Mish's Global Economic Trend Analysis

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• More Robots: Google's "Atlas" Robot Mimics "Karate Kid"; Flying Defibrillator "Ambulance Drone" Unveiled; Fed Has No Answer
• More Blowbacks: Russia to Build 8 New Nuclear Reactors in Iran; Putin Signs Another Gas Deal with China
• Obamacare Architect Explains "Stupidity of American Voter" Needed to Pass ACA

More Robots: Google's "Atlas" Robot Mimics "Karate Kid"; Flying Defibrillator "Ambulance Drone" Unveiled; Fed Has No Answer Posted: 11 Nov 2014 02:59 PM PST Robotic technology continues at a rapidly expanding pace. Here's a look at two new technologies. Flying Defibrillator "Ambulance Drone" Tech Crunch reports Flying Defibrillator 'Ambulance Drone' Cuts Response Time Down to Couple of Minutes A Dutch engineer has created a flying defibrillator for emergency situations. The drone, called the Ambulance Drone, would be stationed at various points in the city. In an emergency, people on the scene can call it in and it arrives a few seconds later. The built-in defibrillator unit can be used by anyone and it allows doctors to monitor the situation after the shocks are administered. The drone includes a webcam and loudspeaker and allows remote doctors to walk people on the scene through the process of attaching the electrodes and preparing the defibrillator. The creator, Alec Momont of TU Delft's Faculty of Industrial Design Engineering, said that 20% of people can operate a defibrillator without instruction and the number rises when they have prompts from trained personnel. "Some 800,000 people suffer a cardiac arrest in the EU every year, and only 8% survive," Momont explains. "The main reason for this is the relatively long response time of the emergency services (approx. 10 minutes), while brain death and fatalities occur within 4 to 6 minutes. The ambulance drone can get a defibrillator to a patient inside a 12 km zone within one minute. This response speed increases the chance of survival following a cardiac arrest from 8% to 80%." Ambulance Drone Video Google's "Atlas" Robot Mimics "Karate Kid" 9-to-5 Google reports Google-owned Boston Dynamics debuts new video of Atlas robot mimicking 'The Karate Kid'. Google-owned robotics lab Boston Dynanics has debuted new video of its 6'2″ Atlas robot, also known as "Ian." The hulking mass of metal, which weighs a whopping 330 lbs, has been programmed to recreate a key scene from the 1984 film The Karate Kid. Ian is part of an ongoing robotics project that seeks to create automatons that can replace humans in hazardous roles like firefighting. Ian has already demonstrated a variety of abilities, including traversing difficult and uneven terrain, carrying objects such as firehoses, and even to get into a car and drive it. It can also use both its hands and feet to climb over the most treacherous obstacles. Ian's head is made up of two cameras and a laser rangefinder that provide it with the necessary depth perception to accomplish many tasks that most other robots simply wouldn't be able to. It can turn its head to get a better view of its surroundings. It has a total of 28 moveable joints throughout its body. Atlas Drone Video As 9-to-5 suggests, turn down your audio for this one. The video sound is more than a bit annoying. Amazing Technology Pace Robot technology advances at an amazing pace. It is easy to pooh-pooh this technology as unusable, but it will not be unusable for long. I believe it's safe to assume that drones, under command from a limited number of humans, will eventually be able to replace a big subset of firefighters. More On Robots October 29, 2014: Meet "OSHbot" Lowes New Store Helper; Goodbye Retail Associates, Hello Robots August 18, 2014: Rising Robots: Is it Obvious Robots Cost Human Jobs? Looking for Someone to Blame? June 23, 2104: Robot Truck Convoy Tests in Nevada; Driverless Trucks Before Cars, and Before the End of the Decade May 28, 2104: Google Unveils Self-Driving Car, No Steering Wheel, No Accelerator, No Brake Pedal; Self-Driving Taxi Has Arrived May 23, 2014: Amazon to Increase Robots from 1,400 to 10,000 by End of 2014; Day in the Life of a Robot October 9, 2013: High-Tech Robotic Wine: The Future of Winemaking is Robots October 6, 2013: Reader Question on Robots: What are People Supposed To Do For Their Livelihoods? October 4, 2013: Never Has Arrived; The Last MileApril 25, 2013: Robotic Outsourcing; Food Preparation Robots Invade China, Japan, US; Who is to Blame, and What Can be Done About It?February 24, 2013: Robots Don't Commit Suicide (and Other Robot Advantages) January 22, 2013: Meet "Baxter" the Robot Out to Get Your Minimum-Wage, No Benefits, Part-Time Job, Because He's Still Much Cheaper; Fed Cannot Win a Fight Against Robots August 20, 2012: Robots to Rule the World? Taking All Jobs? Replace Women? Fed Has No Answer Technology is extremely price-deflationary. Robots are cheaper and faster than human counterparts in an ever-increasing number of roles. Neither the Fed, nor governments have an answer. Higher minimum wages encourage more use of robots. Lower interest rates make it easier for companies to borrow to invest in technology.  Lower interest rates also increase income inequality. In regards to point number three above, lower interest rates boost earnings which in turn boosts CEO salaries and raises the value of stock options. Those with no assets lose as real wages decline. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

More Blowbacks: Russia to Build 8 New Nuclear Reactors in Iran; Putin Signs Another Gas Deal with China Posted: 11 Nov 2014 11:50 AM PST As the US (but not Germany) threatens more sanctions to "punish" Russia, I keep wondering who is punishing whom? Is Chancellor Merkel finally beginning to see the economic and geopolitical stupidity of sanctions? I ask because the Wall Street Journal reports Merkel: No New Economic Sanctions on Russia Planned. Meanwhile, Obama and Putin briefly met on Tuesday at the Asia-Pacific Economic Cooperation summit in Beijing. On that note, the Washington Examiner reports Obama Talks Ukraine with Putin as White House Hints New Sanctions are Coming. Rocks in Head Sure to Rattle Russia has responded twice in two days in ways that will have the rocks in president Obama's and Senator John McCain's head rattling for sure. Russia to Build 8 New Nuclear Reactors in Iran The Financial Times reports Russia-Iran Nuclear Reactor Deal Raises Eyebrows. Russia has agreed to build eight new nuclear reactors in Iran in a deal raising eyebrows in Washington and Europe as fraught international talks to curb Tehran's atomic ambitions near their deadline. Meeting in Moscow on Tuesday, Iranian and Russian officials said they had negotiated terms for the construction by Russia's state nuclear power company Rosatom of four new reactors at the Islamic republic's existing Russian-built Bushehr facility, and four more at another site in the country. Russian officials said their eight-plant nuclear deal – the broad terms of which were first laid down in a 1995 agreement – could boost efforts to make Iran's nuclear activities more transparent and would benefit the Vienna discussions. "The entire construction project of the nuclear power units in Iran, including equipment and nuclear fuel supplies, will be under International Atomic Energy Agency safeguards and fully meet the nuclear non-proliferation regime the same way as during construction of the first power unit of Bushehr," Rosatom said in a statement. Make-or-Break Moment Iranian negotiators and counterparts from the P5+1 – the five permanent members of the UN Security Council and Germany – are set to meet next week in Vienna to begin the final bout of talks aimed at ending crippling international sanctions against the Islamic republic in exchange for permanent limits to its uranium enrichment activities. Speaking in Berlin, German foreign minister Frank-Walter Steinmeier warned that the talks were at a "make-or-break moment," and if no agreement was achievable by the November 24 deadline, it could be at least two years before they could meaningfully resume.  Oversight Not Wanted More independent oversight by the International Atomic Energy Agency should be precisely what everyone wants. Perhaps Merkel can pound some common sense into Obama's head, but don't count on that. Her judgement has not been all that brilliant lately, to say the least.    Instead, I fully expect McCain will have a hyperventilation attack and Obama will go along with McCain. This is really not about oversight but rather about total control. The US wants to dictate what every country can or cannot do. It's that simple. Iran Sanctions Will Break Soon Should the US scuttle the "make-or-break talks", look for Russia and China to work out more deals to buy Iranian oil. South Africa, which only went along with sanctions under pressure from Obama, may also throw in the towel. Other countries will follow. One way or another, I expect the sanctions on Iran to break down soon. Obama has two unpalatable choices at this point. Option 1: Should the November 24 talks die without agreement, the Obama-inspired sanctions will end in total complete failure, obvious to the entire world. Option 2: Obama agrees to lift the sanctions, with McCain and the war hawks howling bloody murder. No Winning Play for Obama Putin's Iran nuclear reactor deal was announced purposely at this time to make Obama look like a fool. And it worked. There is no real winning play for Obama at this point. That's something one ought to consider when imposing inane sanctions. Should sanity prevail and the US lift the sanctions, one needs to stop and ask the questions "What did we get, and was it worth the effort?"   Perhaps the threat of option 1 will save the day, culminating in an Obama "we did it speech" that in reality will be much ado about nothing, and with McCain bellowing like a sick moose for weeks. That is the very best Obama can get out of this mess now. Putin Signs Another Gas Deal with China The Financial Times takes the cake for the most ridiculous headline of the month with Putin Snubs Europe with Siberian Gas Deal that Bolsters China Ties. "Putin Snubs Europe?!" What the H should Europe expect when it bows to the inane wishes of Obama and imposes ridiculous sanctions on Russia. Also note that in response to Ukraine, the EU blocked Russia's pipeline proposals to bring more gas to Europe. What's Putin supposed to do? Kiss Obama's ass? Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

Obamacare Architect Explains "Stupidity of American Voter" Needed to Pass ACA Posted: 11 Nov 2014 12:29 AM PST The truth on Obamacare is finally out: The bill was purposely written to trick the CBO (congressional Budget Office) into believing the bill was not a tax. Moreover, the bill also depended on the "Stupidity of the American Voter". Many of us knew that long ago. But those are the words of Jonathan Gruber, a numbers wizard at M.I.T., who was courted by the Obama administration, and paid $400,000 for his efforts to see that the bill made its way through Congressional obstacles. The following short video explains the setup. Academic Case Back in 2012, regarding Gruber's role in getting the bill passed, the New York Times wrote Academic Built Case for Mandate in Health Care Law. Interestingly, Gruber was also the architect for Romneycare when Mitt Romney was Massachusetts governor. Romney was proud of Romneycare until president Obama endorsed virtually the same idea as Obamacare. Romney then ran against his own creation. Lovely. I picked up the video above from Reason.Com Watch Obamacare Architect Jonathan Gruber Explain Why "Lack of Transparency" Was Key to Passing the Health Care Law. Complete Quote Gruber: "This bill was written in a tortured way to make sure CBO did not score the mandate as taxes. If CBO [Congressional Budget Office] scored the mandate as taxes, the bill dies. Okay, so it's written to do that. In terms of risk rated subsidies, if you had a law which said that healthy people are going to pay in – you made explicit healthy people pay in and sick people get money, it would not have passed… Lack of transparency is a huge political advantage. And basically, call it the stupidity of the American voter or whatever, but basically that was really really critical for the thing to pass....Look, I wish Mark was right that we could make it all transparent, but I'd rather have this law than not." Reason says (and I wholeheartedly agree) ... Gruber thinks it's acceptable to deceive people if he believes that's the only way to achieve his policy preference. That's not exactly surprising, given that he failed to disclose payments from the administration to consult on Obamacare even while providing the media with supposedly independent assessments of the law. But it's particularly revealing in light of Gruber's recently discovered comments regarding the way the law's subsidies for health insurance are supposed to work. In a 2012 video unearthed this summer, Gruber said explicitly that the tax credits to offset coverage costs were conditioned on state participation in the law's exchanges—a contention that the administration denies, and is at the heart of a legal challenge on its way to the Supreme Court. Tax Credit Legal Challenge Jumping to the above 2012 video link we find Gruber arguing out of both sides of his mouth in regards to tax credits. Each side taking the opposite side of the other. Gruber: "What's important to remember politically about this is if you're a state and you don't set up an exchange, that means your citizens don't get their tax credits—but your citizens still pay the taxes that support this bill. So you're essentially saying [to] your citizens you're going to pay all the taxes to help all the other states in the country. I hope that that's a blatant enough political reality that states will get their act together and realize there are billions of dollars at stake here in setting up these exchanges. But, you know, once again the politics can get ugly around this." Reason: "What he says is exactly what challengers to the administration's implementation of the law have been arguing—that if a state chooses not to establish its own exchange, then residents of those states will not be able to access Obamacare's health insurance tax credits. ... In early 2013, Gruber told the liberal magazine Mother Jones that the theory advanced by the challengers in this case was 'nutty.' Gruber also signed an amicus brief in defense of the administration and the IRS rule. But judging by the video it is quite clear that in 2012 he accepted the essence of the interpretation advanced by the challengers." Here's the video, which according to YouTube's date stamp was uploaded by Noblis on January 20, 2012. The relevant passage starts around minute 31. And so here we are, stuck in a system designed by Gruber and implemented first by Mitt Romney, then by President Obama. To get Obamacare through Congress was a chore. It depended on the "Stupidity of the American Voter", says Gruber in those exact words. Whom do we "thank" most? Gruber, Romney, Obama, or the stupid American public? Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

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"Brink" of a New Cold War? Another Cold War Already Started? Is McCain Brain Dead? Posted: 10 Nov 2014 06:08 PM PST Former Soviet Union leader Mikhail Gorbachev warned on Saturday that the Ukraine crisis had brought the world to the "Brink of a New Cold War". "The world is on the brink of a new cold war. Some say it has already begun," said [Mikhail Gorbachev] the 83-year-old former Kremlin chief in a sombre speech delivered in Berlin at an event to mark the 25th anniversary of the fall of the Berlin Wall this weekend. Mr Gorbachev accused the west, led by the US, of "triumphalism" after the fall of the Berlin Wall ended Soviet dominance in eastern Europe. Trust between Russia and the west had "collapsed" in the last few months, he said, highlighting the damage done by the Ukraine crisis. He called for new initiatives to restore trust, including a lifting of personal sanctions imposed by the US and the EU on top Russian officials in response to Moscow's actions in Ukraine. Mr Gorbachev clearly sees the west as the culprit in the crisis, having given his unequivocal backing to Mr Putin last week. He said, before arriving in Germany, that he was "absolutely convinced that Putin protects Russia's interests better than anyone else". New Cold War Already Started Count me in the group that says it's blatantly obvious a new cold war has already begun. Inane sanctions by the US and Europe led by President Obama and fueled by warmongering hype from Senator John McCain and others provides sufficient evidence. US Blowbacks and Russian Interests The US once again is clueless when it comes to predicting global blowbacks to its inept foreign policy. Gorbachev's statement he was "absolutely convinced that Putin protects Russia's interests better than anyone else" is well beyond reproach. The US is not interested one iota in other country's best interests. Arguably, the US shouldn't be. The other side of the coin should be equally easy to see: Other countries have a need to protect their vested interests. And they will. The US needs to understand that. It also needs to weigh the potential for blowbacks when it doesn't. The blowbacks in Iraq, Ukraine, and Libya have been spectacular. Iran is on deck. US Wakes Up Russian Bear When the US meddled in the internal affairs of Ukraine, it woke up the Russian bear. Threats to make Ukraine a member of NATO in spite of promises otherwise, then fomenting the overthrow of the prior Ukrainian government led by Viktor Yanukovych was too much for Russia to take. The US does not like the annexation of Crimea that followed or the resultant civil war that will break Ukraine in two, although we helped cause those outcomes. (For further discussion, see Ukraine Split in Two; Expect Major Rebel Advance). Even though the overthrow of Yanukovych was unconstitutional and the ensuing election a complete sham, the US accepted that vote. The US does not accept the vote in Crimea or the more recent rebel vote in Donetsk, labeling them "unconstitutional". Why? The former suits US interests but the latter doesn't. That's all you need to know. Fool's Mission to Teach Russia a Lesson In a fool's mission to "teach Russia a lesson", the US initiated sanctions on Russia, then persuaded fools in Europe to go along. The fact of the matter is sanctions don't work. Ironically, it was Russia who taught the US a lesson (except the US was to stupid to learn from it). Sanctions Do Four Things (All Bad) Cause a collapse in trade harming both sides Cause retaliations, harming both sides Cause public sentiment for the leader of the sanctioned country to rise Increase the likelihood of war if economic pressure rise high enough Is McCain Brain Dead? McCain wants to send missiles to Eastern Europe and arms to Ukraine. And in spite of the complete foolishness of sanctions, he wants to increase them on Russia. Besides wasting taxpayer money for the benefit of McCain's defense industry cronies, what good would any of that do? Would it increase or decrease the odds of war? Is McCain simply too brain-dead to figure out sending missiles to Europe and weapons to Ukraine a bad idea? Another other possibility is that McCain simply does not care. A third possibility is McCain knows what he is doing and wants more wars regardless of cost. I lean towards the idea that McCain is brain-dead, perhaps a result of captivity in Vietnam, but the question is certainly debatable. Whatever your answer, Prepare for War: Obama Asks Congress for ISIS War Authorization; Republican Hawks Have War Plan Prepared. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

"Stock Market Is Overvalued By 100%" Says John Hussman in Chris Martenson Interview; Financial Repression Revisited Posted: 10 Nov 2014 11:19 AM PST Guest Post from Peak Prosperity   In an exclusive interview of John Hussman by Peak Prosperity's Chris Martenson, Hussman says Stock Market Is Overvalued By 100%. Chris Martenson: John Hussman is highly respected for his prodigious use of data and adherence to what it tells him about the state of the financial markets. His regular weekly market commentary is widely regarded as one of the best-researched, best-articulated publications available to money managers. John's public appearances are rare, so we're especially grateful he made time to speak with us yesterday about the precarious state in which he sees global markets. Based on historical norms and averages, he calculates that the ZIRP and QE policies of the Fed and other world central banks have led to an overvaluation in the stock market where prices are 2 times higher than they should be: John Hussman: What's interesting here is that if you think about equities, they're not a claim on next year's prediction of earnings by Wall Street analysts. A stock, in fact any security, is a claim on any long-term stream of cash flows that investors can expect to be delivered to them over a very long period of time. When you look at equities you can calculate something called duration. It's essentially the effective life of a security over which you are collecting cash flows in return for the amount you pay. For the S&P 500 the duration is about 50 years. In other words it is a very, very long-term asset. The only reason you would want to price that asset based on your estimate of next year's earnings is if you were convinced that next year's earnings are actually representative of the very, very long-term stream -- and I'm talking 50 years or so of earnings that you're likely to get -- that those earnings are in a sense accurately proportional to the whole long-term stream. What's amazing about that is that is it has never been true. It has never been true historically. If you look at corporate profits and especially corporate profit margins, they're one of the most cyclical and mean-reverting series in economics. Right now, we have corporate profits that are close to about 11% of GDP, but if you look at that series you will find that corporate profits as a share of GDP have always dropped back to about 5.5% or below in every single economic cycle including recent decades, including not only the financial crisis but 2002 and every other economic cycle we have been in. Right now stocks as a multiple of last year's expected earnings may look only modestly over valued or modestly richly valued. Really if you look at the measures of valuation that are most correlated to the returns that stocks deliver over time say over seven years or over the next 10 years the S&P 500 in our estimation is about double the level of valuation that would give investors a normal rate of return. So right now, we've got stocks valued at a point where we estimate the 10 year prospective return on the S&P 500 will be about 1.6 to 1.7% annualized -- talking right now with the S&P 500 at 2032 as of today's close. Chris Martenson: I guess 1.6 or 7% doesn't sound bad if you are getting 0% on your risk-free money, I guess. But this says that any move by the Fed to normalize -- which means rates have to go up -- any move to drain liquidity from the system is going to have its own impact. If we held all things equal, a normalization effort is going to then basically expose that the stock market is roughly overvalued by 100%. John Hussman:  100%, yes. I actually think the case is a little bit harsher than that; in fact, quite a bit harsher than that. The idea that well, "1.7% isn't so bad" or "1.6% isn't so bad" ignores the fact that really in every market cycle and economic cycle we have had a point where stocks were fairly valued or undervalued.The only cycle in which we didn't see that was actually the 2002 low where stocks actually ended that decline at an overvalued level on a historical basis.  But valuations were still relatively high on a historical basis in 2002. They got slightly undervalued in 2009, but not deeply. On a historical basis, what's interesting is that if you look at measures of valuation that correct for the level of profit margins, you actually get about a 90% correlation with subsequent 10 year returns. That relationship has held up even over the past several decades. It has held up even over the past 5 years where the expected return that you would have forecasted based on time-tested valuations turned out to be pretty close to what you would have forecasted 10 years earlier. Right now, like I say, we are looking at stocks that have been pressed to long-term expected returns that are really dismal. But more important than that, in every market cycle that we've seen with the mild exception of 2002, we've seen stocks price revert back to normal rates of return. In order to get to that point from here, we would have to have equities drop by about half. Audio Podcast Greater Fool Speculation On his November 3, 2014 weekly commentary, Hussman comments on QE and the Massive Speculative Carry Trade. At present, the entire global financial system has been turned into a massive speculative carry trade. A carry trade involves buying some risky asset – regardless of price or valuation – so long as the current yield on that asset exceeds the short-term risk-free interest rate. Valuations don't matter to carry-trade speculators, because the central feature of those trades is the expectation that the securities can be sold to some greater fool when the "spread" (the difference between the yield on the speculative asset and the risk-free interest rate) narrows. The strategy relies on the willingness of market participants to equate current yield (interest rate or dividend yield) with total return, ignoring the impact of price changes, or simply assuming that price changes in risky assets must be positive because low risk-free interest rates offer "no other choice" but to take risk.  The narrative of overvalued carry trades ending in collapse is one that winds through all of financial history in countries around the globe. Yet the pattern repeats because the allure of "reaching for yield" is so strong. Again, to reach for yield, regardless of price or value, is a form of myopia that not only equates yield with total return, but eventually demands the sudden and magical appearance of a crowd of greater fools in order to exit successfully. The mortgage bubble was fundamentally one enormous carry trade focused on mortgage backed securities. Currency crises around the world generally have a similar origin. At present, the high-yield debt markets and equity markets around the world are no different. As we've detailed previously, zero-interest rate policy has very little historical evidence or compelling theory to recommend it. Rather, the policy is based on 1) the misguided belief that people consume on the basis of fluctuations in volatile asset prices and other transitory forms of income (a concept that Milton Friedman won a Nobel Prize largely for debunking), and 2) a view of the global economy as nothing more than one big interest-sensitive demand curve. See Broken Links: Fed Policy and the Growing Gap Between Wall Street and Main Street to review the reasons why suppressed interest rates have had such weak impact on global growth, despite fueling the third equity market bubble in 15 years. The fact is that financial repression – suppressing nominal interest rates and attempting to drive real interest rates to negative levels – does nothing to help the real economy. ... Mish Take I side with Hussman and have been in his camp for a number of years. Make calls like this and you look foolish until the bust happens. To paraphrase John (I cannot find the exact historical quote) "The choice is whether one looks foolish during the runup, or during the inevitable decline." Financial Repression Revisited Fed policy certainly represents financial repression at its finest. It's very much behind the income inequality that Fed Chair Janet Yellen moans about all the time. That was a central idea I presented in my interview with Gordon Long. See Gordon Long Video Interview of Mish: Topic - Financial Repression (and How to Defend Yourself From It). Forcing stock, bond and other asset prices higher only helps those who hold stocks, bonds and assets (the wealthy, not the poor). When stocks rise, it also drives CEO pay higher and higher via performance incentives and stock options. That money is not taken back when stocks crash. The irony is stunning. If Yellen wants to understand the central cause of income inequality, all she has to do is look in a mirror. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

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Ukraine Split in Two; Expect Major Rebel Advance Posted: 09 Nov 2014 02:58 PM PST Writing is on the wall. It says, Ukraine is increasingly likely to split in two. Recent events appear to have sealed that fate. October 28: Russia Backs Plan by Ukraine Separatists for an Early Election October 31: Ukraine, France, Germany Urge Putin Not to Recognize Rebel Polls November 2: In Hope and Defiance, Voters in East Ukraine Go to Polls in Rebel Elections November 2: Pro-Russian rebels vote for leaders in eastern Ukraine November 2: Pro-Russian Rebel Alexander Zakharchenko Gets 81% of Vote November 2: Tass: Moscow Considers Elections in Eastern Ukraine Valid November 3: Ukraine Calls Emergency Meeting to Dael with Election Vote November 4: US, Ukraine Condemn "Sham Vote" November 4: Ukraine President Calls for Disputed Poll to be Annulled November 4: White House Slams Separatist Elections in Southeastern Ukraine. November 4: Ukraine Tension Rises as Poroshenko to End Autonomy Law "Ukrainian President Petro Poroshenko will ask parliament to revoke a law giving more autonomy to regions occupied by pro-Russian separatists after the rebels held elections condemned by the U.S. and the European Union." November 4: Ukrainian President Sends More Troops to the East November 5: Ukraine Rebels Say Annulment of Autonomy 'Cancels' Truce November 5: Ukraine Truce Teeters as Kerry, Merkel Warn on Sanctions November 6: Ukraine Begins "Large-Scale" Offensive In Donetsk; "War Has Resumed" Rebel Leader Warns November 8: Ukraine rebels seen moving large military convoys Headline Summation Ukraine rebels held polls. In heavy turnout, vote was strongly pro-Russia. Russia recognized the vote but Ukraine, the US, Germany didn't The West threatens more sanctions. Ukraine annuls cease-fire autonomy agreement. Rebels cancel truce. War resumes. Reflections from Reader Jacob Dreizin Hi Mish, Allow me to chime in on another election. On November 2nd, the Donetsk and Lugansk Peoples' Republics held elections to basically validate the existing, Moscow-backed rebel leadership that has come to the fore since roughly July-August of this year.  The turnout was incredible, considering that many residents of battered frontline towns braved potential artillery fire to get to the polling stations. On a symbolic note, the elections were held exactly six months after the May 2nd massacre of 40-some pro-Russian demonstrators in Odessa, for which, incredibly, no one has yet been indicted.  (Several "investigations" were quietly abandoned months ago, as they were likely pointing to prominent nationalist groups in Kiev.) Naturally, the EU and U.S. State Department are not happy with these elections, although they were quite happy with the Ukrainian parliamentary elections of October 26th, in which turnout was as low as 30% in some areas as parties more popular in the south and east were too intimidated to campaign or were simply banned. In other news, Ukraine's Prime Minister Yatseniuk recently stated that Ukraine is open to buying coal from the rebel areas. This is a sign of desperation, which shows that buying coal from overseas (chiefly from South Africa) has not saved the day as there is simply not enough infrastructure to keep Ukrainian power plants continuously supplied with foreign coal. Also, some Ukrainian plants are specifically designed to burn certain grades of Donbass coal. Already there have been many rolling blackouts and hot water cut-offs, and things will only get worse.  Keep in mind that water flowing to apartment buildings (for both washing/cooking and central heating) in the former USSR is typically heated by coal. So you can expect Ukraine to have a very rough winter. Yatseniuk also said that while Ukraine will continue selling electricity to the rebel areas, it will no longer be paying out pensions or any other benefits to residents of rebel-held areas until such time as these areas return to Ukrainian control. Although Kiev had already minimized these disbursements since summer, Yatseniuk's statement is the most formal and and extreme announcement to that effect. This is a clear abdication of responsibility for the rebel areas as well as a de facto recognition that those people are no longer Ukrainians. Note that Russia continued to pay benefits in Chechnya during its periods of de facto independence in the early 1990s and again in the late 1990s. Thus, there is precedent for continuing to treat people as your own citizens as you seek to return them to the fold. In this context, Kiev has just severed the last link that people in Donetsk and Lugansk may have had with the Ukrainian state. It is a scorched-earth policy as well as an admission of failure. Reader Jacob Dreizin is a US citizen who speaks Russian and reads Ukrainian. Here's an interesting video about who is responsible for shelling that kills school children. The video is from last summer, but translations have been added so the video is now understandable to those who speak English. Prepare for Major Rebel Advance Finally, I have one more email from Jacob Dreizin to share. He believes another major rebel advance is in the cards this year. Hello Mish, Based on a long, detailed, and seemingly very authoritative (and conspicuously anonymous) contribution on Strelkov's social media page, which is sort of a mouthpiece for various elements of the rebel movement (much more so than even Colonel Cassad), I am thinking that there will be one more major rebel advance before winter. [Mish note: "Strelkov" is the nickname for Igor Girkin, a Russian nationalist and former rebel commander.] The piece does not go into specific geography, but the most likely target is the semi-encircled Ukrainian force in the Debaltsevo salient [Mish note: Debaltsevo is a city in the Donetsk Oblast (province) of Ukraine.] Cutting it off completely and then reducing it as was done with other "cauldrons" last summer would even-out the rebel front line and remove the initiative from the Ukrainian side once and for all, not to mention destroying Kiev's most combat-capable army group. Another possibility is the capture of Mariupol. Strelkov's page has also strongly hinted at that recently. However, I should mention that misleading, speculative, or seemingly contradictory information on Strelkov's page has been used to spread fear and uncertainty on the Ukrainian side, helping keep them off-balance in advance of major rebel moves. So, this is just speculation, but I am pretty sure there will be one more major rebel advance (and major Ukrainian defeat) before winter starts in earnest. The rebels simply cannot afford to have their largest cities still within range of Kiev's heavy artillery when the temperatures are consistently below freezing. They can't continue to have their people being made homeless all through the long Russian winter. If for no other reason, they will have to strike hard to push the Ukrainians further back. Jacob Realistically Speaking Realistically speaking, Ukraine is already split in two. How long it takes for the West to recognize that fact, and how many get killed in the process remains to be seen. Right now, there is no sign either side will back down.  Hypocrites in Washington DC and other misguided souls insist such a result "cannot be allowed to stand" even though the US has no legitimate business in the region. More importantly, and even if you think the US does have a vested interest in the region, those in Eastern and Southern Ukraine are culturally and politically more aligned with Russia than Kiev. Russian Language Usage Map from Online Russian Do Ukrainians Speak Russian or Ukrainian? Crucial Facts Wars happen when politicians draw borders to the disagreement of a huge portion of a region's citizens. Politically and culturally speaking there was never one united Ukraine in the first place! Iraq is another perfect example of the failure that happens when outsiders set borders without taking cultural differences into consideration. It is the height of arrogance and foolishness for the US to be involved in this mess. Similar arrogance and foolish nation building in Iraq gave rise to ISIS. Simple Proposal Ukraine and the US don't like the vote. OK, how about another one? I propose a vote in which the citizens in Ukraine's Eastern and Southern regions get to pick the questions as opposed to Kiev forcing questions down the throats of citizens in those regions. Think the vote would be much different than the one that just took place in Donetsk? I don't. That's why Kiev won't allow it. Pro-Democracy Stance  By the way, I will be inaccurately accused (yet again) of taking a pro-Putin stance. The fact of the matter is that I am taking a pro-democracy stance. I really don't care what the questions are, or how Ukrainians in those regions vote. This is internal business of Russia and Ukraine, especially those who live in sections of Ukraine that arguably should never have been part of Ukraine in the first place! Why should anyone else care what the voters choose? Shouldn't people in the region get to decide their own fate? Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

Catalan Leaders Defy Madrid, Hold Independence Referendum Posted: 09 Nov 2014 11:11 AM PST On Tuesday, Spain's highest court suspended the Catalan independence vote in response to a legal challenge filed by prime minister Mariano Rajoy's government in Madrid. In defiance of that constitutional ruling and vows from Madrid the vote would not take place, it did. Millions voted and the results will likely be for independence. The Financial Times reports Catalan Leaders Hope Poll Turnout Will Send Independence Signal. Millions of Catalans took part in a symbolic vote on the political future of the northern Spanish region on Sunday, in the biggest show of strength yet for Catalonia's increasingly vocal independence campaign. The poll was held in the face of fierce opposition from the Spanish government, and despite a constitutional court ruling last week to suspend the exercise. Results due to be published on Monday are expected to show an overwhelming majority in favour of independence. Most anti-independence parties were opposed to the poll. Voter turn-out by 6pm, with voting stations set to remain open for another two hours, was thought to be high – significantly more than have attended even the largest independence rallies to date. Catalonia has a population of 7.5m, of whom 5.4m are eligible to vote. "We have been waiting for this opportunity for many years," said Pau Domingo, a 22-year old pro-independence voter outside a polling station in central Barcelona. "This is an important step towards taking our destiny in our hands, and towards no longer depending on a state that doesn't accept us the way we are." Despite a series of last-minute legal appeals and a warning from the state prosecution service, the voting process across the region was orderly and peaceful, Catalan officials said. In many cities, voters formed long queues before polling stations opened at 9am, generating what participants described as a "festive atmosphere". Mariano Rajoy, the Spanish prime minister, told a party conference on Saturday that the Catalan vote "is not a referendum, it is not a consultation, or anything like that." He added: "It will have no effect."  Voters were asked for their response to two questions. The first was: "Do you want Catalonia to be a state?" If answered affirmatively, the ballot paper posed a second question: "Do you want that state to be independent?" No Effect? Rajoy said the vote would have "no effect". Of course it did. His government pledged to stop the vote. Millions of Catalans effectively gave Rajoy the finger. Voter turnout was higher than expected in defiance of the court. Rajoy's government has been weakened. Is that not an effect? Expect tensions to increase. If so, is that not an effect? Prior to the vote, Catalans faced a Cyber-Attack on the Catalan National Congress (ANC) Website, effectively shutting it down. In addition, "75 mobile phones used in the last few days to campaign in favor of the referendum were blocked by a massive reception of calls from an unknown origin." What's next is unclear, but you cannot disenfranchise 7.5 million people to the point of open defiance of a court ruling and claim there is "no effect". Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

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Climate Model Predicts Very Cold Winter in Northern Hemisphere; Another Record Breaker? Posted: 08 Nov 2014 12:04 PM PST There is a huge buildup up snow in Siberia this year like last. Meteorologists believe that portends another brutal winter. Bloomberg reports Climate Model Predicts Very Cold Winter in Northern Hemisphere. About 14.1 million square kilometers of snow blanketed Siberia at the end of October, the second most in records going back to 1967, according to Rutgers University's Global Snow Lab. The record was in 1976, which broke a streak of mild winters in the eastern U.S. In addition, the speed at which snow has covered the region is the fastest since at least 1998. Taken together they signal greater chances for frigid air to spill out of the Arctic into more temperate regions of North America, Europe and Asia, said Judah Cohen, director of seasonal forecasting at Atmospheric and Environmental Research in Lexington, Massachusetts, who developed the theory linking Siberian snow with winter weather. "A rapid advance of Eurasian snow cover during the month of October favors that the upcoming winter will be cold across the Northern Hemisphere," Cohen said in an interview yesterday. "This past October the signal was quite robust." Cold air builds over the expanse of snow, strengthening the pressure system known as a Siberian high. The high weakens the winds that circle the North Pole, allowing the cold air to leak into the lower latitudes. The term Polar Vortex actually refers to those winds, not the frigid weather. Cohen said he first noticed the relationship between the Eurasian snow cover and larger weather patterns while doing post-doctoral work at the Massachusetts Institute of Technology in the 1990s. It came about by chance because the original assignment was to look at the North American snow cover, Cohen said. He changed it to Eurasian and "when we investigated further it turned out it was Eurasian snow cover that was the dominant influence." Last year, 12.85 million square kilometers covered Eurasia at the end of October. By January, waves of frigid air were pummeling the U.S. Prices for natural gas, a heating fuel used by half of American households, rose to a five-year high in February. "The big early snowbuild will definitely set things up for a cold back half of the winter," said Todd Crawford, a meteorologist at commercial forecaster WSI in Andover, Massachusetts. Another Record Breaker? Model theory makes sense to me. And if so, this winter could be as bad as last year's record breaker (or worse). Flashback March 26, 2014: One of the Coldest Winters in 20 Years Shatters Snow Records. Advance Warning on October 12 in UK: Worst winter for decades: Record-breaking snow predicted for November  US on December 13, 2013: Snow, Cold Already Crush Records Beware, the Ice Age Cometh Bring on the warmth! Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

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• Reader Question on Greenspan and Gold: "No Fiat Currency Can Match It"
• Crony Capitalism Tribute: Mafia Dons vs. Politicians; Who Really Won the Election?
• Nonfarm Payrolls +214K (Led by 52,000 Leisure Jobs); Unemployment 5.8%; Labor Force +416,000

Reader Question on Greenspan and Gold: "No Fiat Currency Can Match It" Posted: 07 Nov 2014 01:28 PM PST Reader Stephen is wondering about Greenspan's Stunning Admission: "Gold Is Currency; No Fiat Currency, Including the Dollar, Can Match It". It seems the Council on Foreign Affairs left out some key sentences in its transcript of A Conversation With Alan Greenspan. The conversation is between Alan Greenspan and Gillian Tett, U.S. Managing Editor, Financial Times. Missing Snip Tett: Do you think that gold is currently a good investment? Greenspan: Yes... Remember what we're looking at. Gold is a currency. It is still, by all evidence, a premier currency. No fiat currency, including the dollar, can match it. Question From Reader Stephen Hello Mish I am a frequent reader and would like to know what you think about the Greenspan news. In particular, how is it that a former head of the Fed can make a statement that gold outshines the dollar and it is not headline news. Rather, his remarks to that effect are expunged from the transcript. Am I alone in thinking this is surreal? What's It all About? Let's step back a bit and ask what the conversation is really about. The transcript shows Greenspan still attempts to absolve himself of blame for the housing bubble and the great financial crisis. Contrary Indicator? Secondarily, one has to wonder about Greenspan's new-found liking for gold given that Greenspan was a contrary indicator for his entire career (For details see Maestro Memoirs). I had a conversation along these lines with Pater Tenebrarum at the Acting Man blog last week. Pater commented ... "You often find retired officials suddenly espousing stances that are quite different from those they supported in their time in office. I think about a year ago, Greenspan said something even more important, and very true: he mentioned that before there was a Fed, the US economy experienced the strongest growth in its history during the gold standard Gilded Age. I recall that the press reports on this were tinged with bemusement, mainly because most people know nothing about history, least of all economic history. They all think economic history started in 1929." Feeling Guilty? For all his faults, it appears Greenspan knows the score.  I suggest the man simply has a mighty guilty conscience. As for why none of this is big news ... Yes, it is a bit surreal. Then again, gold has been entirely written off by nearly everyone. Anti-gold sentiment is likely at an all-time high. The Council on Foreign Affairs may prefer to keep it that way, or perhaps there is some other explanation. They did include this snip. TETT: I imagine right now, it's because of a question mark hanging over the value of fiat currency, the credibility going forward. ... GREENSPAN: Well, that's what I'm getting at. Every time you get some really serious questions, the 50 percent of the gold price determination begins to move. ... TETT: Right. Well, I'm sure with comments like that, that will be turning you into a rock star amongst the gold bug community. In fact, you're probably trending on Twitter today. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

Crony Capitalism Tribute: Mafia Dons vs. Politicians; Who Really Won the Election? Posted: 07 Nov 2014 09:32 AM PST Who Really Won the Election? If you think Republicans won the recent mid-term election you are mistaken. PolicyMic has One Chart that Shows Who Won. Most Expensive Senate Races Money Won the Election! The Center for Responsive Politics projects the 2014 mid-term election will cost roughly $3.67 billion. When all is said and done, Team Red (all Republican candidates, parties, committees and conservative outside groups) will spend $1.75 billion on this election. Team Blue (all Democratic candidates, parties, committees and liberal outside groups) will spend a total of $1.64 billion. [Outside groups account for the rest.] Election Cost Estimate Just three-one-hundredths of one percent of Americans wrote a check larger than $2,600 — the maximum one individual can give to a candidate each election — during this cycle. But those are numbers based on the system of so-called "hard money" donations — money given to candidates or committees, which is strictly limited. Outside groups rarely deal in sums so small. Most outside groups rely heavily on large donors. Very large donors The number one donor of disclosed outside money is Steyer, followed by former New York City mayor Michael Bloomberg, who has given $20 million to super PACs, of which 98 percent went to liberal or Democratic recipients. But despite those top two donors, conservative donors dominate the top 20 — 15 of them are conservative. The three other liberal donors are: Fred Eychaner ($7.9 million), George Soros ($3.5 million) and hedge-funder James Simons (and his wife Marilyn), who have given $3 million. The top conservative donor to outside groups is Paul Singer, of hedge fund Elliott Management, who has given $9.3 million. Last cycle's top donor — both to outside groups and overall — was Sheldon Adelson, owner of the Venetian casino in Las Vegas, who with his physician wife Miriam gave $92 million. Topping the list of organizations contributing money to outside groups is the National Education Association, which has given a whopping $22.4 million to outside groups. Following the NEA are a slew of other labor unions — the Carpenters & Joiners Union ($11.2 million), the AFL-CIO ($7.6 million) and AFSCME ($6 million). These unions gave almost exclusively to liberal outside groups. There are, however, a handful of conservative organizations on the list of big organizational donors, including the No. 3 group, the National Association of Realtors, which gave to its own super PAC; it has spent the money in support of Republicans by a two-to-one margin. An important caveat: These lists of top donors (individuals or organizations) do not include donations made to dark money groups, which in some instances pass money on to super PACs. Finger-Pointing Each side can (and does) point the finger at the other. Regardless, the end results show incumbents get reelected year after year. Even in the 2014 mid-term rout, Republicans only picked up 12 House seats. Want to get elected? First you need to pass a litmus test for your party. Want to reform Social Security or Medicare? If you do, you better not say so. Next, you better not offend both unions and the NRA. Depending on where you live, one of those alone may do you in. Both and you are toast. Live in a state that gets military contracts? If so, you cannot get elected if you are "weak on defense". Bottom line: If you want to get elected, you better listen to what big money wants, or you don't get any of it. And you need money to win! Mafia Dons vs. Politicians Gordon Long has an interesting post this week called The Crony Tribute System. Instead of clipping text here are some self-explanatory graphics. Crony Tribute Mafia Tribute System US Political System Evolution of Crony Capitalism "Impenetrable" Firewall Between Public Service and Private Profit Why Does It Takes a Crowbar to Review Regulations? Investigating Fraud and Corruption Corporations are People, Money is Speech Checks and Balances Does It Matter Which Party Controls the Senate? I believe those graphics from Gordon Long sum things up quite nicely. If you believe differently, Charles Hugh Smith may change your mind with an excellent set of questions in his post If You Really Think It Matters Which Party Controls the Senate, Answer These Questions. Eight Questions Will U.S. foreign policy in the Mideast change from being an incoherent pastiche of endless war and Imperial meddling? Will basic civil liberties be returned to the citizenry? Will the predatory, parasitic policies of the Federal Reserve that virtually everyone from the Wall Street Journal to what little remains of the authentic Left understands has greatly increased income and wealth inequality be reined in? Will the steaming pile of profiteering, corruption, waste, fraud and ineptitude that is Sickcare in the U.S. be truly reformed so its costs drop by 50% to match what every other developed democracy spends per person on universal healthcare? Will the influence of Big Money be well and truly banned from politics? Will the incentives in the Status Quo be reset to punish rapacious financialization and gaming the system and reward productive investment and labor? Will anything be done to dismantle the Neofeudal Debt-Serfdom known as student loans? Will any prudent assessment be made of unaffordable weapons systems like the F-35 Lightning--$1.5 trillion and counting for aircraft that will soon be matched by drones that cost a fraction of the F-35's $200 million a piece price tag? Financial Repression I define financial repression as "a set of fiscal and monetary policies for the expressed benefit of the ruling class: politicians, banks, and the already wealthy, at the expense of everyone else." Any doubt that financial repression by central banks and lobbyist-sponsored government legislation explains income inequality? For further discussion, please see Gordon Long Video Interview of Mish: Topic - Financial Repression (and How to Defend Yourself From It). Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

Nonfarm Payrolls +214K (Led by 52,000 Leisure Jobs); Unemployment 5.8%; Labor Force +416,000 Posted: 07 Nov 2014 08:24 AM PST Initial Reaction The payroll survey shows a net gain of 214,000 jobs vs. an expectation of 240,000 jobs. Last month was revised up from 248,000 to 256,000. The labor force rose by a solid 416,000. The unemployment rate fell by 0.1% on the basis of increased employment (+683,000) instead of the more typical reason that people dropped out of the labor force. Swings in employment and the labor force have been wild lately. All things considered, this was a pretty strong report. The one drawback is where the job gains came from. 52,000 of those jobs came in the leisure and hospitality category. Of them, 42,000 were in food and drinking services. These are typically low-pay if not minimum wage jobs. BLS Jobs Statistics at a Glance Nonfarm Payroll: +214,000 - Establishment Survey Employment: +683,000 - Household Survey Unemployment: -267,000 - Household Survey Involuntary Part-Time Work: -76,000 - Household Survey Voluntary Part-Time Work: +208,000 - Household Survey Baseline Unemployment Rate: -0.1 at 5.8% - Household Survey U-6 unemployment: -0.3 to 11.5% - Household Survey Civilian Non-institutional Population: +211,000 Civilian Labor Force: +416,000 - Household Survey Not in Labor Force: -206,000 - Household Survey Participation Rate: +0.1 at 62.8 - Household Survey October 2014 Employment Report Please consider the Bureau of Labor Statistics (BLS) October2014 Employment Report. Total nonfarm payroll employment rose by 214,000 in October, and the unemployment rate edged down to 5.8 percent, the U.S. Bureau of Labor Statistics reported today. Employment increased in food services and drinking places, retail trade, and health care. Click on Any Chart in this Report to See a Sharper Image Unemployment Rate - Seasonally Adjusted Nonfarm Employment January 2003 - October 2014 Nonfarm Employment Change from Previous Month by Job Type Hours and Wages Average weekly hours of all private employees rose by 0.1 hours to 34.6 hours. Last month I said the same thing, but a correction now puts last month at 34.5 hours. Average weekly hours of all private service-providing employees was flat at 33.4 hours. Average hourly earnings of production and non-supervisory private workers rose $0.04 to $20.70. Average hourly earnings of production and non-supervisory private service-providing employees also rose $0.04 to $20.49. For the second consecutive month, the prior month's hourly earnings (both figures) were revised lower by by $0.01. For discussion of income distribution, please see What's "Really" Behind Gross Inequalities In Income Distribution? Birth Death Model Starting January 2014, I dropped the Birth/Death Model charts from this report. For those who follow the numbers, I retain this caution: Do not subtract the reported Birth-Death number from the reported headline number. That approach is statistically invalid. Should anything interesting arise in the Birth/Death numbers, I will add the charts back. Table 15 BLS Alternate Measures of Unemployment click on chart for sharper image Table A-15 is where one can find a better approximation of what the unemployment rate really is. Notice I said "better" approximation not to be confused with "good" approximation. The official unemployment rate is 5.8%. However, if you start counting all the people who want a job but gave up, all the people with part-time jobs that want a full-time job, all the people who dropped off the unemployment rolls because their unemployment benefits ran out, etc., you get a closer picture of what the unemployment rate is. That number is in the last row labeled U-6. U-6 is much higher at 11.5.0%. Both numbers would be way higher still, were it not for millions dropping out of the labor force over the past few years. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

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