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Five Things for Friday, May 15


Consumer Prices; GMAC and the ARt of Imagery; We're Mad as Hell, and We're Going to Advertise It! and Much More

1) Consumer Prices

Prices Suggest Little Deflation Risk
- Wall Street Journal, May 15, 2009

That's the actual headline on the Wall Street Journal's Consumer Price Index story this morning. It was written by Federal Reserve Chairman Ben Bernanke. How do I know this? Because Bernanke has a vested interest in denying the threat of deflation, and because otherwise the headline is a non sequitur given the story's lead:

"Annual U.S. inflation measures plunged deeper into the red last month, as falling energy and food prices brought consumer prices down by their fastest 12-month rate in over a half century."

Of course, Bloomberg too was optimistic about the Threat of Deflation in their CPI story this morning:

"Companies from Gap (GPS) to Toyota Motor Corp. (TM) are keeping a lid on prices to draw buyers amid the deepest recession in five decades. Still, recent increases in commodity costs and Federal Reserve efforts to thaw credit markets by pumping trillions of dollars into the economy will help lower the odds that broad- based price declines, or deflation, will take root."

It is true. I am not well read beyond the walls of Minyanville. Because this - nominal prices and inflation vs. deflation - is precisely the ground covered the past two days in Five Things.

2) Yes, But...

Related to the above, this morning's Empire State Manufacturing Survey by the New York Federal Reserve contained a datapoint that is key to understanding the continuing breakdown between pricing power and consumer spending.

Before we get into the regional numbers, remember that the divide nationally between prices paid and prices received, or roughly speaking, pricing power, is not a symptom of the recession; it's been a key thematic element of the economy for about eight years now.

Apart from the fact the Empire State Manufacturing Survey was "good" (by virtue of the fact it contracted by the least amount since last August), the key datapoint in my mind is the prices paid versus the prices received component:

Prices Paid "improved" to -11.4 from -14.6 in April.

But Prices Received declined sharply, from -17.9 in April to -27.3.

3) GMAC and the Art of Imagery

GMAC LLC, the auto and mortgage lender, is rebranding the name of its bank to avoid the negative connotations associated with being an insolvent, money-burning rot of a financial institution which you and I have sunk somewhere in the neighborhood of $20 billion into just to keep afloat... because who in their right mind would want to deposit money in a bank like that?

According to the Wall Street Journal, the company's executives hope that the rebranding of GMAC Bank will spur retail deposit growth. GMAC executives are looking at retail deposits as a primary funding source because the lender has few other avenues in which to raise capital... barring still more public funds being stuffed into the bank.

So, beginning today, the new GMAC bank will change its name to Alley Bank. The rebranding of GMAC's bank to Alley Bank is certainly an appropr -

I'm sorry, just a moment.

What? Ah, I see. Yes, of course. My mistake. It's not Alley Bank. It's Ally Bank.

Get it? Because you, me and GMAC are like allies. See, they don't have any money after losing it all. And we've given them the equivalent of of about $200,000 for each public school in America. So, that makes us like allies. Hence, Ally Bank.

4) We're Mad as Hell, and We're Going to Advertise It!

For those who have been following the Socionomic observations in Five Things over the past few years, check out this piece in the New York Times this morning: "Angry Ads Seek to Channel Consumer Outrage."

""We're turning up the volume in relation to what our customers are feeling," Jeffrey W. Hayzlett, chief marketing officer at the Eastman Kodak Company (EK), told the Times. "It's a departure for us," Mr. Hayzlett acknowledged, given the "touchy-feely" image the Kodak brand has long had, but "it's right for today's times."

5) News & Weirdness

Department of Incongruity 1:
Obama Says U.S. Debt Load "Unsustainable" - Bloomberg
But Mr. President aren't you... didn't we... bailout... everything... and.... nevermind.

Department of Incongruity 2:
U.S. Makes $22 Billion in Bailout Funds Available to Insurers - WSJ
Among those receiving bailout funds are Hartford Financial Services Group (HIG), Prudential Financial (PRU), Principal Financial Group (PFG) and Lincoln National (LNC).

Germany's Economy Shrinks 3.8% - Financial Times
Germany's economy contracted by a record 3.8 percent in the first quarter, marking a recession that is the deepest in its post-war history.

The Return of Protectionism and Trade Wars - Washington Post
"Rather than merely raising taxes on imported goods -- acts that are subject to international treaties -- nations including the United States are finding creative ways to engage in protectionism through domestic policy decisions that are largely not governed by international law."

General Motors (GM) to Send Termination Notices to 1,100 U.S. Dealers - Bloomberg
Franchisees should receive the letters today, Bloomberg said, citing an unidentified source. (GM) is working to pare U.S. dealers by 42 percent, to 3,600, by the end of next year. Chrysler has said it intends to shut down 25% of its U.S. dealers.

Food Companies Placing Onus of Safety on Consumers - NYT
ConAgra (CAG) and many other food companies have decided to make the consumer responsible for the so-called "kill step" - cooking at high temperatures to kill microbes. The move opens the door for many new exciting frozen food products, such as Campylobacter Frozen Chowder, Groton's Frozen Fish Ticks and the Swansen's TB Dinner.

Government Encouraging Short Sales
- Washington Post
Banks to get government incentive payments for allowing borrowers to sell their home at a loss rather than go through foreclosure.

Mexican Data Say Migration to U.S. Has Plummeted - NYT
Hey, now they're trying to keep us out!

Paris Hilton Sees Her Pink Bentley Transformed by West Coast Customs
- USA Today
Why was this story in the USA Today Money section? Even more important, why did I click on it? Herding behavior.
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