Silicon Valley companies going green in a big way

Silicon Valley companies are focusing more than ever on climate change, energy and the environment, turning the area into a hub for "clean tech" research.

That's the conclusion of a report released today by the Silicon Valley Leadership Group, a public policy organization whose members include many of the region's biggest companies.

More than 100 Bay Area companies now concentrate on solar power research, development or installation, according to the report. Venture capitalists are pouring money into clean technology companies, with most of that money - about $1.13 billion in 2005 - going to California companies.......

David R. Baker, Chronicle Staff Writer
Monday, September 24, 2007

For rest of story go to Link Here

Finally!

Well the Fed finally seems to be listening. The market, myself, anyone who lives in the real world have begged for this cut for many months. The Fed acted boldly after playing it close to the vest, waiting it out, then cutting 50 basis points from the Funds rate today to the cheers of many. I'm terribly relieved that they acted, and I hope they continue to move in the neighborhood of 50-100 more by the end of the year. There is no inflation threat right now, only deflation of many American assets as the demand for money increased and liquidity stalled out. I think Larry Kudlow did an excellent job of calling for the cut, some excerpts from his latest blog postbelow describe the immediate market affects:

Bernanke Gets It Right

Once in a while you get it right. One time in a row.

I talked about this in my last column,

Goldilocks 2.0.

The Bernanke Fed made a good strong move this afternoon. The stock market applauded loudly with a 250-point rise in the Dow. Essentially, the Fed followed Treasury market rates lower. The 4 percent Treasury bill rate had been urging the Fed to make this move.

By itself, this action will not heal the credit markets overnight. But it will help. Lowering the cost of money will -- over time -- raise asset values across-the-board. New cash injections at the new target rate of 4.75 percent will raise the low 2 percent growth of the monetary base in order to accommodate the banking system’s unusually high cash demands.

Adjustable rate mortgage holders will get almost immediate relief.

This is a confidence-inspiring move by the Fed. Lenders will be more apt to lend and investors will be more apt to take risks..........

Link to rest of story at Kudlow's Money Politics Blog

Roll the dice: 25 or 50?

As the Fed prepares to make one if it's most important policy decisions under Bernanke, I'm elated that we are at least seemingly locked into a rate cut which I have been clamoring for months. Unfortuantely, I don't think the Fed will take out the insurance policy necessary by cutting 50 basis points this week. They will again, continue to fall behind the curve of the economic slowdown and most likely take it 25 basis points at a time. This will be a defacto rate increase as the effective Fed Funds rate has been hovering below 5.00% and the market and the economy will be disappointed. We can only hope for more cuts sooner rather than later.......


Economists predict/debate on WSJ economics blog.........

Economists Debate: A Quarter Point or a Half?

This Tuesday, the Fed is expected to lower the target for the federal-funds rate — therate at which banks lend to each other — for the first time in over four years. The key question is how much will the Fed cut? Economists preview the rate decision, and what they expect the Fed statement to say, below.

We look for a 25-basis-point rate cut from the FOMC this Tuesday …, although we believe a larger 50-basis-point cut still carries significant probability. We expect further cuts in the discount rate [currently at 5.75%], possibly of greater magnitude than the drop in the funds rate [currently at 5.25%]. We expect the FOMC statement to emphasize that the downside risks to the growth outlook are the predominant policy concern. – Credit Suisse

While we certainly would not be surprised if the FOMC cut the fed-funds target rate by 50 basis points [by 1/2 percentage point, to 4.75%] next Tuesday, in our view, a 25 basis point cut by a slim margin seems the more likely outcome. Even though the FOMC appears to be trying to move toward greater transparency, we think that this Tuesday’s FOMC statement may be a situation in which the less said, the better. …. The outlook for the economy, the credit markets, and the financial markets is highly uncertain right now. In times of great uncertainty, we think the FOMC generally favors an incremental approach to policy changes. – Friedman, Billings, Ramsey Economic Research

For blog link and further debate click link here

Productivity Strong and Inflation Low

Simply stated - more head room for the Fed to do what it needs to do - cut the Fed Funds Rate................

Productivity Grows at Faster Pace
US Worker Productivity Rebounds Strongly, Wage Pressures Ease Sharply in the Spring

WASHINGTON (AP) -- Worker productivity rebounded, growing at the fastest pace in nearly two years, while wage pressures eased sharply in the spring -- developments that should reduce inflation worries.

The Labor Department reported Thursday that productivity, the amount of output per hour of work, jumped to an annual growth rate of 2.6 percent in the April-June quarter, even better than the 1.8 percent increase that was originally reported.

Wage pressures, as measured by unit labor costs, slowed to an annual growth rate of 1.4 percent, slower than the initial estimate that labor costs were rising at a 2.1 percent rate..................

................The increase in productivity and the reduction in labor costs were better than had been expected, raising hopes that the Federal Reserve will have the leeway to cut interest rates at its next meeting on Sept. 18...........

-By Martin Crutsinger, AP Economics Writer

For rest of story link here

Rate Cuts = Stronger Dollar

Fed Ease Means Dollar StrengthRate
Increases have rarely constituted “tightening” when it comes to restoring the greenback’s value.
By John Tamny & Paul Hoffmeister

The Federal Reserve’s change in bias last week toward cutting the federal funds rate, along with its half-point cut in the discount rate, offers an opportunity to test the widely held belief that rate cuts weaken the dollar while exacerbating existing inflationary pressures. In truth, the opposite is typically the case, since dollar-demand shifts when the Fed acts.

Last week, the market response to the Fed’s new course was profound: Gold began a new short-term downtrend. The dollar adjusted for gold started a short-term uptrend compared with the euro adjusted for gold. The 30-year Treasury yield began a short-term downtrend. And the Russell 2000 Index — comprising small-cap companies and arguably the most sensitive equity index to monetary policy error — ended its recent short-term downtrend.

Overall, lower gold prices, a stronger dollar against the euro, lower long-term bond yields, and rising equity valuations are indisputable hallmarks of a disinflationary environment — not a resurgence of inflation........


Full Story Link Here

Fed Needs to Finish the Job - Part 2

Joseph Mason, an economist at Drexel Univerisity, discussed today why the Fed's Discount Rate cut is only a short term bandaid at best...............


Mr. Mason’s comments:

Let’s be direct. While markets may have been temporarily assuaged by Friday’s Discount Rate cut, the problem at the heart of current credit difficulties is over-leverage. Structured finance conduits (like subprime) are failing because they sold too much high-rated credit and not enough risky credit. That is, they over-leveraged. CDOs bought those over-leveraged structures and then leveraged the structures some more. Hedge funds bought the CDOs and then borrowed to buy more, leveraging themselves 10 or more times over in the process. Over-leverage is a condition of over-borrowing. While discount window lending to insolvent institutions as a broad based bailout policy was attempted in the Thrift Crisis and the Great Depression in the US, and many times elsewhere, it has never once meaningfully addressed industry-wide problems of over-leverage or help restore banks to solvency.

The point is, over-borrowing has not once been reconciled through more borrowing, whether through the discount window or elsewhere. Here are two relevant articles. One is the Federal Reserve Bank of St. Louis’ Homer Jones Memorial Lecture given by Anna Schwartz (Milton Friedman’s co-author on the Monetary History of the United States) in 1992, and one is authored by myself, published in 2001. Both show the frivolity of discount window lending in cases of industry-wide difficulties. Discount window policy will help the industry weather a few weeks of transitory market difficulties, but discount window policy is unlikely to help in the long term. Given the magnitude of interest rate resets increasing well into 2008, more meaningful policy geared toward providing transparency toward RMBS, CDO, Hedge Fund, and Mutual Fund holdings needs to be developed in the few weeks we have bought with the discount window policy. Financial panics tend to happen in the fall, and that time is soon upon us.

- From WSJ Real Time Economics Blog

Blog Link Here

CNBC says Silicon Valley Housing Sizzling

I've been posting about the strong bay area and silicon valley economy since Q3 last year, and it's continuing to show up in the housing market...........

Here is a very pertinent special report in video form from CNBC:

Link Here

Fed Needs to Finish the Job

Cutting the discount rate was a nice gesture, but the market needs a a dramatic Fed Funds rate cut immediately. To wait is only to deepen the chance of a recession and create more uncertainty in the market. As I mentioned Friday, I can only attribute this lack of action on the Funds rate as to stubbornly protect a flawed Fed forecast just weeks ago forcing them to admit they have been out of touch with the real world.

Fed may have to cut federal funds rate
Most economists believe Fed will cut at or before its Sept. 18 meeting

WASHINGTON (MarketWatch) -- U.S. credit markets remained extremely fragile Monday, and observers said the Federal Reserve may have to lower its federal funds target rate to inject permanent liquidity into the market and provide investors with more assurances that the central bank will act to keep the economy growing.

Yields on short-term Treasurys plunged on Monday, evidence that fund mangers were parking their cash in the safest and most liquid assets rather than risk them in any asset backed by mortgages or even in the normally sedate commercial paper market.

The yield on the three-month Treasury fell more than a full percentage point at one point, finishing at 3.09%, down 66 basis points on the day and down about 150 basis points in a week. It was the largest decline since the day the market crashed in 1987.

By Rex Nutting, MarketWatch
Last Update: 6:03 PM ET Aug 20, 2007


Full Story Link Here

It's a start..............

This is a start, but I don't understand the stubbornness of not lowering the fed funds rate.........

Fed OKs Reducing Discount Rate on Loans

Friday August 17, 9:52 am ET

Federal Reserve Approves Half-Percentage Point Cut in Discount Rate on Loans to Banks
WASHINGTON (AP) -- The Federal Reserve approved a half-percentage point cut in its discount rate on loans to banks Friday, a dramatic move designed to stabilize financial markets roiled by a widening credit crisis.

The action had an immediate positive impact, sending stocks soaring on Friday right at the opening bell. The Dow Jones industrial average surged by more 300 points at the start of trading.

The decision means that the discount rate, the interest rate that the Fed charges to make direct loans to banks, will be lowered to 5.75 percent, down from 6.25 percent.

The Fed did not change its target for the more important federal funds rate, which has remained at 5.25 percent for more than a year. Friday's move was not expected to have an immediate impact on consumer borrowing...............

Friday August 17, 9:52 am ET
By Martin Crutsinger, AP Economics Writer

For rest of article click here

C'mon Ben....This is getting ridiculous

Ok, Ben Bernanke is going to transform me from Dr Brightside to Dr Evil. I'm just going to chalk it up to stubbornness and rhetoric, I suppose. I heard Steve Liesman of CNBC make a great point this morning about Big Ben; he descends from academia so until he can touch and feel the data he's going to sit on the sidelines, that he's not going to look at what's coming until it's here. I find that quite frustrating, but I have to imagine pressure is mounting hourly and the Fed will be forced to cut rates soon or they will be losing any real credibility that they are worried about inflation. They have a looming financial crisis on their hands that they can relieve and allow the underlying relatively strong U.S. economy keep it's momentum.

Just the facts to state my case

-The Fed should follow the markets, the 91 day treasure closed today at 4.038% down nearly 100 basis points in a week. This is an incredible turn of events.

-The headline CPI is moderating nicely gaining only .1% . Also the chain weighted 12 month core CPI is at 1.8%, well within the feds comfort zone, so I believe this gives the Fed room to duck and cover and cut.

-Liquidity in the financial markets is almost frozen. Commercial paper is not trading as it should thus not allowing many institutions to meet their daily obligations. This is despite the Fed's various attempts in the last few days to inject liquidity.

We are what we believe

The reason for birthing this blog is my contention the main stream media has been overtly negative about our economic situation the last few years and that there needed to be a counterbalance, even if it's a grass roots effort of one person and one blog at a time(read the mission statement above). I understand glorifying news to sell papers and advertising, but the last few years the negative slant has been ridiculous. If find alas, the artful prose of Brian Westury in a recent WSJ Op Ed piece describing the business that is economic news.............

Fair but Unbalanced
How the media promote false pessimism about the economy.
BY BRIAN S. WESBURY

Not that it needed any help, but the already energized debate about journalistic bias was electrified when Rupert Murdoch, owner of the "fair and balanced" Fox News Channel, struck a deal to buy The Wall Street Journal.

I have no desire to take sides in this debate, or question anyone's integrity, but my role as a business economist gives me a unique view of this subject.......

.......For example, the most recent Wall Street Journal economic forecasting survey, from July, shows that 49 out of 60 forecasters expect real GDP to grow at an average annual rate of 2%, or faster, in 2007. Of the remaining 11 forecasters, only two expect growth of less than 1%, and only one expects a recession. For 2008, the forecasters are even more optimistic, with none expecting recession......

.......Despite this, an NBC News/Wall Street Journal poll taken in late July found that 68% of Americans thought that the economy either was in recession already, or would experience a recession sometime during the next 12 months. Interestingly, this is not much of a change from the past. This same survey question has been polled at least five times since September 2002. Each time a robust majority of between 65% and 85% of respondents thought a recession either was under way or would occur within the year. Americans have been bearish on the economy for quite some time.

In short, over the past five years, forecasting economists from academia, consulting shops, financial services and industry have a perfect 5-0 record against a random sample of American citizens. It's important to understand that economists are not always right. Some even say that economists were put on earth to make weathermen look good......

For Rest of Story and Link to WSJ click here

I told You So

I've been asking the Fed to cut rates since the birth of this blog. In Bernanke's stubborness to show is monetary manhood he's overtightened and held on too long causing a freeze up in the credit markets. Memo to Bernanke, it's much easier to lower the Fed Funds rate than to continually pump daily emergency liquidity into the financial markets..............

U.S. Rate Cut Looks More Likely

Central banks pumped money into distressed markets for the second day to relieve strains in money markets, while investors concluded the Federal Reserve is increasingly likely to cut rates soon and that rate increases in Europe and Japan may be deferred.

Explaining that it was "providing liquidity to facilitate the orderly functioning of financial markets," the Fed injected $38 billion, following Thursday's $24 billion. The European Central Bank, saying that its "liquidity-providing fine-tuning operation" was aimed at assuring orderly market conditions, added $83.56 billion following the $130 billion it injected to euro-zone markets Thursday.......

........Futures markets place high odds on the Fed cutting the rate target to 5% at its Sept. 18 meeting, and some possibility of a cut before then. The decision turns on how conditions in credit markets develop in coming days. If they don't improve, officials would probably be inclined to cut rates to offset the negative impact.

By JOELLEN PERRY and GREG IPAugust 11, 2007 - WSJ

Stealth Rebound

It's always darkest right before the dawn.....................

U.S. MBA's Mortgage Applications Index Rose 8.1% Last Week

By Shobhana Chandra

Aug. 8 (Bloomberg) -- Mortgage applications in the U.S. rose last week by the most since January, as cheaper borrowing costs encouraged more Americans to seek loans for home purchases and refinancing.

The Mortgage Bankers Association's index of applications to buy a home or refinance a loan jumped 8.1 percent to 656.5 from 607.1 the prior week. The group's gauge of demand for credit for home purchases gained 7.4 percent, while a measure of refinancing increased 9.1 percent.

A resilient labor market and lower home prices may support sales and eventually help reduce the glut of unsold properties, economists said. A report last week showed Americans signed more contracts to buy previously owned homes in June, a sign the weakness in the housing market may not get much worse.

``We're at the bottom right now in housing,'' said Mark Vitner, senior economist at Wachovia Corp. in Charlotte, North Carolina. ``The biggest declines are over.''


For Bloomberg Link Click Here

Place Your Bets

Ahead of tomorrow's Federal Reserve meeting the Dow had it's biggest daily gain in four years. What does this mean? Maybe investors are hoping the Fed will get back out of the way of the ongoing U.S. prosperity and cut rates to a more "market" rate level. My guess is the Fed will acknowledge more of the slowing its lagging monetary tightening has produced, but still keep rates unchanged and remain "vigilant" on inflation.

I've been saying ad nauseam this year that the Fed should let prosperity run and cut rates.

Here are a few of my recent posting links:

Inflation Calm Link Here

Memo To Bernanke to Cut Link Here

And Merrill Lynch Agrees............

"Still, there were some who did expect movement from the Fed, if not now, soon. Merrill Lynch put out a report predicting that the Fed funds rate would be at 4.50% by the end of the year, from 5.25% now. "Not only do we see the Fed cutting rates sooner than the consensus and markets currently expect, but we see the cuts being deeper, with the Fed eventually lowering the funds rate to 3.75% by mid-year 2008," they wrote."-courtesy WSJ.

With the core rate nicely in the Fed's "comfort" zone and decelerating it will be only stubborness and flexing of inflation fighting Bernanke manhood muscle that will allow him to beat the vigilance drum. Soon the beat will tire and cooler heads will prevail.

Venture Capital Still Hot

VENTURE CAPITAL FUNDRAISING ACTIVITY HEALTHY AND PRUDENT IN SECOND
QUARTER OF 2007

Expansion Stage Fundraising Breaks Record


" Sixty eight venture capital firms raised $7.2 billion dollars in the second
quarter of 2007 according to Thomson Financial and the National Venture Capital Association (NVCA).
This quarter’s figures represented a decline in the number of funds but an increase in dollars raised. For the
first half of 2007, venture capital firms have raised approximately 62 percent of volume raised in the first
half of 2006."

For Entire NVCA Report

Click Here

More Jobs Expected

Business Economists Expect Stronger Hiring

Companies’ economists are more upbeat about hiring than they’ve been in more than a year, according to the latest quarterly survey by the National Association for Business Economics.
About 41% of respondents said they expect their firms to add employees over the next six months, up from 29% in April and 31% a year ago. About 17% predicted decreases in employment through attrition or layoffs, while the rest expected no change.

The NABE industry survey showed stronger profit margins, hiring and capital spending in the second quarter compared to the first quarter and a better outlook for the economy in the months ahead. But companies also reported cost pressures that could start weighing on their results.

More than 40% of firms reported that wages and salaries rose in the second quarter, the second-highest reading since early 2000, and 40% reported shortages of skilled labor. Other costs also surged: About two-thirds of companies said materials costs are rising, twice as high as January’s levels. Some 60% expect non-labor input prices to rise over the next three months.

Despite higher costs, only 22% of firms said they had raised prices last quarter, marking the lowest percentage in four years. And about that many expect to do so in the third quarter. Yet industry profit margins have continued increasing for four years, and a key reason may be productivity, the NABE said. About 91% of firms reported productivity gains over the last year, due largely to technology improvements or investing in more productive capital.

– Sudeep Reddy WSJ Econ Blog

Building Boom - continued

As I mentioned last week, it seems most economists are baffled by the strength of employment in light of the temporary residential construction slowdown. What they don't realize is that many of these firms are general and specialy contractors that can shift their focus to commercial construction which has been booming. In this week's Businesweee Outlook James Mehrig backs up this hypothesis with data.


Builders Are Busy With Offices And Factories

Outside of housing, there's a construction boom. The protracted recession in residential building is getting all the attention, but nonresidential building shows scant signs of letting up. That's softening the blow from housing for both the industry and the overall economy.

In the second quarter, U.S. office-vacancy rates fell to 12.6%, down from 13.7% a year ago, according to commercial real estate services company CB Richard Ellis Group (CBG ). The decline came despite a 21.5% yearly increase in the amount of office space constructed during the second quarter.......






......The outlook remains upbeat. "There is still a large pool of buyers" for office space, says Ward Caswell, U.S. director of research at CB Richard Ellis. In May, new nonresidential construction starts increased at an annualized rate of 4.4% from April, while nonbuilding starts, such as constructing new highways and bridges, spiked by 43%, according to McGraw-Hill Construction.

JULY 23, 2007 - Business Outlook, James Mehring - BusinessWeek

For Full Story Businessweek subscribers link here

Building Boom - The Real Story of Construction Employment

Economists and nay sayers who claim that the economy is destined for ruin due to construction layoffs from the temporary housing slowdown, forget many of these firms and their workers have multi- dimensional skill sets that transfer quite well to the booming commercial sector.........

Building boom won't quit
Commercial construction up 37% despite housing slump

Residential construction has fizzled but Sacramento is otherwise booming, with about $180 million more in non-residential building under construction so far this year compared to early 2006 -- a 37 percent increase.

The area's top general contractors report they haven't seen a decline in work that typically accompanies a new-housing slump. They're tied up with projects for years to come. ...................

............"We're booked for two years," said David Higgins, president of Harbison-Mahony-Higgins Builders Inc., the area's No. 3 contractor based on revenue of $330 million in 2006. Like other large contractors, the company does a substantial amount of work in the medical field, which hasn't been hindered by the housing market. One reason for that, Higgins said, is state seismic safety requirements. Some of the work on hospitals has already started.

"Our volume is going to be up this year and next year," said Frank DaiZovi, vice president of Turner Construction Co., the area's top builder, with $475 million in revenue last year through the Sacramento office. The company is building medical centers and schools among many other projects. ......

Sacramento Business Journal




Link Here

7/11 - Lucky Day Brings Good Tidings

Housing Bottoming.............

U.S. home loan demand climbs even as rates surge

NEW YORK (Reuters) - U.S. mortgage applications rose last week, fueled by increased demand for home purchase loans even as interest rates hit their highest level in nearly a year, an industry group's data showed on Wednesday. .....
Full Story Link Here

Rebounding Nicely Next Year...........

Realtors Pare Back Forecast Again,But Project Rebound Next Year

"WASHINGTON -- The National Association of Realtors continued to pare back its forecast for existing U.S. home sales in 2007, while projecting a modest rebound for the struggling housing market in 2008.....

"This should help the overall inventory level to move steadily into a more balanced state," he added. With that in mind, NAR remains sanguine about the housing market in 2008, projecting existing home sales will rise 4.2%, to 6.37 million....

......New home sales are expected to increase at a much more modest pace, with NAR forecasting a 1.4% rise to 878,000 in 2008. "Markets that sharply reduce new construction in 2007 will generally experience respectable price increases in 2008," Mr. Yun said.".....

By BENTON IVES-HALPERIN- WSJ
Full Story Link Here

Goldilocks Keeps on Cruisin' Along

Job Growth Is Better-Than-Expected

Employers Boost Payrolls by 132,000 in June,
Unemployment Rate Holds Steady at 4.5 Percent

"WASHINGTON (AP) -- Employers boosted payrolls by a better-than-expected 132,000 jobs in June, enough to keep the unemployment rate at a relatively low 4.5 percent. It was another sign that the economy is snapping out of a nearly yearlong sluggish spell.

The latest picture of the nation's employment climate, released by the Labor Department on Friday, also showed that workers saw solid gains in their wages last month.

The tally of 132,000 new jobs was stronger than the 125,000 that economists were forecasting. They did, however, predict that job growth would be sufficient to hold the unemployment rate at 4.5 percent, where it has stood for three straight months.........

.........Meanwhile, the economy added more jobs in April and May than the government previously thought. Revised figures released Friday showed that payrolls grew by a strong 190,000 in May, much stronger than the 157,000 reported last month. In April, 122,000 positions were added, which was better than the 80,000 previously reported, which had been the fewest in two and a half years."

By Jeannine Aversa, AP Economics Writer

Full Story Link Here

Venture Capital IPO's Best in 7 years

Q2 IPOs hit 6-year high, raising $2.73B

"U.S. venture-backed companies raised $2.73 billion in initial public offerings in the second quarter, according to a report by Dow Jones VentureOne on Monday.

This more than doubled the $1.25 billion raised via IPO during the same period last year and was the highest amount raised since the third quarter of 2000.


Additionally, the $3.93 billion raised through venture-backed IPOs thus far in 2007 has surpassed the total amount raised through IPO in all of 2006."

Courtesy-Silicon Valley / San Jose Business Journal

Full Story Click Here

Paulson: Housing 'at or near bottom'

Paulson: Housing 'at or near bottom'

But Treasury secretary gives no timetable for recovery; says financial markets remain healthy despite subprime mortgage mess.

July 2 2007: 4:40 PM EDT

WASHINGTON (Reuters) -- Treasury Secretary Henry Paulson said Monday the U.S. housing market correction was "at or near the bottom," although it could be some time before an upturn.

"In terms of looking at housing, most of us believe that it's at or near the bottom," he told Reuters. "It's had a significant impact on the economy. No one is forecasting when, with any degree of clarity, that the upturn is going to come other than it's at or near the bottom."

Courtesy CNN Money.com

Link Here

Economy Stronger and Rates Lower

Some excellent indicators today of a strong economy with low inflation............The ISM came in better than expected and hit a 14 month high concurrenlty as interest rates headed lower. The 10 year dipped below 5% to 4.99%, once again signifying that there is not an inflation threat out there.


"The June ISM national manufacturing survey came in at 56.0. This was up a bit from 55.0 in May and was about in line with expectations. It represents good news in that it reflects steady and decent growth for manufacturing. A reading above 50 is intended to show growth for the sector."

-courtesy of Briefing.com

Inflation Calm

I won't say I told you so, but I did...............The Fed is now being stubborn and still talking big, rate cuts should still be in play.............

Fed's Preferred Price Gauge Dips Below 2% Into 'Comfort Zone'

The Fed's preferred measure of inflation dipped below 2% for the first time in three years in May, vindicating the Federal Reserve's decision to soften its description of inflation on Thursday.

At the same time, while personal incomes and consumer spending both grew in May, they did so a bit more slowly than expected.

The price index for personal consumption expenditures rose 0.5% in May compared to the prior month and 2.3% from a year earlier. Excluding food and energy, the "core" index rose 0.1% in May and 1.9% from a year earlier, the first reading below 2% since April, 2004.

The core PCE index is the Fed's preferred benchmark for inflation. Some Fed officials say their "comfort zone" for inflation is 1% to 2%. On Thursday, the Fed left its short-term interest rate target at 5.25% and dropped its description of core inflation as "somewhat elevated," but also warned it had yet to see convincing evidence the drop in inflation was lasting.

By GREG IP and JEFF BATER - WSJ
June 29, 2007 8:59 a.m.


For Rest of Story Link Here

Homeowners Optimistic about Home Prices

Homeowners upbeat despite housing slowdown


NEW YORK - Slumping home sales and drooping prices haven't diminished homeowner optimism about their own nest egg's value, a recent survey shows.

The survey by Boston Consulting Group showed 55 percent of Americans believe they could sell their house for more money now than a year ago, down slightly from the 59 percent who felt that way last summer.

Nearly three-quarters think they could sell their homes within the next six months at a price they set, and 63 percent feel that real estate is a good or excellent investment.

Associated PressJun. 24, 2007 12:51 PM


For Rest of Story Go To Link Here

Nor Cal Job Growth Quite Robust

Northern California performed better than the state as a whole posting almost 60,000 new jobs in the bay area year over year and approximately 20,000 new jobs in the Sacramento region. Unemployment was also lower than the rest of the state. But the state performed well too, adding 224,000 new jobs in the last year.


For Full Story Link Here

Housing Slump Over

Another Clip From Businessweek - Economic Outlook


U.S.: Is The Housing Recession Starting To Recede?
The drag on economic growth is easing, and home demand is firming up

It's still way too early to celebrate, but more and more signs suggest the housing recession is starting to ease its grip on the economy........

......Over the past three quarters the residential-construction segment of real gross domestic product has robbed 1 to 1.2 percentage points per quarter from the economy's annualized growth rate. Clearly, reports on housing remain mixed, but many economists are encouraged by key trends in housing starts, new-home sales, mortgage applications, and other indicators. Some analysts even think the second-quarter drag will be half that of recent quarters.....

.......Sales of new homes soared 16.2% in April, the largest monthly gain in 14 years, reaching an annual rate of 981,000......

....One bit of corroborating evidence that demand has stopped falling is the trend in weekly mortgage applications to buy a home, which has been on the rise since February. Through May 25, the four-week average of new filings was at its highest level since early 2006, according to data from the Mortgage Bankers Assn.

ALSO, IT APPEARS the subprime loan debacle is not causing a broader restriction on credit that would depress home sales to prime borrowers. Subprime mortgages are almost exclusively adjustable-rate loans, for which applications are down sharply over the past year. However, new paperwork for fixed-rate mortgages is up 40% from a year ago. .......


For Link and Full Story Click Here

Q2 Much Stronger than Most Expected

This Business Outlook is from the latest issue of Businessweek and contains a well depicted synopsis of the recent sources of strength in the U.S. economy and a detail of the rebound in the second quarter. If it all pans out to be true, then we had a soft landing and goldilocks lives on. One thing, though, is I disagree with the author's headline and premise; that the good news entails the next Fed move is a rate hike; in fact the next move should be a cut, even inf the face of last weeks bond market activity and the 10 year treasury yield rising t0 5.15, the 9o day t-bill still signifies a cut. Anyhow, enjoy.........

U.S.: Stop Thinking Rate Cut, Start Thinking Rate Hike With economic growth rebounding, it's time to revise expectations

After a long and pleasant dream about the Federal Reserve cutting interest rates, the financial markets are beginning to wake up to reality. That is, maybe the Fed's next move will be not to lower rates but to raise them. We won't see action anytime soon, but market expectations are starting to turn 180 degrees from where they were only a month or two ago.

Most Wall Street Fed watchers who had been predicting the central bank would cut rates are already either pushing those forecasts further into the future or abandoning them altogether. And options trading in federal funds futures, which can offer a reading on what the market expects the Fed's rate will be, implies a 43% chance that policymakers will lift rates by their Dec. 11 meeting.......

......What has changed? Economic reports are making it increasingly apparent that the slowdown in the economy is over, with little if any progress on either loosening up the labor markets or bringing inflation permanently back into the Fed's comfort zone

.......ALTHOUGH WASHINGTON revised first-quarter growth in real gross domestic product down to a puny 0.6% from its original estimate of 1.3%, the overall implication for future economic growth, based on the details of the report, was clearly encouraging. The GDP numbers showed that demand from U.S. consumers and businesses grew 2.5% during the quarter, a faster annual rate than first estimated. That pace was a speedup from 1.8% during the previous three quarters and the fastest in a year..........

For rest of story link here

Auto Sales Rebounding in U.S.

Here Dr James Hamilton of Econobrowser depicts the untold story of the quietly rebounding auto sector. The headline: Sales this May were better than May of 2006 and 2005..............

Link Here

Trifecta of Good News

So we were treated to a trifecta of good news about the U.S. economy today.
The jobs number came in stronger than expected at 157,000, much improved over May. The ISM number came in at 55, the strongest in a year. And, as I stated again and again there is no inflation out there, and the numbers are starting to show with core inflation at 2.0% for the last 12 months, now in the Fed's "comfort zone"..........

Employers Nearly Double New Jobs in May, Hopeful Sign of Improving Economy

WASHINGTON (AP) -- The country's economic health may be improving. Employers nearly doubled the number of jobs they added to payrolls in May, allowing the unemployment rate to hold steady at a relatively low 4.5 percent. The fresh employment picture provided by the Labor Department on Friday showed job creation bounced back, with payrolls growing by 157,000 last month.....

.....The Institute for Supply Management's manufacturing index rose to 55 in May, the best showing in a year. A reading above 50 indicates growth, while a reading below 50 indicates contraction......

.......An inflation barometer -- excluding food and energy prices -- closely watched by the Fed moderated in April. The measure showed prices rising 2.0 percent over the last 12 months. That was down from a 2.1 percent increase for the 12 months ending in March.

By Jeannine Aversa, AP Economics Writer

Story Link Here

Mainstream Media Love Tech Again

As I've noted in a number of posts, tech is back, big time. I believe this tech 2.0 cycle is in the early innings of a nine inning game. Gradually over the last year, wall street and the main stream media seem to have caught on. Touting tech is no longer taboo as the wounds of the dot com era have been mostly healed or forgotten. The silicon valley companies of today are better run, more tangible, and vastly more profitable than their fallen brethren of the past.

In Fierce Competition, Google Finds Novel Ways to Feed Hiring Machine

MOUNTAIN VIEW, Calif. — On a spring Saturday, about 90 students from Stanford and as many from the University of California, Berkeley, converged on Google’s corporate campus for a day of spirited team competition over mind-bending puzzles, Lego building problems and video games.

It was called the Google Games, a convivial way for the mostly computer science and engineering students to renew the Stanford-Berkeley rivalry. But behind the fun was a serious corporate recruiting event that underscores a rivalry no less intense: the tug of war for talent between Google and its competitors.

As much of the high-tech industry is enjoying a renewed boom, the competition for top recruits in engineering and other fields is as intense as ever. Companies like Google, Microsoft and Yahoo frequently find themselves going after the same candidates or recruiting in one another’s backyards. At the same time, they are running up against a myriad of start-up companies across Silicon Valley that have been pumped up with venture capital in recent years.............

Excerpts from NY Times

For Full Story Follow Link Here Link Here