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Five Things You Need to Know: Leading Economic Indicators Retroactively Revised Downward, Greenback Slack, My Fellow American Slackers..., Paging Dr. Schadenfreude, They're For a Friend, I Swear!


What you need to know (and what it means)!


Minyanville's daily Five Things You Need to Know to stay ahead of the pack on Wall Street:

1. Leading Economic Indicators Retroactively Revised Downward

It's a relatively quiet week on the data front but today we did get the Conference Board's Leading Economic Indicators report for December.

  • The U.S. index of leading economic indicators rose 0.3% in December, the fastest pace since September, the Conference Board reported.
  • Market expectations were for a bump to 0.2% in December, following November's 0.1% increase.
  • But just as we've seen a handful of upside surprises to recent economic data that have sent economists scurrying to upgrade GDP estimates, so too did we get what amounted to a slight upward surprise in the LEI.
  • Meanwhile, you know how we just noted, above, that November saw a 0.1% increase? Well that was revised away to 0%.
  • October's 0.1% increase too was revised away... to a drop of 0.1%.
  • True, these disappointments are so much easier to take in hindsight, but we have a question: If the numbers reported by the leading indicators are revised months later, then doesn't that make them not leading indicators?
  • Because, you know, at first they were reporting something that is supposed happen later since that is what's usually meant by the word "leading," but then that thing was, you know, it didn't happen, or whatever, so isn't that like not really leading at all but instead totally lagging?

2. Greenback Slack

Hey, isn't that the dollar off a hefty 55 basis points today? Why?

  • Look, all these dollars floating around don't buy themselves, you know.
  • Also, there were a number of developments overnight lending a bid to other currencies, including the yen, the euro and yes, even the British pound sterling.
  • First, the pound is now at its highest level since 1992, with speculation mounting that the Bank of England, which surprised the market earlier this month with a 25 basis point rate hike, may have yet another rate boost in store for the markets in a couple of weeks.
  • Second, a number of European Central Bank officials have come out of the woodwork suggesting monetary police in the EU may still be too accommodative and that growth is "robust."
  • Most notably, ECB board member Lorenzo Bini Smaghi, asked if the ECB would once again raise its interest rate, said point blank: "If the growth scenario is confirmed, not to adjust interest rates accordingly would mean feeding excessive liquidity growth."
  • As if on queue, it was then reported that French consumer spending on manufactured goods was up 1.3% in December, far ahead of expectations for a rise of just 0.3%.
  • Lastly, but certainly not (whatever), minutes released from the most recent Bank of Japan meeting (yes, the one where we stood out on that very thin limb yakking about a rate hike that did not materialize) disclosed that despite unanimous voting to stand pat at 0.25%, three of the bank's nine members actually favored an increase this month.
  • Bottom line: Everyone is raising rates except us... at least for now.
  • While that is certainly enough to keep a lid on the dollar, it's far from enough to collapse it, so we remain reluctant (and lonely) dollar bulls in 2007.

3. My Fellow American Slackers...

The US economy last year recorded its lowest rate of labor productivity growth in more than a decade, the Financial Times reported, which means there's clearly been a little too much grab-assing-around going on around here and not nearly enough work.

  • Research to be published today by the Conference Board (what, those guys again?), shows that US labor productivity grew by just 1.4 percent in 2006, the slowest rate in more than a decade as slower economic growth met a relatively rapid rise in employment.
  • Conference Board chief economist Gail Fosler told the Financial Times that the fall in productivity growth was unlikely to be cyclical, raising concerns about the long-lasting productivity impact of information and communications technology.
  • Easy, killer. Keep in mind that productivity comparisons are bound to be pretty tough.
  • As recently as 2002, productivity gains as measured by nonfarm business output per hour were running at a 30-year high.
  • Why, the Maestro himself, then Federal Reserve Chairman Alan Greenspan, devoted an entire speech to the miracle of U.S. productivity gains.
  • So what happened? First tepid demand and the disappearance of pricing power pressured corporate profit margins.
  • That left cost cutting as the only viable profitability control mechanism available to corporations - and cut costs they did.
  • Or, as then-Chairman Greenspan put it, they trimmed the "fat."
  • Second, if you were fortunate to be among the employed "slim," you were "utilized more intensively." ("Utilized more intensively" is Fed slang for "forced to work your ass off.")
  • As Greenspan did indeed warn, however, the downside of out-sized productivity gains that come almost exclusively from the cost side is that "corporate management cannot unendingly reduce cost without at some point curtailing output or embodying new technologies through investment to sustain it." (Translation: "Engine room more steam! And where are those robots we ordered?"
  • And that, my fellow slackers, is how we have arrived at the slowest productivity growth in more than a decade.
  • Now quit grab-assing-around on the Internet and get back to work!

4. Paging Dr. Schadenfreude

Ooops! How embarrassing. You caught us rubbernecking at all these Sacramento-area real estate disasters.

  • A new blog, "Flippers In Trouble," is cataloging Sacramento-area real estate speculator woes... and man, it's like driving slowly by the scene of a horrible highway accident just to take in the carnage.
  • Like us, you probably have a few questions about this schadenfreude-dipped endeavor.
  • Fortunately, in anticipation of our queries, the blog has a Frequently Asked Questions page.
  • We don't want to steal the FAQ thunder, but to top-line it, a "flipper in trouble" is apparently "somebody who bought a house within the last two years and is selling it now for less than what they paid."
  • Maybe it's the bright red highlights in the listings below that make the damage so... vivid.

5. They're For a Friend, I Swear!

Whoa! What's that... that... smell? Why it's the wonderful smell of absolutely nothing, thanks to our Under-Ease Anti-Flatulence Underwear!

No positions in stocks mentioned.

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