I don't think it's any coincidence that today's spike in gold coincided with Bernanke's smoke-blowing session in front of the National Press Club. What is really sad and pathetic is that most of the country that bothers to read/follow the news will wake up tomorrow morning to headlines which proclaim that Bernanke said the economy is improving. BUT, if you look at the real TRUTH behind the economic numbers released lately, you will see that the indices used to measure economic activity have been skewed to the upside primarily by price inflation at the "non-core" level, where "non-core" as defined by the Fed/Govt is "the cost of food and energy." Yes, 'tis indeed a massive farce.
Let's use today's factory orders report as an example, which posted a .2% gain vs. an expected .4% decline. If you read thru the details of the report, which you can do HERE, you will find that the index gains were driven primarily by an increase in the output of non-durable goods and inventory build-up. If you read thru the data table, you'll find that "petroleum and coal products" were nearly 15% of the total value of the index and represented one of the largest % increase in value from Nov to Dec. Given that we know that the price of oil increased during November by almost 13%, it stands to reason that a large percentage of the gain in the factor order index was the price of oil (and coal). Furthermore, the price of steel has been climbing sharply, ergo the increase in the value of the durable goods component of the index.
Given that new orders for durables were down, and unfilled orders also declined (meaning there was plenty of inventory to fill orders) AND that inventories continued to grow during the month, end user unit demand was flat to down. Thus, the increase in the value of many of the components of the factory order index would have been derived from price increases. Analysts should be quite troubled by the fact that inventories continue building with little evidence of ultimate end-user (consumers, ultimately) demand. We saw more evidence of this dynamic with the auto sales report, which was largely driven by a massive spike in GM sales, but which proved to be largely a function of GM selling cars to dealers, as dealer inventory exploded month over month. There is an excellent accounting of that dynamic HERE.
Anybody read about, or hear/see, any of the above in their local newspaper or nightly news broadcast? How about the geniuses in CNN or CNBC or Fox Biz? Did any of those news sources go over this?
There's more. The Purchasing Manager's Index reported the other day showed an unexpected increase. But you'll find, if you read thru the details of the report, that one of the largest - by far - components in the increase of this index came from a large increase in prices. Not only that, but that the trend in higher prices has sustained for 19 months. To further bolster the lack of end-user (consumer) real demand, the customer inventory metric is still contracting - and has been for 22 months. What's even more frightening, is that per a NY Post business section (yes, the NY Post, believe it or not, has one of the more credible business editors in medialand) featured an article two days ago in which some anonymous insiders at Walmart were fearing a much larger than expected comparable sales decline this quarter and that they were working toward reducing inventories and reducing new orders. That article is HERE.
Finally, there is the Government's "estimate" of 4th quarter GDP, which was glorified and worshipped by the media. The stock market initially did an end zone dance, but then sold off. Now why would that be? I'll direct everyone's attention to an excerpt from the highly regarded King report, which explains the farce that is the Government GDP calculation:
"The Q4 GDP estimate is a total fraud. The BEA made the estimate with only two months of data. Though the usual suspects emphasized that the decline in inventory growth subtracted 3.70 percentage points from GDP, they ignored that fooling with the deflator added 1.77% percentage points and goofy trade accounting added 3.44 percentage points to GDP.
The fraud in the GDP report is evinced by the fact that despite roaring inflation in Q4 government toadies reduced its inflation measure, the GDP Implicit Deflator, to 0.26% in Q4 from 2.03% in Q3!Even the bogus CPI shows 2.6% inflation in Q4!!! And PPI shows 4% inflation!!!! The most infuriating and disgusting scam in the GDP report is that the BEA states inflation at 0.26% to overstate GDP and then it puts import inflation at 21.8% annualized.
The toadies at the US Ministry of Truth report negligible inflation to overstate GDP and also report huge inflation in imports, which allows the deceivers to reduce imports, which increases GDP. The sharp decline in imports grossly conflicts with the biggest surge in consumption in years – unless the trade deficit has suddenly disappeared!!!!
Consumer Metrics Institute: Ironically, the flip-side of the low "deflater" being used for the entire economy is the extremely high 21.8% annualized "deflater" that was used to inflation-adjust the amounts of goods that were imported during the quarter. This huge spike in the imported goods "deflater" (up 31% from a -9.2% dis-inflationary number used in the third quarter) partially explains the dramatic drop in reported imports in the GDP equation (and that consequently boosted the overall GDP growth rate by over 4.9%). Given the recent movement in commodity prices (especially oil) it is hard to quarrel with the 21.8% number per se (even if it brings the 0.3% overall "deflater" into question), but the impact of that "deflater" has certainly added to the noise present in this GDP release, if not to the headline number itself."
Next time you see a bullish economic report from the Government, remember that they are usually fabricated from estimates, incomplete data and outright data manipulation. Yes, Bernanke is either completely stoned or a calculated liar. And, yes, the farce continues...