Government Inflation Numbers Are Bogus

Sir Alan is not absolved from helping stir inflationary demons

Consumer prices rose 0.1% in November and less than a percent over the past year. If you strip out food and energy, which government number crunchers do, because those prices are allegedly “volatile,” you still get a 0.1% increase.

That’s the “core” CPI, and that’s what the monetary mandarins at the Federal Reserve care about when drafting plans to buy Treasuries, control interest rates, goose employment numbers, order pizza, drink wine, play Xbox 360 or any of the myriad other things they do during their FOMC meetings.

As a group, they can’t be pleased with the number. Over the last year, despite trillions of dollars in government stimulus and quantitative easing, core CPI has risen a scant 0.8% – far below the Fed’s “sweet spot” of 1.6-2.0%.

Special Offer: Make the most out of gold’s phenomenal move higher but don’t get left holding the bag when it’s time to run. Click here for instant access to market timing analysis and specific gold, silver and hard asset model portfolios in Curtis Hesler’s Professional Timing Service.

Whom are we kidding? Even the “headline” figure, the one including food and energy, is suspect. Our friends at Casey Research put out this chart a couple months ago. The column in the far right – CPI-U – is actually lower now than it was then, all those other columns notwithstanding:

How does the government pull this off? We ask constant readers to indulge our newer ones as we revisit three of the most common tools the statisticians use…

• Substitution. If steak becomes more expensive, and you buy hamburger instead, then the Bureau of Labor Statistics reasons your cost of beef has stayed the same – no inflation!

• Hedonics. If the 2011 model of a car costs more than the 2010 model, but it also comes with more standard equipment, the BLS reasons you’re still getting the same value for your money – no inflation!

• Geometric weighting. Nothing fancy here: If the price of something goes up, the BLS simply makes it count for less in the CPI relative to everything else. If the price comes down, it counts for more. Voila!

These changes started with the last round of Social Security “reform” under the auspices of Alan Greenspan in the early ’80s. The idea was that if CPI were lower, Uncle Sam could pay out less in Social Security benefits.

You can see the end result over time maintained by our friend John Williams of Shadow Government Statistics. Mr. Williams calculates economic numbers the way they did back in the Carter era. The “official” CPI number is in red. The shadow stat is in blue:

In the meantime, the Federal Reserve statement issued after yesterday’s meeting amounted to, “steady as she goes” on the ill-fated QE2. The Fed, looking at current “official” CPI numbers, sees “deflation”…

And so the plan to goose the system with $875 billion in Treasury purchases that started last month will continue to at least double the official rate from whence it sat while they were kibitzing over bagels before the meeting began yesterday morning.

Sooner or later, reality is going to catch up to the gamed statistics. Indeed, “an inflationary outbreak is very likely,” says Chris Mayer, editor of Mayer’s Special Situations.

History is on our side.

“The dollar has done nothing more reliably than lose its value over time,” Chris points out. “I think the future will be no different. People who worry about deflation – that, somehow, the dollars in our pocket will actually buy more in the years ahead, not less – will not only be wrong. They will be broke.

“Writer Jason Zweig points out that ‘Since 1960, 69% of the world’s market-oriented economies have suffered at least one year in which inflation ran at an annualized rate of 25% or more. On average, those inflationary periods destroyed 53% of an investor’s purchasing power.’

“That is why I believe that being prepared for inflation is the most important investment decision we have to face in the coming decade. If you aren’t prepared, then the consequence is a mean hit to your wealth.”

Why You Shouldn’t Trust the Core CPI Numbers by Addison Wiggin originally appeared in the Daily Reckoning.

This entry passed through the Full-Text RSS service — if this is your content and you're reading it on someone else's site, please read our FAQ page at fivefilters.org/content-only/faq.php
Five Filters featured site: So, Why is Wikileaks a Good Thing Again?.

View the original article here

Akamai Can Fatten Up On Government Work

Underdeveloped opportunity in government

Akamai, which operates in the content delivery and value-added solutions business, recently reported its third-quarter 2010 earnings. Akamai makes money delivering Web content for its customers and by providing value added service like dynamic site acceleration and advertising decision solutions. In this segment is competes with Level 3, AT&T and Limelight.

The company is witnessing growth across all of its business verticals with the highest growth observed in the public sector. While revenues from the e-commerce and media verticals have registered growth of close to 20% ^[] in the first 9 months of 2010 compared to same period last year, the public sector has registered a growth of over 32% ^[]. This has been driven by an increase in revenue per customer as well as increased customer count.

While our price estimate of $31.11 is well below the market price, we believe there is upside risk to our forecasts in light of the structural tailwinds in its core businesses.

Special Offer: CREE is back to $65. Paul McWilliams told his readers to buy it at $17. Buy more now or sell the rally? Click here for instant access to analysis and recommended trades in?Next Inning Technology Research.

The majority of the public sector business for Akamai comes from the U.S., and within the U.S., from the federal sector. Akamai’s customers include both G2C (government-to-consumer) agencies and military. However there is still plenty of growth for the company when it comes to the state sector. In its earnings transcript, Akamai noted that states have generally not invested in services to improve process efficiency and delivery creating an opportunity for Akamai. ^[]

Despite growth in the public sector vertical, we estimate that public sector (government & NGO) constitutes about 4% to Akamai’s stock. This is because it has a significantly fewer number of customers when compared to other verticals like online shopping and media.

We estimate that Akamai will have close to 100 public sector customers by the end of 2010, and we expect this figure to exceed 130 by the end of our forecast period. While the uptick in public sector growth is encouraging, we note that there is limited upside. If Akamai gained 200 customers in this segment in the coming years , this implies about 2% upside to our estimates.

You can see the complete $31.11 Trefis price estimate for Akamai’s stock here.

Like our charts? Embed them in your own posts using the Trefis Wordpress Plugin.

This entry passed through the Full-Text RSS service — if this is your content and you're reading it on someone else's site, please read our FAQ page at fivefilters.org/content-only/faq.php
Five Filters featured article: Beyond Hiroshima - The Non-Reporting of Falluja's Cancer Catastrophe.

View the original article here

Step trust Google, Government

Error in deserializing body of reply message for operation 'Translate'. The maximum string content length quota (8192) has been exceeded while reading XML data. This quota may be increased by changing the MaxStringContentLength property on the XmlDictionaryReaderQuotas object used when creating the XML reader. Line 1, position 9190.
Error in deserializing body of reply message for operation 'Translate'. The maximum string content length quota (8192) has been exceeded while reading XML data. This quota may be increased by changing the MaxStringContentLength property on the XmlDictionaryReaderQuotas object used when creating the XML reader. Line 1, position 9291.

Image via Wikipedia

At a time when most of the pub-lic believes lead-er-ship of all sorts, espe-cially polit-i-cal, to be weak, we should not focus on find-ing scape-goats but rather on assum-ing account-abil-ity to help fix problems.

As detailed in his book, Bad Money: Reck-less Finance, Failed Pol-i-tics, and the Global Cri-sis of Amer-i-can Cap-i-tal-ism and in the Harper’s Mag-a-zine arti-cle, “Num-bers racket: Why the econ-omy is worse than we know”, Ken Phillips doc-u-ments how since the 1960s Wash-ing-ton has been play-ing with the offi-cial sta-tis-tics by which the health of our econ-omy and soci-ety are mea-sured in order to avoid the per-cep-tion of their legacy as hav-ing done a poor job. I bor-row from the Harper Mag-a-zine article:

“The cor-rup-tion has tainted the very mea-sures that most shape pub-lic per-cep-tion of the economy—the monthly Con-sumer Price Index (CPI), which serves as the chief bell-wether of infla-tion; the quar-terly Gross Domes-tic Prod-uct (GDP), which tracks the U.S. economy’s over-all growth; and the monthly unem-ploy-ment fig-ure, which for the gen-eral pub-lic is per-haps the most vivid indi-ca-tor of eco-nomic health or infirmity.”

The point is that: as getting-elected has become the pri-mary busi-ness of politi-cians, less and less have we been able to trust any-one in polit-i-cal lead-er-ship to make the dif-fi-cult but cor-rect deci-sions. Evi-dence of this trend is all around us in the state of our econ-omy and soci-ety. No one in office wants to take respon-si-bil-ity for exces-sive and prof-li-gate bor-row-ing and spend-ing for fear of being vil-i-fied as anti-growth, anti-jobs, anti-happiness or anti-anything that their polit-i-cal com-peti-tors believe pleases peo-ple in the cur-rent moment.

In the aforementioned con-text, I am pleased to learn of Google’s inten-tions to cre-ate its own Price Index and find it reas-sur-ing that we are not paving the Road To Serf-dom. I believe the found-ing fathers would cheer this endeavor as a shin-ing exam-ple of suc-cess of the inno-v-a-tive spirit empow-ered by free enter-prise. Indeed, their orig-i-nal vision for the United States is to cre-ate a soci-ety that rewards cit-i-zens com-men-su-rate with the value they cre-ate. That, in my opin-ion, is the Amer-i-can?Dream.

The longer we allow cer-tain fac-tions of soci-ety to exploit oth-ers or reap rewards greater than the value they cre-ate, the more our lib-eral demo-c-ra-tic sys-tem declines. Our civ-i-liza-tion depends on cit-i-zens trust-ing that their oppor-tu-nity for achieve-ment and suc-cess is equal to their peers and that no injus-tice will under-mine their efforts to cre-ate value for them-selves, their fam-ily and their soci-ety. Fran-cis Fukuyama artic-u-lates this idea with ter-rific lucid-ity in his book, Trust: The Social Virtues and the Cre-ation of Pros-per-ity.

Given that our abil-ity to trust polit-i-cal lead-ers is low, we must rely more than ever on pri-vate enter-prise to lead our soci-ety. Keep in mind that the pri-vate enter-prise is not to blame for Wall Street’s excesses and inor-di-nate com-pen-sa-tion.

Blame the politi-cians, begin-ning with Greenpsan, who paved the way for Wall Street to loot the cap-i-tal mar-kets. In his inter-view with ABC, Larry Sum-mers points out the fact that the finan-cial ser-vices sec-tor (part Wall Street and part cor-po-ra-tions) spends, annu-ally, about $1 million per con-gress-man while employ-ing four lob-by-ists per con-gress-man. That is why Wall Street and cor-po-rate Amer-ica con-tinue to get what they want and are not held account-able for what amounts, in many cases, to rob-bing the invest-ing pub-lic. That’s right – politi-cians and polit-i-cal influ-ence can be bought. All the more rea-son for pri-vate enter-prise to step into the lead-er-ship void and help steer Amer-ica back on?track.

Special Offer: Gary Shilling was mocked for predicting a housing crash back in 2006, but he and his subscribers cleaned up. Click here for instant access to Shilling’s current investment strategy in his Insight newsletter.

Google is not the only exam-ple of excel-lent lead-er-ship by pri-vate enter-prise. There are many. ?I can-not fail to men-tion my own firm, New Con-structs. Per our mis-sion state-ment, we are ded-i-cated to improv-ing the integrity of the cap-i-tal mar-kets because we believe that is in the best inter-est of the long-term pros-per-ity of our soci-ety. Though not nearly as impact-ful as Mr. Mas-ters, I also spent time in Wash-ing-ton meet-ing with Sen-a-tor Corker, the SEC, the Sen-ate Bank-ing Com-mit-tee, FDIC, Con-gres-sional Over-sight Panel and oth-ers. My presentation focused how to improve the integrity of the capital markets most efficiently. As detailed in my let-ters (#1 and #2) to Sen-a-tor Corker , my pur-pose was to pro-vide our polit-i-cal decision-makers with a pow-er-ful tool to com-bat stock mar-ket manip-u-la-tion.

I sub-mit-ted a list of over 20 Cor-po-rate Finan-cial Dis-clo-sure Trans-gres-sions to the Sen-ate Bank-ing Com-mit-tee. I pointed out that not only were com-pa-nies able to manip-u-late the account-ing sys-tem, but also that vio-la-tion of account-ing was ram-pant and unde-tected. For exam-ple, as detailed in our Cor-po-rate Finan-cial Dis-clo-sure Trans-gres-sions report, over the last five years we found 10 com-pa-nies whose income state-ments do not add up cor-rectly and 20 com-pa-nies in the last 11 years whose bal-ance sheets do not bal-ance. I’d say that is proof that when the cat is away the mice will?play.

Hav-ing worked on Wall Street for sev-eral years, I know how the “sausage is made.”

This entry passed through the Full-Text RSS service — if this is your content and you're reading it on someone else's site, please read our FAQ page at fivefilters.org/content-only/faq.php
Five Filters featured article: Beyond Hiroshima - The Non-Reporting of Falluja's Cancer Catastrophe.

View the original article here

Government, association CNG fail to agree

The Government and CNG Association has failed to agree on the number of days CNG stations must be closed in a week.

Manila:Failure of negotiations between the Government and the Association of compressed natural gas (CNG) Monday, when they could not agree on the number of days that CNG stations must be closed in a week.

The meeting which was held at the Office of Sui Northern Gas Pipeline Limited (SNGPL) in Lahore, the Government stated that stations should close two days per week because of shortages of gas during the winters.

However, the said association cannot afford stations in more than one day by semaine.Il said a strike will be observed if the request is not complied.

The association also threatened to violate all levels of Government, if a decision was forced upon them.

Association of CNG also required the Minister and Syed Naveed Qamar, terminate without notice from gas loadshedding natural resources.

Talk to the media, the Qamar said that gas loadshedding will take place throughout the country and that he is going to be no exception for any province.

This entry transmitted via the service for full-text RSS - if this is your content and you read on someone to another site, please read our FAQ page fivefilters.org/content-only/faq.php
Article five filters features: After Hiroshima - non-rapport Cancer Catastrophe of Fallujah.

View the original article here