Five Things You Need to Know: Inflation Officially Dead, Subprime Borrowers Living Up to Their Credit Scores, Wall Street Journal Unveils New Fire Kindling Design, NASA Employee Fears Transfer to Moon Office, Post-Apocalyptic Earth FAQ
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. Inflation Officially Dead
Unit Labor Costs for the third quarter came in at 2.3% versus 3.2% expected. This officially removes the last remaining leg from Fed Chairman Ben Bernanke's inflation stool.
- Not only did Unit Labor costs (ULC) for the third quarter come in far below expectations, but ULC for the second quarter was revised much lower as well.
- ULC for the second quarter was revised lower from 5.4% to -2.4%, a huge downward revision.
- On an annualized basis, ULC were revised to 2.3% from 3.8%.
- Taken at face value, the ULC data, combined with third quarter productivity reported at 0.2%, looks bullish. After all, it confirms that inflation expectations are far more benign than Fed officials expected.
- The key to unwrapping this, however, is whether one believes the Fed is concerned about inflation, or most worried about deflation.
- Their speeches and rhetoric say they are worried about inflation. Their actions say they are most worried about deflation.
- As credit expands, nominal asset prices rise. But is the credit expanding because it was generated by normal economic activity, or because it was "created" by the Fed?
- Evaluated in terms of Fed activity over the past six years, the answer is clearly an expansion that is not based on normal economic growth and activity.
- The bottom line is the Fed has little left to talk about now in terms of inflationary pressures.
2. Subprime Borrowers Living Up to Their Credit Scores
A surge in mortgage delinquencies in the past few months is squeezing lenders and unsettling investors world-wide in the $10 trillion U.S. mortgage market, the Wall Street Journal reported.
- According to the Journal, the pain is most evident in the "subprime" category.
- The "subprime" mortgage market consists of loans made to borrowers who are considered credit risks.
- They are typically charged higher interest rates, which is one reason subprime mortgages are among the most profitable segments of the industry. the Journal noted.
- Subprime mortgage originations climbed to $625 billion in 2005 from $120 billion in 2001, according to Inside Mortgage Finance.
- Based on current performance, however, 2006 is on track to be one of the worst ever for subprime loans, according to UBS AG.
- Roughly 80,000 subprime borrowers who took out mortgages packaged into securities this year are behind on their payments, the bank says, according to the Journal.
- Meanwhile, the National Association of Realtors yesterday reported that its index for pending home sales for October fell a seasonally adjusted rate of 1.7% from September and was down 13.2% from a year earlier.
- Pending home sales tend to lead existing home sales and the drop-off suggests housing has not yet bottomed, as is widely believed.
3. Wall Street Journal Unveils New Fire Kindling Design
The Wall Street Journal unveiled a new design on Monday that it hopes will draw new, younger professional readers to the newspaper.
- Why the changes for the somewhat stiff and staid Journal?
- According to figures from the Audit Bureau of Circulation FAS - FAX report, circulation for newspapers continues to decline and, in fact, is accelerating.
- For the six-month period ending in March 2006, daily circulation slipped 2.5% and Sunday decreased 3.1%.
- By comparison, in the period-ending March 2005 daily fell circulation fell 2% and Sunday was down 2.5%.
- Meanwhile, print ads in newspapers fell 2.6% in the third quarter to $11.1 billion, according to the Newspaper Association of America.
- Newspapers' print advertising revenue is expected to decline 1.1 percent for the full year.
- So yesterday the Journal unveiled a new, smaller design to go into effect January 2 that it hopes will draw a younger professional audience.
- Beginning in 2007 the Wall Street Journal print edition will feature a computer monitor and high speed internet connection that will enable print subscribers to read the newspaper online like everyone else.
4. NASA Employee Fears Transfer to Moon Office
US space agency NASA has said it plans to start work on a permanently-occupied base on the Moon, according to the BBC.
- NASA has said it plans to start work on a permanently-occupied base on the Moon after astronauts begin flying back there in 2020.
- The base will serve as a science center and possible stepping stone for manned missions to Mars.
- The base will be paid for by funds moved from space shuttle flights which are due to be scrapped in 2010.
- Late last week renowned physicist Stephen Hawking said the long-term survival of the human race is at risk as long as it is confined to a single planet.
- "Sooner or later disasters such as an asteroid collision or a nuclear war could wipe us out," Hawking said. "But once we spread out into space, and establish independent colonies, our future should be safe."
- By "our future" Hawking of course meant himself, me, my wife, my kids, and a few other select people, not, specifically you.
- Naturally, somebody will need to stay here on earth after the global nuclear holocaust to help forage for salvageable materials that our androids will return to pick up in a few years.
- Of course, we realize this raises many questions about roles and responsibilities. That is why we created the FAQ section below.
"I'll put in a good word for you when I get back to Houston, but transfers take time."
5. Post-Apocalyptic Earth FAQ
How long will it take for you to send the medical supplies and food we requested in our earlier distress signals just before the global nuclear disaster destroyed our ability to communicate?
This is a great question. If we use chemical fueled rockets, like the Apollo mission to the moon, it would take us approximately 50,000 years to travel back to Earth from the nearest star. If we use what science fiction calls "warp drive" technology, then the trip would be instantaneous. Another possibility is traveling just below the speed of light, which would take about six years. Because "warp drive" technology is so expensive we'll probably just play it by ear and opt for something in between a chemical fueled rocket up to just below light speed. So figure anywhere from 10 years to 25,000 years.
How many of you will be coming back to help us?
Yes. Well, that's a bit tricky. See, we won't actually be returning ourselves, not physically anyway. The nuclear radiation exposure would kill us. For dangerous missions such as this we'll be sending cargo ships manned by androids with special hologram projection instructional messages from us, kind of like in the first Star Wars movie when Luke accidentally discovered Princess Leia's hologram "help" message in the R2D2 robot. Only our message will not be a "help" message but will instead feature detailed instructions on how you should help the androids load the cargo ships with the materials we need from you.
How will you know how many ships to send so you can transport everyone off Earth?
Uh, right. Yes. I think what we need to focus on here, however, are the details of how to separate and organize the piles of salvage materials. We'll need to prioritize things by their platinum and silver content, of course. Also, I think you will really, really like the androids. They are very friendly and have a pleasant, human-like demeanor as long as you obey their commands.
What will we be able to bring with us on the evacuation ships?
Good question. It is important not to mistake the friendly, human-like demeanor of the androids for weakness. Also, while they may appear to lack mobility, they actually have the ability to fly and shoot lasers out of their eyes which, we want to emphasize, although they look exactly like eyes, are not really eyes, but laser guns.
How long will the boarding process take, and will the trip affect us physically?
You do understand that the androids have laser guns for eyes, don't you? Because we want to be really, really clear on this. You know the androids' eyes? They aren't really eyes. They are laser guns. Also, the laser guns really do work. We have tested them.
Will we be able to sleep on the spaceship trip when we leave Earth?
Hmm, let's try a different approach. You know how a laser gun can emit a burst of energy that completely evaporates the particles of any substance that can be found anywhere on the planet Earth including a fully-grown, physically fit adult male? Ok, imagine the laser guns are coming out of an android's eyes. Also, imagine that the androids can read minds and that the lasers will shoot out of their eyes and evaporate, say, a fully-grown, physically fit adult male just because that adult male momentarily considered in his mind disobeying them. Because we programmed them to do that.
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