Mish's Movie Review

IT’S NOW TIME for a brand-new feature: Mish’s Movie Review.

The first movie on today’s list is Men in Green:


We had a sneak preview of Men in Green yesterday, June 5, 2006, and quite frankly, I was unimpressed. Let’s take a look at a portion of the script released today.

What follows is actual text by the widely acclaimed actor $Ben Bernanke from a critical scene in the movie:

“With the economy now evidently in a period of transition, monetary policy must be conducted with great care and with close attention to the evolution of the economic outlook as implied by incoming information. Given recent developments, the medium-term outlook for inflation will receive particular scrutiny. There is a strong consensus among the members of the Federal Open Market Committee that maintaining low and stable inflation is essential for achieving both parts of the dual mandate assigned to the Federal Reserve by the Congress. In particular, the evidence of recent decades, both from the United States and other countries, supports the conclusion that an environment of price stability promotes maximum sustainable growth in employment and output and a more stable real economy. Therefore, the committee will be vigilant to ensure that the recent pattern of elevated monthly core inflation readings is not sustained.

“Toward this end, and taking full account of the lags with which monetary policy affects the economy, the committee will seek a trajectory for the economy that aligns economic activity with underlying productive capacity. Achieving this balance will foster sustainable growth and help to forestall one potential source of inflation pressure. In addition, the committee must continue to resist any tendency for increases in energy and commodity prices to become permanently embedded in core inflation. The best way to prevent increases in energy and commodity prices from leading to persistently higher rates of inflation is by anchoring the public’s long-term inflation expectations. Achieving this requires, first, a strong commitment of policymakers to maintaining price stability, which my colleagues and I share, and, second, a consistent pattern of policy responses to emerging developments as needed to accomplish that objective.

“Our economy has reaped ample rewards in recent years from the achievement and maintenance of price stability. Although challenges confront us, as they always do, I am confident that we will be able to preserve those hard-won benefits while promoting sustainable economic growth.”

What could possibly be more boring? Where are the guns blazing and helicopters leaking $100 bills over New York, Chicago, and Los Angeles? Imagine the frenzy of helicopters leaking trillions of dollars in cash over major cities as compared to this lame scenery.

My understanding is the end of this movie has not yet been finalized, but on the basis of today’s preview, I have to give two thumbs down to Men in Green . The stock market yesterday was as unimpressed with the script as I was. Can this movie be salvaged? Not without a major rewrite.

A Few Good Men

The next movie on our list is a potentially exciting remake of A Few Good Men . For reasons that will soon become apparent, I will not be able to vote on this movie. Following are the script changes from the original as proposed by Snooky on Silicon Investor. Here goes:

“Greenspan: You want answers?

“Mishedl I think I’m entitled to them.

“Greenspan: You want answers?

“Mishedl I want the truth!

“Greenspan: You can’t handle the truth! Son, we live in a world that has markets. And those markets have to be guarded by men with dollars. Who’s gonna do it? You? You, Patron? I have a greater responsibility than you can possibly fathom. You weep for REFCO and you curse the Treasury. You have that luxury. You have the luxury of not knowing what I know: that REFCO’s death, while tragic, probably saved money. And my existence, while grotesque and incomprehensible to you, saves money…You don’t want the truth. Because deep down, in places you don’t talk about at parties, you want me in those markets. You need me in those markets.

“We use words like ‘honor,’ ‘code,’ ‘loyalty’… we use these words as the backbone to a life spent defending something. You use ’em as a punch line. I have neither the time nor the inclination to explain myself to a man who rises and sleeps under the blanket of the very liquidity I provide and then questions the manner in which I provide it! I’d rather you just said thank you and went on your way. Otherwise, I suggest you pick up a dollar bill and stand a post. Either way, I don’t give a damn what you think you’re entitled to!

“Mishedl Did you order the coupon pass?

“Greenspan: (quietly) I did the job you sent me to do.

“Mishedl Did you order the coupon pass?

“Greenspan: You’re goddamn right I did!!”

For comparison purposes, here is a recreation of the original dramatic scene from A Few Good Men .

Those interested in the origins of the name “Mish” are now alerted that “Mish” is a shortened version of Mishedlo. Mishedlo was a user ID I had while working in the banking industry. It seems that many banks use 1-2 characters from a person’s first name and the remaining characters from their last name to formulate user IDs (eight characters maximum on IBM mainframes). I had similar user IDs at four or five places I worked at. (Secure, huh?) Many times if you know who works for a bank you can figure out their user ID. All that remains is to hack the password. Harris Bank (now owned by the Bank of Montreal) had me on their list of employees as of last year even though I have not worked there since 2000. For those who were curious about the name “Mish,” that is the rest of the story.

Snooky, your remake is much appreciated. For obvious reasons, I cannot give either a thumbs-up or a thumbs-down honest appraisal of your rewrite.

OK. Enough of movie reviews. Let’s get back to reality.

Anecdotal evidence is rapidly piling up that Greenspan and Bernanke have overshot. Given that Fed policy changes are lagging, as is job growth, as are home sales, it appears Bernanke is fighting the battle that should have been waged years ago.

Standard Pacific Latest Numbers

Please consider that homebuilder “Standard Pacific Orders Were Down 41%”:

“Home-building stocks traded down Monday after another builder, Standard Pacific Corp., joined the growing number of builders reporting a steep decline in housing demand in the current quarter and announcing plans to ratchet down earnings guidance for 2006.

“The Irvine, Calif., homebuilder issued a statement late Friday indicating that orders plummeted 41% in April and May — one of the biggest dropoffs in demand reported yet by a homebuilder. The news left Wall Street wondering if the sector is heading for a cliff, rather than the soft landing that many had been touting.

“Standard Pacific cited a surge in cancellations and continued softening demand in many of the company’s larger markets, especially in Southern California, Northern California, Florida, and Arizona. This was partly offset by higher orders in Texas and Colorado.

“The company said it expects to lower its earnings guidance and cut its delivery target for 2006 when it updates its guidance at the end of July.

“New York Stock Exchange-listed shares of Standard Pacific traded recently at $28.42, down $1.58, or 5.3%.

“Standard Pacific is the latest homebuilder to issue a statement warning Wall Street of weaker-than-anticipated housing demand and an earnings shortfall. Pulte Homes Inc., Hovnanian Enterprises Inc., Ryland Group Inc., and luxury builder Toll Brothers Inc. all have reported a hefty pullback in demand and cut earnings guidance for 2006.

“However, Standard Pacific’s 41% order decline appears to be the steepest drop-off yet. Pulte said its orders fell 29%, while Ryland’s orders were off 35% in the first two months of the quarter. Hovnanian’s orders dropped 20% and Toll’s fell 32% in their fiscal second quarters.

“The news has left some analysts wondering if the sector is heading for a crash — and not a short-term correction.”

Pulte’s Latest Numbers

Pulte Homes, Inc.

Preliminary Net New Order Data

April and May Results

New orders:         2006          2005

Northeast               514            871

Southeast            1,708         2,493

Midwest                797         1,176

Central               1,169         1,492

West                  2,259         3,096

————       ——–

6,447         9,128

========       =====

Cancellation Rate    27.4%    14.8%

Orders are falling and cancellation rates are soaring. Yet we are in the very beginning of an economic downturn.

Job Numbers

The latest job numbers were nothing but a complete disaster. The numbers were so bad I hardly know where to begin. If this were a movie, it would be a horror story. Let’s start with “birth/death” assumptions.

Birth/Death Assumptions

For new readers, birth/death refers to assumptions about estimated jobs created or lost at this point in a recovery due to the creation or loss of businesses, as opposed to the birth or death rate of individuals:


Once again, according to the Birth/Death assumptions, 211,000 jobs were presumed to have been created in May 2006 even as the past two months’ figures were revised lower. How long the BLS can get away with this nonsense is anyone’s guess, but eventually the public has to wonder if it would be more accurate if the L was dropped from BLS.

Arguably the most critical number is the number of Part-Time Employed for Economic Reasons. That number was up over 159,000. It is an enormous number that is roughly twice the level of the headline growth for all jobs. Let that sink in. One hundred fifty-nine thousand people wanted full-time employment but could not find it for “economic reasons.” They are not counted as unemployed, nor are those whose benefits have expired, nor are those who simply just gave up. Unemployment would be 10% and rising if we counted it the way it was counted 20 years ago.

Quite honestly, it gets tiring refuting bullish nonsense month after month, year in and year out. Let’s look at it another way.

Three Questions

1. Do you really think Bush’s approval rating would be under 30% if jobs were plentiful and wages were rising?
2. Do you think there would be a concern about kicking out illegal immigrants if jobs were plentiful?
3. Do you really think there would be a discussion about building a wall on the Mexican border if immigrants were not taking jobs U.S. citizens wanted?

I try and avoid politics but it is not always possible. At some point, no matter what the propaganda is, the public will simply stop believing the lies they are told. Lies and distortions about the CPI, or jobs, or the cost of gasoline, or medical expenses, or education can be hidden only for so long. Everyone knows I dislike this administration. My personal opinion is irrelevant. Bush’s approval rating under 30% is another matter. From a moral point of view, the public would probably not care how many innocent Iraqis we killed if it created jobs here. That is the simplistic as well as the sad and unfortunate state of affairs. The fact of the matter is the only real source of jobs during this recovery was (past tense) housing. Housing is stalling and the public is responding. I would like to believe that Bush’s numbers reflect his ineptitude in Iraq, but to believe that I would only be fooling myself. Bush’s numbers are low because the economy is sinking, no more, no less. That is not a moral judgment (unfortunately) but an economic one, and like it or not, I see little reason for those numbers to turn around.

Given that Wall Street seems to like Bush, we could be in for a very rough ride if Democrats take control of the House or the Senate or both. You may agree or disagree with my obvious dislike of Bush, but from an economic standpoint his approval rating numbers are what they are, and those numbers are pathetic. I am but one vote out of millions, yet the undeniable fact is the general population has had enough. Whether or not you agree with my personal opinions or not, look at public sentiment toward this administration and ask yourself if you want to be long this market. This post is not about politics or movies or housing, it is about making money. On the other hand, politics is money and the politics have changed.

Mike Shedlock ~ “Mish”
June 6, 2006