In The News Of Late...

('Click' on the highlighted items to go to the cited articles)...

A recurring theme in these segments has been to focus on factors
contributing to economic revival as well as elements that may
delay or stall the recovery. In the past two editions we've touched
upon the impact of crude oil prices and both times have revisited
the Reuter's article forewarning a 'Double-Dip' Recession
(see 05/26 installment). The specter of that $60+ budget-busting,
recovery-ruining, gas-pump-gouging barrel of crude is still with us
and only Friday did the price slip just below the $70 mark...

Fortune Magazine and President Obama have taken on that topic
of late - the magazine searching for the rationale, if any, for the
uptick, and the President preaching 'tried-but-truisms' to quell
the crowd. In one article Fortune reruns some of the banalities on
the subject; supply is ample and demand is weak so the rally in
crude pricing isn't "supported by the fundamentals...". Many take
this as an indication that money is flowing back into the system.
But maybe some new light is shed through a Morgan Stanley
analysis focusing on the inverse relationship between a weakening
dollar and the rising price of crude. As the dollar falls, oil becomes
cheaper in other currencies, consumption increases and higher
pricing can ensue... and guess what? The US Dollar Index has
dropped 9% since March. The President, faced with the oil bubble
and its recovery-dampening impact, is pulling out the regulatory
hammer and proposing that commodities pricing be insulated
from any impact by the investment community through specifically
designed additional reform. This is to be an extension to the role
of the Commodities and Futures Trading Commission and is a
subject that bears watching over the next few months... Particularly
so as things continue to percolate in Asia and we begin to see the
recovery many claim is being cultivated there, (and the inevitable
impact on Asia's demand for crude).

Every few weeks we try to put a perspective on where things are
and where they may be going. We've mentioned the 'Economic Clock'
before and now Fortune has developed their "Big Picture Index",
adding some poignancy to the 'Clock'... Take a look at the
contributory indices pertaining to Homes (foreclosures), Jobs
(employment), Stocks (market cap), Business & Consumer Loans
(amount of new), Household Income (income tax withholding)
and CEO Confidence (stock buybacks). Keep an eye on this Index
going forward as some of these metrics are particularly telling
and currently do not really support the media-favored view
that improvement is already much in evidence.

That brings us to the most recent positively positioned media
reports... Three articles from EIU, Reuters and CNNMoney
speaking to the expectation that things are getting better in
the business world. The first lays out data from another
EIU Survey on how executives view their businesses in the
coming 12 months. Aside from the expected differences by
business sector there are also dramatic regional differences
with Asia being much more optimistic and East Europe/Latin
America being decidedly pessimistic, (think about that
around-the-corner oil demand in Asia). Reuters says that
the CEO Index has shown some rebound even though most
(CEOs polled) are still planning more layoffs and less capital
expenditure (49% & 51% respectively). It's interesting to
compare this to the EIU report also suggesting that execs
are more bullish about their own businesses, and then again
to that Fortune index that arguably does not support this
position. Revisit the Fortune CEO Confidence Index
pertaining to stock buybacks... the number for June is
showing a slight uptick but still is only 10% of the August
2007 peak and maybe indicates that some corporations
expect cash flow to continue to decline? Then we have the
Fed's Claim ,"that the pace of the decline is slowing...".
This will be the first year of negative GDP growth since
the end of WWII. But, while noting that the economy is
weak, the Fed still says, "there are signs of a recovery"...
Supporting the assertion we are told that we have
household spending stabilizing, financial markets improving,
inventories coming more in line with demand, little near
term threat of inflation... But take another look at the
Fortune CEO Index... is lack of buybacks a sign that the
current stock market rally is premature?

Aside from the Fed's positive signs there is still an
abundance of negative indications... and they all come
this time from CNNMoney. During the week we had
reports on Jobless Claims and Mass Layoff numbers. Claims
for this past week unexpectedly exceeded the previous week...
reportedly the "underlying trend is downward but slow and
uneven"... sounds a lot like the Fed suggestion that the "pace
of the decline is slowing"... on top of this continuing claims are
also up, but, the 4-week moving average is down (a whole
5bps)...is this a trend or are benefits starting to become
exhausted? Or is it simply noise that is a part of the usual
average revisions? In any event, Mass Layoffs are up and
the June rate is expected to hit 9.6% as compared to the May
number of 9.4%. Recall when we talked of 'mixed messages'
in the media? Well they're in the numbers, too... Home Sales
numbers also came out this week and while total inventory
fell 3.5%, reportedly due to a much needed 2.4% increase in
existing home sales - prices fell. Median year-over-year
housing prices dropped 17% and we are still left with nearly
a 10-month inventory.

So.... are we better off this week than we were 2+ weeks ago?
We are better off knowing more and more about how this
economy works, what metrics need to be monitored and what
processes are functioning properly as compared to those which
are not. To a large extent not knowing these things, and readily
accepting the status quo without question, brought us to where
things are today. And in that way our collective experience is
like that of any business that needs to have the same questions
asked of its status by those responsible for managing business
risk. In your business are you comfortable with the processes
in place? Do they need to be at least reviewed if not challenged?
Are you looking at the right metrics and is your data sufficiently
robust to support those metrics and the analyses you need to be
doing?

Think about it...look into it...call someone for help if you need it....