5/03/2012
Obama, Romney Look to November Showdown
President Barack Obama’s surprise trip to Afghanistan on the first anniversary of the death of Osama bin Laden is the latest indication that foreign policy and national security issues will matter this election year, even if most political analysts predict that the economy will be the central issue in the U.S. presidential campaign.
While in Afghanistan, the president signed a long-term security agreement with Afghan President Hamid Karzai and met with U.S. troops at Bagram Air Field. And, in a televised address, Obama spoke about winding down the U.S. military commitment in Afghanistan.
"I will not keep Americans in harm's way a single day longer than is absolutely required for our national security," the president said. "But we must finish the job we started in Afghanistan and end this war responsibly."
To highlight the one-year anniversary of bin Laden's death, the Obama presidential campaign released a video recalling the decision to go after the al-Qaida leader and the tense moments that followed.
“He took the harder and the more honorable path,” former U.S. President Bill Clinton said in the video.
The Obama campaign also raised the issue of whether the president's expected Republican opponent in November, Mitt Romney, would have approved the bin Laden raid - based on a 2007 comment he made questioning the resources devoted to the manhunt.
10/24/2011
Inflation Peaking in U.S. With Prices Tumbling in Bear Market: Commodities
The biggest rout in commodities since the global recession may be a sign that the fastest U.S. inflation in three years is peaking.
The Standard & Poor’s GSCI Index of 24 commodities entered a bear market last month after sliding more than 20 percent from a two-year high in April, on concern that slower growth will cut demand. A slump in the gauge from a 2008 record preceded a drop in inflation, while a 2009 rebound caused the consumer price index to climb. Raw materials fell 12 percent in September as the CPI rose 3.9 percent from the same month a year earlier, the most since 2008.
“There is a sense that headline inflation is receding,” said Stephen Stanley, the chief economist at Pierpont Securities LLC, a government-bond broker in Stamford, Connecticut. “Things have been a little more tame the last few months than they were earlier in the year, when you had this relentless push higher, in energy prices especially.”
That’s good news for shoppers, manufacturers and Federal Reserve Chairman Ben S. Bernanke, whose efforts to revive the economy have been criticized for risking faster inflation. Lower commodity costs, accounting for 40 percent of the CPI, would give Bernanke even more flexibility to shore up growth. The benchmark measure for prices will slow to 2.1 percent in 2012 from 3.1 percent this year, according to the median estimate of 75 economists surveyed by Bloomberg News.
Retail Costs
While the commodity gauge doubled from its 2009 low as shortages emerged in energy, metals and grain markets, the cost of regular gasoline fell to $3.451 a gallon on Oct. 23 from $3.985 in May, American Automobile Association data show. The fuel accounts for 4.9 percent of CPI. Three years ago, a plunge to $1.616 from $4.114 helped reverse the year-over-year inflation rate of 5.6 percent in July 2008 to a contraction of 2.1 percent in the same month a year later.
The pace of food-cost gains will slow to 2.5 percent to 3.5 percent next year, compared with 3 percent to 4 percent in 2011, the U.S. Department of Agriculture estimates. The commodities account for almost 14 percent of CPI.
The United Nations World Food Price Index has fallen 5.3 percent from a record in February as wheat plunged 30 percent from this year’s peak and corn and soybeans retreated. In August, Orrville, Ohio-based J.M. Smucker Co. lowered the price of Folgers coffee, the top-selling U.S. brand, as arabica-bean futures dropped as much as 24 percent from a peak in May. Cotton is 51 percent cheaper than at the end of March, easing pressure on clothing manufacturers. Apparel accounts for 3.6 percent of CPI.
Slowing Inflation
Price growth will slow to 3.35 percent this quarter from 3.77 percent in the previous three months, according to the median of 68 economists’ estimates compiled by Bloomberg. CPI will cool to 2 percent by the third quarter of next year, the estimates show.
The government’s measure includes 60 percent services such as rent and medical care and 40 percent commodities, which the Bureau of Labor Statistics defines as food, beverages, apparel and other non-durable goods, as well as durable goods including cars and appliances. The cost of those items is determined by raw materials and other expenditures, including labor.
“We’ve already seen some declines in gasoline prices and at least for some foodstuffs,” said Randy Kroszner, a former Fed governor and an economics professor at the Booth School of Business at the University of Chicago. “That suggests that the outlook for inflation is relatively subdued.”
Investors’ Outlook
Investors are expecting a slower pace than they did in April, when the S&P GSCI gauge was at a 32-month high. The difference in yields on 10-year Treasury Inflation Protected Securities and 10-year bonds is 2.0309 percentage points, the average rate investors anticipate in CPI over the life of the securities, down from an almost five-year high of 2.6556 points on April 11.
Consumers also are changing their outlook. In a survey released by the University of Michigan on Oct. 14, they expected an inflation rate of 3.2 percent over the next 12 months. In the same survey in March, respondents forecast rates would reach 4.6 percent, the highest since August 2008.
While commodities are declining, they remain costly relative to past years, meaning inflation will stay near the highest levels since 2008. The median forecast of a 3.1 percent gain in the CPI this year compares with expectations for 1.5 percent in January, a Bloomberg survey of 75 economists shows.
Copper, Crude
Copper averaged $8,993 a metric ton in London in the third quarter, down for a second straight period. A typical U.S. home has 439 pounds (199 kilograms) of copper wire and plumbing, while a car has about 50 pounds. New and used vehicles account for 6.3 percent of the CPI. Shelter, a category that includes everything from rent to household insurance, makes up 32 percent.
Crude oil cost $89.54 a barrel on the New York Mercantile Exchange on average in the past quarter, 13 percent above its five-year trend. Heating oil was $2.9847 a gallon, 45 percent higher than a year earlier. Household energy makes up 4 percent of CPI.
Cattle futures in Chicago reached a record $1.24475 a pound on Oct. 17, in part because corn-feed costs surged in the first half of 2011 and a drought led to depleted herds in Texas. Pork chops rose to a record $3.831 a pound at the end of September, and ground beef retailed at $2.868 a pound, also the highest ever, according to the Bureau of Labor Statistics. Sirloin steak is 8.5 percent more expensive than a year earlier, and bacon advanced 5.4 percent.
Expensive Cheese
Dairy is still appreciating, with cheddar cheese in supermarkets costing the most in at least a quarter century, government data show. Milk futures rose 35 percent this year in Chicago, driving ice cream to $4.805 for a half-gallon, up 11 percent from a year earlier. Dairy accounts for 0.8 percent of CPI, and meat, fish and eggs are 1.8 percent.
While the drop in commodities may be good for consumers, it may curb the boom in U.S. agriculture. The government anticipates record farm income of $103.6 billion this year. North Dakota, the biggest wheat grower in 2010, has the nation’s lowest jobless rate, at 3.5 percent. The second-lowest, at 4.2 percent, is Nebraska, the biggest corn producer after Iowa and Illinois.
Goldman Sachs Group Inc. predicted on Oct. 4 that the slump will give way to a 20 percent gain in the next 12 months, led by energy and industrial metals. Barclays expects shortages in copper and tin next year. The International Energy Agency anticipates record demand for crude oil. Macquarie Group Ltd. forecasts deficits in corn, wheat and soybeans.
‘Here to Stay’
“Input-price inflation is here to stay, and that’s demand and supply driven,” said Pete Sorrentino, a senior fund manager at Huntington Asset Advisors in Cincinnati, which oversees $14.5 billion of assets.
Companies will be reluctant to cut prices because “they think any sell-off is short term in duration,” Sorrentino said. “They run up fast, and then they’re sticky on the downside.”
SuperValu Inc., the owner of Save-A-Lot grocery stores, has “taken a deliberate approach to passing on price increases as soon as practical,” Chief Financial Officer Sherry Smith said on an Oct. 19 conference call. The Eden Prairie, Minnesota-based company expects inflation of 3 percent to 4 percent this year, compared with 4.5 percent in the second quarter.
Weakening confidence and higher-than-average unemployment make people reluctant to pay more for some products. Bentonville, Arkansas-based Wal-Mart Stores Inc., the world’s largest retailer, said Oct. 12 that it plans to lower prices as it cuts operating expenses as a percentage of sales over the next five years.
Tight Budgets
Shoppers have “concern about their income, and their family, and their budgets and how they’re going to get through,” Wal-Mart Chief Executive Officer Michael Duke said on a conference call Oct. 12. “That economic pressure our customers still feel today here in the U.S., and I can’t tell you that I’ve seen it get better.”
The data doesn’t support Bernanke’s critics, including Republican presidential candidate Rick Perry and Allan H. Meltzer, an economics professor at Carnegie Mellon University.
After the Fed purchased $2.3 trillion in housing and government debt during two rounds of so-called quantitative easing from December 2008 to June 2011, Perry, the governor of Texas, said in August that printing more money may be “treasonous.” Meltzer, who has written a two-volume history of the central bank, said in March that inflation was a growing threat and that the pace would quicken as soon as housing prices stop falling.
Employment Gains
According to estimates compiled by Bloomberg, economists anticipate the jobless rate falling to 8.7 percent in the fourth quarter of 2012, from 9.1 percent unemployment now, which is almost double the rate four years ago. U.S. growth will accelerate to 2 percent next year from 1.7 percent in 2011, the estimates show.
That may not mean faster inflation, which “appears to have moderated,” the Federal Open Market Committee said Sept. 21. Bernanke said in testimony to Congress on Oct. 4 that the higher prices haven’t become “ingrained” in the economy.
The central bank said in its Beige Book survey Oct. 19 that economic activity “continued to expand” last month while some areas of the country are reporting the pace of growth as “slight,” and companies see more doubt about the strength of the recovery. Prices paid by producers for raw materials were 6.9 percent higher in September than a year earlier, outpacing the gain in CPI and suggesting that some businesses may be reluctant to pass on higher costs.
Meat and Dairy
The USDA expects food inflation to retreat in all but four of 21 categories it monitors, including meat and dairy products. Futures traders anticipate gasoline dropping about 6.4 percent by the end of next year, and heating oil 4.9 percent. Motor fuel makes up 5.1 percent of CPI.
The Journal of Commerce Smoothed Price Index, which tracks the annual growth rate of 18 industrial materials from burlap to tallow, fell below zero in August, and reached minus 23.32 on Oct. 21, the lowest since June 2009. The last time it went from positive to negative was in August 2008, a month before the collapse of Lehman Brothers Holdings Inc.
“Commodities come off most when the winds of recession are blowing pretty strong,” said Chris Rupkey, the chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. Inflation has “run up to the top because gasoline prices were so high this spring,” he said. “Now that gas peaked at around $4, there’s nowhere for headline CPI to go but down.”
The Standard & Poor’s GSCI Index of 24 commodities entered a bear market last month after sliding more than 20 percent from a two-year high in April, on concern that slower growth will cut demand. A slump in the gauge from a 2008 record preceded a drop in inflation, while a 2009 rebound caused the consumer price index to climb. Raw materials fell 12 percent in September as the CPI rose 3.9 percent from the same month a year earlier, the most since 2008.
“There is a sense that headline inflation is receding,” said Stephen Stanley, the chief economist at Pierpont Securities LLC, a government-bond broker in Stamford, Connecticut. “Things have been a little more tame the last few months than they were earlier in the year, when you had this relentless push higher, in energy prices especially.”
That’s good news for shoppers, manufacturers and Federal Reserve Chairman Ben S. Bernanke, whose efforts to revive the economy have been criticized for risking faster inflation. Lower commodity costs, accounting for 40 percent of the CPI, would give Bernanke even more flexibility to shore up growth. The benchmark measure for prices will slow to 2.1 percent in 2012 from 3.1 percent this year, according to the median estimate of 75 economists surveyed by Bloomberg News.
Retail Costs
While the commodity gauge doubled from its 2009 low as shortages emerged in energy, metals and grain markets, the cost of regular gasoline fell to $3.451 a gallon on Oct. 23 from $3.985 in May, American Automobile Association data show. The fuel accounts for 4.9 percent of CPI. Three years ago, a plunge to $1.616 from $4.114 helped reverse the year-over-year inflation rate of 5.6 percent in July 2008 to a contraction of 2.1 percent in the same month a year later.
The pace of food-cost gains will slow to 2.5 percent to 3.5 percent next year, compared with 3 percent to 4 percent in 2011, the U.S. Department of Agriculture estimates. The commodities account for almost 14 percent of CPI.
The United Nations World Food Price Index has fallen 5.3 percent from a record in February as wheat plunged 30 percent from this year’s peak and corn and soybeans retreated. In August, Orrville, Ohio-based J.M. Smucker Co. lowered the price of Folgers coffee, the top-selling U.S. brand, as arabica-bean futures dropped as much as 24 percent from a peak in May. Cotton is 51 percent cheaper than at the end of March, easing pressure on clothing manufacturers. Apparel accounts for 3.6 percent of CPI.
Slowing Inflation
Price growth will slow to 3.35 percent this quarter from 3.77 percent in the previous three months, according to the median of 68 economists’ estimates compiled by Bloomberg. CPI will cool to 2 percent by the third quarter of next year, the estimates show.
The government’s measure includes 60 percent services such as rent and medical care and 40 percent commodities, which the Bureau of Labor Statistics defines as food, beverages, apparel and other non-durable goods, as well as durable goods including cars and appliances. The cost of those items is determined by raw materials and other expenditures, including labor.
“We’ve already seen some declines in gasoline prices and at least for some foodstuffs,” said Randy Kroszner, a former Fed governor and an economics professor at the Booth School of Business at the University of Chicago. “That suggests that the outlook for inflation is relatively subdued.”
Investors’ Outlook
Investors are expecting a slower pace than they did in April, when the S&P GSCI gauge was at a 32-month high. The difference in yields on 10-year Treasury Inflation Protected Securities and 10-year bonds is 2.0309 percentage points, the average rate investors anticipate in CPI over the life of the securities, down from an almost five-year high of 2.6556 points on April 11.
Consumers also are changing their outlook. In a survey released by the University of Michigan on Oct. 14, they expected an inflation rate of 3.2 percent over the next 12 months. In the same survey in March, respondents forecast rates would reach 4.6 percent, the highest since August 2008.
While commodities are declining, they remain costly relative to past years, meaning inflation will stay near the highest levels since 2008. The median forecast of a 3.1 percent gain in the CPI this year compares with expectations for 1.5 percent in January, a Bloomberg survey of 75 economists shows.
Copper, Crude
Copper averaged $8,993 a metric ton in London in the third quarter, down for a second straight period. A typical U.S. home has 439 pounds (199 kilograms) of copper wire and plumbing, while a car has about 50 pounds. New and used vehicles account for 6.3 percent of the CPI. Shelter, a category that includes everything from rent to household insurance, makes up 32 percent.
Crude oil cost $89.54 a barrel on the New York Mercantile Exchange on average in the past quarter, 13 percent above its five-year trend. Heating oil was $2.9847 a gallon, 45 percent higher than a year earlier. Household energy makes up 4 percent of CPI.
Cattle futures in Chicago reached a record $1.24475 a pound on Oct. 17, in part because corn-feed costs surged in the first half of 2011 and a drought led to depleted herds in Texas. Pork chops rose to a record $3.831 a pound at the end of September, and ground beef retailed at $2.868 a pound, also the highest ever, according to the Bureau of Labor Statistics. Sirloin steak is 8.5 percent more expensive than a year earlier, and bacon advanced 5.4 percent.
Expensive Cheese
Dairy is still appreciating, with cheddar cheese in supermarkets costing the most in at least a quarter century, government data show. Milk futures rose 35 percent this year in Chicago, driving ice cream to $4.805 for a half-gallon, up 11 percent from a year earlier. Dairy accounts for 0.8 percent of CPI, and meat, fish and eggs are 1.8 percent.
While the drop in commodities may be good for consumers, it may curb the boom in U.S. agriculture. The government anticipates record farm income of $103.6 billion this year. North Dakota, the biggest wheat grower in 2010, has the nation’s lowest jobless rate, at 3.5 percent. The second-lowest, at 4.2 percent, is Nebraska, the biggest corn producer after Iowa and Illinois.
Goldman Sachs Group Inc. predicted on Oct. 4 that the slump will give way to a 20 percent gain in the next 12 months, led by energy and industrial metals. Barclays expects shortages in copper and tin next year. The International Energy Agency anticipates record demand for crude oil. Macquarie Group Ltd. forecasts deficits in corn, wheat and soybeans.
‘Here to Stay’
“Input-price inflation is here to stay, and that’s demand and supply driven,” said Pete Sorrentino, a senior fund manager at Huntington Asset Advisors in Cincinnati, which oversees $14.5 billion of assets.
Companies will be reluctant to cut prices because “they think any sell-off is short term in duration,” Sorrentino said. “They run up fast, and then they’re sticky on the downside.”
SuperValu Inc., the owner of Save-A-Lot grocery stores, has “taken a deliberate approach to passing on price increases as soon as practical,” Chief Financial Officer Sherry Smith said on an Oct. 19 conference call. The Eden Prairie, Minnesota-based company expects inflation of 3 percent to 4 percent this year, compared with 4.5 percent in the second quarter.
Weakening confidence and higher-than-average unemployment make people reluctant to pay more for some products. Bentonville, Arkansas-based Wal-Mart Stores Inc., the world’s largest retailer, said Oct. 12 that it plans to lower prices as it cuts operating expenses as a percentage of sales over the next five years.
Tight Budgets
Shoppers have “concern about their income, and their family, and their budgets and how they’re going to get through,” Wal-Mart Chief Executive Officer Michael Duke said on a conference call Oct. 12. “That economic pressure our customers still feel today here in the U.S., and I can’t tell you that I’ve seen it get better.”
The data doesn’t support Bernanke’s critics, including Republican presidential candidate Rick Perry and Allan H. Meltzer, an economics professor at Carnegie Mellon University.
After the Fed purchased $2.3 trillion in housing and government debt during two rounds of so-called quantitative easing from December 2008 to June 2011, Perry, the governor of Texas, said in August that printing more money may be “treasonous.” Meltzer, who has written a two-volume history of the central bank, said in March that inflation was a growing threat and that the pace would quicken as soon as housing prices stop falling.
Employment Gains
According to estimates compiled by Bloomberg, economists anticipate the jobless rate falling to 8.7 percent in the fourth quarter of 2012, from 9.1 percent unemployment now, which is almost double the rate four years ago. U.S. growth will accelerate to 2 percent next year from 1.7 percent in 2011, the estimates show.
That may not mean faster inflation, which “appears to have moderated,” the Federal Open Market Committee said Sept. 21. Bernanke said in testimony to Congress on Oct. 4 that the higher prices haven’t become “ingrained” in the economy.
The central bank said in its Beige Book survey Oct. 19 that economic activity “continued to expand” last month while some areas of the country are reporting the pace of growth as “slight,” and companies see more doubt about the strength of the recovery. Prices paid by producers for raw materials were 6.9 percent higher in September than a year earlier, outpacing the gain in CPI and suggesting that some businesses may be reluctant to pass on higher costs.
Meat and Dairy
The USDA expects food inflation to retreat in all but four of 21 categories it monitors, including meat and dairy products. Futures traders anticipate gasoline dropping about 6.4 percent by the end of next year, and heating oil 4.9 percent. Motor fuel makes up 5.1 percent of CPI.
The Journal of Commerce Smoothed Price Index, which tracks the annual growth rate of 18 industrial materials from burlap to tallow, fell below zero in August, and reached minus 23.32 on Oct. 21, the lowest since June 2009. The last time it went from positive to negative was in August 2008, a month before the collapse of Lehman Brothers Holdings Inc.
“Commodities come off most when the winds of recession are blowing pretty strong,” said Chris Rupkey, the chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. Inflation has “run up to the top because gasoline prices were so high this spring,” he said. “Now that gas peaked at around $4, there’s nowhere for headline CPI to go but down.”
9/16/2010
What Will Be the Headline
When a man in Macon, Ga. , came upon a wild dog attacking a young boy, he quickly grabbed the animal and throttled it with his two hands. A reporter saw the incident, congratulated the man and told him the headline the following day would read, Local Man Saves Child by Killing Vicious Animal.
The hero, however, told the journalist that he wasn't from Macon.
Well, then, the reporter said, the headline will probably say, 'Georgia Man Saves Child by Killing Dog. '
Actually, the man said, I'm from Connecticut.
In that case, the reporter said in a huff, the headline will read ,'Yankee Kills Family Pet.'
The hero, however, told the journalist that he wasn't from Macon.
Well, then, the reporter said, the headline will probably say, 'Georgia Man Saves Child by Killing Dog. '
Actually, the man said, I'm from Connecticut.
In that case, the reporter said in a huff, the headline will read ,'Yankee Kills Family Pet.'
Whose Dog Was the Smartest
Four friends were arguing over whose dog was the smartest. The first man, an engineer, called to his dog, T Square, show your stuff. The dog trotted over to a desk, pulled out a paper and pencil, and drew a perfect triangle.
The next guy, an accountant, called to his dog, Slide Rule, go ahead. The dog went to the kitchen, nibbled opened a bag of cookies and divided the contents into four equal piles.
The next man, a chemist, beckoned his dog, Beaker, to show what he could do. The dog went to the fridge, took out a quart of milk and poured out exactly eighty ounces into a measuring cup.
The last man was a government worker. Coffee Break, he hollered to his dog, go to it. With that, the dog jumped to his feet, soiled the paper, ate the cookies and drank the milk.
The next guy, an accountant, called to his dog, Slide Rule, go ahead. The dog went to the kitchen, nibbled opened a bag of cookies and divided the contents into four equal piles.
The next man, a chemist, beckoned his dog, Beaker, to show what he could do. The dog went to the fridge, took out a quart of milk and poured out exactly eighty ounces into a measuring cup.
The last man was a government worker. Coffee Break, he hollered to his dog, go to it. With that, the dog jumped to his feet, soiled the paper, ate the cookies and drank the milk.
Where Do You Want These Blinds
A drill sergeant ordered two young female recruits to paint a room in the barracks, stressing that they not get any paint on their uniforms. Doubtful they could avoid ruining their clothes, the women locked the door, stripped naked and painted in nude. After about an hour they heard a knock at the door . Who is it? asked one of the women.
Blind man, came the reply.
Seeing no harm in letting a blind man in, they opened the door.
Wow, what knockouts! the man said with surprise. Now, where do you want these blinds?
Blind man, came the reply.
Seeing no harm in letting a blind man in, they opened the door.
Wow, what knockouts! the man said with surprise. Now, where do you want these blinds?
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