The latest diffusion index, which came at 17.5, on expectations of 13.0, confirmed two very much expected things: i) economic "growth" continues to be predicated on inventory stockpiling, as has been the case for the past two years, which is nothing but a highly speculative bet that demand will eventually pick up (and we pray the Dallas Fed respondents use FIFO not LIFO accounting), and ii) margins are getting crushed.
Zerohedge is seriously a great site. To see its origins, check out this New York Magazine article.
...when a former Goldman Sachs computer programmer was arrested for allegedly stealing software codes used for the firm’s electronic trading arm, and a federal prosecutor was quoted saying the codes could be used to “manipulate markets in unfair ways,” the once-obscure blog ignited a chain reaction. While on a golf outing, an editor at the New York Times learned from a friend who worked on Wall Street that the Zero Hedge allegation was the talk of the industry, and an assignment ensued. On July 24, the Times published a front-page article on so-called high-frequency trading and its potential abuses, which in turn prompted Chuck Schumer, a member of the Senate Finance Committee, to draft a letter to the SEC that same day. Twelve days later, the SEC signaled that it was considering a ban on the very computerized trading that Zero Hedge had attacked.
Suddenly, the shadowy figure behind Zero Hedge was a full-blown cult hero—a blogger with a bullet. His readership of angry traders and anti-government malcontents celebrated his newfound power. “Welcome to the party pal!!!” declared one of his fans in the comments section.In a sign of just how radically the order has shifted in the political and media world, neither the Times nor Schumer had a clue about the identity of the pseudonymous author behind Zero Hedge. As it happens, the founder is a 30-year-old Bulgarian immigrant banned from working in the brokerage business for insider trading. A former hedge-fund analyst, he’s also a zealous believer in a sweeping conspiracy that casts the alumni of Goldman Sachs as a powerful cabal at the helm of U.S. policy, with the Treasury and the Federal Reserve colluding to preserve the status quo. His antidote? A purifying market crash that leads to the elimination of the big banks altogether and the reinstatement of genuine free-market capitalism.
Never mind Dow 10,000. Dan Ivandjiiski is all about Dow Zero.While conspiracy theories are fun to read, its tough to put a lot of weight in them. Still, the people at Zerohedge are providing a great public good with their constant data watching.
To end with Did You Know.
Did You Know that the Fed socializes risk when it purchases Treasury securities? Caroline Baum explains in her Bloomberg article that asks five potential questions that Bernanke should face when testifying before Congress:
There’s been some suggestion that the $600 billion was derived from a decision to remove a certain amount of duration, or price risk, from the market. Is that true? And if so, why does the central bank want to socialize the risk, transferring it from investors, who choose or are able to take it, to taxpayers? (Background for lawmakers: Because the Fed turns its profits after operating expenses over to the Treasury, any reduction in profits means a bigger deficit and higher taxes for the rest of us.)Maybe the theories at Zerohedge aren't so crazy.