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I ran across this at Bloomberg News and I thought it was worth sharing. We have heard about green shoots and a the latest pronouncement by Bonddad today that he now agrees with Krugman even though he thought he was full of shit  a few weeks back, because Krugman says he sees signs of the economy turning up. Obviously one has to question, turning up from what? If you fall of a cliff sometime you might turn your face up before going splat. How much farther will we fall before it turns up? So many questions. So much equivocation.

This article is a relative as any because no traditional economic indicator has worked in predicting the start or the demise of this. So for your consideration:  some new indicators, which seem to me just as valid as any since we haven't used them so they haven't failed yet.

The one lesson we can draw from the global credit crisis is that all the traditional ways of measuring the state of the economy are about as useful as a bottle of suntan lotion in a snowstorm.

Isn't that the truth? We have Good times are a coming Bonddad on frequently to tell us all is well in various forms and then presents us with pretty charts to prove it. Some of us bang our heads on the table as we fight the temptation to get any more crude than we already our in our responses. Example:  No dammit, employment is not a lagging indicator in a consumer based GDP".

All of this leads us to the question that finally may be answered. What Can we use as reliable Economic indicators? What could possible be used as an indicator when economic conditions are so FUBAR no one knows which way is up or down . Well here are some new ones.  Kinda hard to chart or put technical analysis too, but give the Math Scientists some time or give Nate a new challenge and we could put up a new graphic real-time economic indicator. Talk about stickiness.

So here are two benchmarks we should all be monitoring more closely: extramarital affairs and the price of Latvian hookers. Both are telling us that there is still plenty of trouble ahead.  

Ok , I'm game. So to speak. They certainly don't go for $5000 an hour so it seems like it could work. Tell me more.

"The contractual terms of prostitution are short (an hour, a night) and entry to the industry is unconstrained," he says. "That means that the prices are very flexible."

True enough. His argument is that since the prices have collapsed by about two-thirds in a year, Latvia and the other Baltic states are still in big trouble with deflation lurking.

Then the article goes on to explain the various INS and OUTS of using these indicators which I think you should read. Unfortunately Bloomberg usually doesn't use pictorial or graphics to illustrate points so you'll  have to use your imagination  Go see for yourself.  

It appears that the predictions of joy and security that are just around the corner,  may have been have fallen victim to a case of pre-economic-ulation

Originally posted to Dburn on Wed May 27, 2009 at 01:25 PM PDT.

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Comment Preferences

  •  Ahh, the old Latvian Hooker metric. (9+ / 0-)

    Haven't seen that used since my days in the service.

    They tortured people to get false confessions to fraudulently justify our invading Iraq

    by Nick Zouroudis on Wed May 27, 2009 at 01:29:14 PM PDT

  •  Deflation and flexibility (4+ / 0-)
    Recommended by:
    Dburn, HeyMikey, Sychotic1, Nick Zouroudis

    often go together in this business, or so I've been told.

    I'd LOVE to tip someone who has the temerity to put up a diaty on Latvian hookers at DKos, especially given the Matheresque climate that sometimes prevails around here.

    Where's your jar?

    "I do not choose to run for President in 1928" Calvin Coolidge

    by dabize on Wed May 27, 2009 at 01:30:04 PM PDT

  •  Supply and demand (6+ / 0-)

    Supply is driven by the number of desperate women. Prostitution is still not most women's first choice. So the price can fall just because more women are desperate for money even if the economy as a whole is doing well.

    Smiting trolls on the tubes since 1977!

    by blue aardvark on Wed May 27, 2009 at 01:32:17 PM PDT

  •  i'll stick with bonddad, thanks (5+ / 0-)
    Recommended by:
    Dburn, Chrisfs, Roadbed Guy, Norbrook, nickrud

    at least for now. maybe when the keyboard headbangers succeeed in convincing The Conference Board to adopt new leading indicators, i'll take another look.

    •  The temptation to stay with the old ways (2+ / 0-)
      Recommended by:
      gogol, HeyMikey

      can be comforting even though we seem to have found new ways to define the business cycle . Not a series of up and down movements so to speak but more or less like a flat tire in fast moving car. Depending on the driver , it could flip right away or he may be able to guide it in without killing anyway. But then there are the factors of rates of speed, cars within a unknown circumference that is dependent on the rate of speed of the car that is losing control,  who may or may not have drivers that respond adequately to another driver whipsawing across the road, weather conditions and all host of other variables that may stop even the most talented driver from a soft landing.

      That's why Another Board called FASB changed one of their valued indicators of a company's health called Mark-to-Market to a Earnings based measurement that managed to produce billions of dollars of profits for the banks despite a 6% contraction in GDP in Q1. See how that works?

      •  no (1+ / 0-)
        Recommended by:
        Dburn

        not sure what if anything FASB's change of mark-to-market rules has to do with whether the Index of Leading Indicators needs to be updated with new metrics. I do know that any case for such a change needs to be evidence based and tested against historic data to see exactly how predictive it is vs the current metrics in the index. such an undertaking would make for a great PhD dissertation.

        when the DKOS keyboard headbangers get around to publishing it, i'll be happy to weigh the quality of analysis vs the stuff Bonddad posts regularly.

        •  So the fact that (1+ / 0-)
          Recommended by:
          gogol

          Bonddad relies on politically influenced indicators that have been played with so much the past 30 years that the unemployment number alone is admittedly half of the actual rate and possible less when the 1980 methodology is used.

          As they say, "don't beleive everything you read" especially after it's proven to be false.

          Govt indicators have been proven wrong in every single area of measurement. Some by a huge amount. Rather than fix the problem, each proceeding administration seems to put their own twist on them to make their time in office far more productive than the other guy's.

          As soon as Bonddad start's putting the necessary disclaimers next to the same charts he used last year , which were in better shape, to bash the Bush economy, I'll start taking him seriously. Until then, he's just another voice. I don't consider myself any voice of authority. He does. Apparently you do too.

          I guess I'm asking you since you were the only one to bring it up. Are you looking for green shoots where ever you can find them?  

  •  Luntz? n/t (4+ / 0-)
    Recommended by:
    Dburn, DemocraticLuntz, Norbrook, danmitch

    This ain't no party. This ain't no disco. This ain't no foolin' around!

    by Snud on Wed May 27, 2009 at 01:34:36 PM PDT

  •  Congress will have to investigate this trend (4+ / 0-)
    Recommended by:
    gogol, Dburn, Sychotic1, DemocraticLuntz

    Spitzer was a spendthrift.

    In a similar vein, John Hempton, who runs the financial blog Bronte Capital, has monitored the health of the Baltic economies based on the price of Latvian sex workers -- currently about 30 lati ($60) for the standard service.

    "It's the planet, stupid."

    by FishOutofWater on Wed May 27, 2009 at 01:38:23 PM PDT

  •  I do have to wonder (2+ / 0-)
    Recommended by:
    dabize, Dburn

    just how he gathered the information on his metric of choice?  Did Bloomberg pay his expenses for conducting the survey?  If so, just how can I get his job?  

    I think that I have had enough of you telling me how things will be. Today I choose a new way to go ... and it goes through you!

    by Norbrook on Wed May 27, 2009 at 01:41:03 PM PDT

    •  Now that is a good question (3+ / 0-)
      Recommended by:
      billlaurelMD, ssgbryan, Norbrook

      just how he gathered the information on his metric of choice?  Did Bloomberg pay his expenses for conducting the survey?  If so, just how can I get his job?  

      What is the going pay rate for identifying interesting new economic indicators? (Standing in the back with hands raised making all kinds of motion to attract attention)

  •  The economy goes in the crapper and... (1+ / 0-)
    Recommended by:
    Dburn

    That's when the WHORES come in.  20 dollars for the rent?  Why not give it to the WHORE!  Shaking their little BEhinds for the menfolk.

    "Chance favors the prepared mind" -Pasteur

    by TheMadScientist on Wed May 27, 2009 at 02:06:13 PM PDT

  •  This diary needs a pole. n/t (3+ / 0-)
    Recommended by:
    ssgbryan, Dburn, danmitch

    This ain't no party. This ain't no disco. This ain't no foolin' around!

    by Snud on Wed May 27, 2009 at 02:09:29 PM PDT

  •  Sharp economists agree with hookers. (1+ / 0-)
    Recommended by:
    Dburn

    The most persuasive economic analysis I've read lately:

    The CS (Case-Shiller, not Christian Science) Monitor envelops official data for inventory numbers and home values in a cloud of uncertainty: the paper estimates that 70% of done-deal foreclosed homes, for fear the prices they’d fetch in auction would be too low, are simply not put up for sale. 500.000 homes just sit there waiting for the tide to change. The report also suggests that the Obama administration exerts pressure on banks to keep them from trying to sell the properties.

    All this serves to prolong an unrealistically high price level, as well as a hugely underestimated number of available homes. And that's still without all the owners who’ve simply removed the For Sale signs from their lawns.

    http://theautomaticearth.blogspot.co...

    But, despite the short sales, foreclosure sales, and the burgeoning rental inventory, there’s also a massive "shadow market" of empty or rented homes yet to come on the block, as banks try to optimize returns on failed investments and homeowners hold off, waiting for a rebound.

    In this foreclosure capital – over 75 percent of homes on the market in Phoenix are owned by banks – such a big backup of inventory could affect streets like Tara Lane for years to come. And it could dramatically impact the trajectory of the much-awaited recovery.

    "Taking a house in foreclosure but not putting it out on the market, that’s common right now," says Rajeev Dhawan, a real-estate economist at Georgia State University in Atlanta. "Short term, it’s good, but long term you’ve got a problem. When the market starts to recover, they’re going to dump the inventory," pushing prices down again. . . .

    Only 30 percent of foreclosed homes are currently on the market, meaning that some 500,000 sit vacant across the country, part of a vast "phantom inventory" that the market has yet to grapple with.

    "There’s a frenzy for bank properties right now, and as a consumer, I’m likely to say, ‘Wow, that’s got to be an indicator of the bottom,’ " says Brett Barry, a real estate agent at HomeSmart in Phoenix. "But a lot of us expect a tsunami of foreclosures to come on top in June, July, or August, because at some point the banks are going to release this stuff."

    Reasons for the backlog vary. For one, the sheer number of complex foreclosure proceedings – six times the average in the past year – has overwhelmed many mortgage-servicing companies. And some banks may find accounting advantages to delaying the loss they’ll have to book when they ultimately sell the property at prices below the value of the principal.

    But Alexis McGee, a real-estate blogger at ForeclosureS.com, wrote earlier this month that banks may also be gaming the market so as not to depress prices – especially as bidding wars are heating up in places such as Surprise.

    There are some indications, too, that the Obama administration may have leaned on banks not to release the entire foreclosure inventory at once in order to preserve neighborhood values.

    That’s not necessarily a bad thing, argues Rick Sharga, a vice president at RealtyTrac.com, a real estate tracking firm in Irvine, Calif.

    "The L-shaped prognosis does not offer much hope, but hopefully it will turn into a U or something," says Mr. Sharga. "The counter argument [is that] ... if they manage the inventory back into the marketplace, they can actually contribute to a quicker stabilization. The question is, will the rest of the dynamics in the marketplace allow the buyers to absorb this inventory in a manageable way, or will something else come along to throw the equilibrium off again?"

    The shadow may stretch beyond foreclosures. Zillow.com, a real estate tracking firm, revealed in a survey this week that a third of the nation’s 55 million homeowners would be somewhat likely to try to sell their homes in the next 12 months if the market improves. A large chunk of those are likely to be the 15 million or so US homeowners currently "underwater" on their mortgages – owing more than their home is worth.

    "[A] lot of these home sellers will also be buyers so they will help some of the inventory," writes Stan Humphries, a vice president in Zillow’s data-analytics division. But it’s also likely that some sellers will become renters or will downsize, so "this ‘shadow inventory’ represents more supply ... than demand."

    http://features.csmonitor.com/... (Christian Science Monitor, not Case-Shiller.)

    "The true strength of our nation comes not from the might of our arms or the scale of our wealth, but from the enduring power of our ideals." - Barack Obama

    by HeyMikey on Wed May 27, 2009 at 02:33:08 PM PDT

    •  That shadow inventory (1+ / 0-)
      Recommended by:
      HeyMikey

      of unsold homes culminated in the FASB rule change of Mark to Market. Once a house is sold at it's true value, that gives Public Auditors ( no one wants to do an Anderson again) and regulators a guidepost to the degree at which banks are overvaluing their assets.

      Lets look at the effect that has for a second. In March when the stock market banged around the November low, FASB announced it's rule change right towards the end of the Month and the 1st Quarter. At the same time Citibank announced they had made a profit. Not how much , just an estimate. That was enough to start a massive stock rally. Which coincidentally enough was absolutely required for the banks to raise more capital which most of them have done already.

      That's why the rally has more or less topped out. TARP was tapped and it had become a political liability to give them more money. So why not let the fund managers of all the pension funds put their money in their along with retail investors. Suddenly 300-400% run-ups in stocks based on earnings of Q1 was not unusual. It was then easy to sell into this rally to raise more capital. Capital they are going to need but well short when you consider the following.

      It turns out this rule change brought the consolidated profits of the banking Industry to 9.6 Billion for  the first quarter when the GDP tanked 6.0%. Note that 4th Quarter results were a net loss for the banking Industry with far less if any reduction in GDP- even using the Govt's pumped up numbers.

      The result of the FASB rule change would would also effect every other economic indicator. The problem being it was a validation of what the banks were already doing and a encouragement to do more of it, much more. We will still see a few million foreclosures this year , the difference being, no one will be anxious to modify mortgages nor sell foreclosed property. Why leave evidence at the crime scene of how fraudulent the financial statements are?

      If you ever wondered why the ABA fought a battle Royale over the bankruptcy bill to the point where Dick Durbin stated to the effect "The banking Industry still wields an awful lot of influence in this chamber".

      Of course this is theory but, I think the facts and the future will show it to be reality. Allowing Bankruptcy Judges to Modify mortgages would have given auditors and regulators a bread trail to the sheer breadth of the fraud on the bank's financial statements. Presumably the judges would have gotten independent appraisals to have a starting point on where to cram down the mortgage. Alarm bells went off in every bank lobbyists office.

      In the final irony, If the Senators had passed Durbin's modification rule there would have been less bankruptcies as banks would have wanted to have control over the modification rather than put it into the hands of the Judicial branch.

      This was also a nightmare for Treasury too.As this whole program was an attempt at wishful thinking. Hopefully the home valuations would grow into the valuations stated on the banks balance sheets. (Reminds me of the dot.com bust just as it topped. Analysts had run out of reasons why a company with no profits should be valued more than a IBM so they resorted to: The company's will grow into their valuations")  

      This had nothing to do with the moral hazard of people filing bankruptcies to get a better deal on their home. It had everything to do with the fraud of the home valuation.

      The Bankruptcy stats show it.

      1. 616,000 filings,
      1. 832,000.
      1. 1,15 Million
      1. On target to surpass 2004.
      1. will pass 2005 the old time high of two million because of the 2005 bankruptcy reform act or BARF.

      It has already been shown that homes that are foreclosed on drive down neighboring homes on average 21%. As this shadow inventory grows and housing prices decline, bankruptcies will increase tearing larger and larger holes in Banks balance sheets. The problem now is , the FDIC no longer has a early warning system. They may find out Citibank collapsed on CNN.

      If Unemployment keep going down, it really doesn't matter much if it's accelerating or slowing, the problem is , the jobs are being reduced which means the ability to pay is being reduced. That means less receipts for the Govt and a substantial problem with the banking industry. Until there are no more decreases, no one can say this thing is close to being over because the damage it has already done will be felt for many many years. The cave ins could happen at any time on these huge banks and just one would be like 20,000 community banks failing. That would stop any recovery cold.

      That's why this shadow inventory will continue to grow and remain unsold. No bank is going to sell a house for $50,000 it's carrying on it's balance sheet at $300,000. Then start thinking of the ALT-As, Option Arms and Ninjas. Resets are starting this year. These are monster loans. Many of them were well over the  FHA max of $432,000 at the time they were made.  The default rate already is showing a stunning 70%. That's why I'm not buying the pretty charts and green shoots.

      I 'll go with the whores in Latvia

  •  $5000 an hour...what are they selling for $5K? I (1+ / 0-)
    Recommended by:
    Dburn

    have friends who got married with less than $5 :-))

    So i understand this correctly, only high priced hookers are a measure for assessing recovery not the street-walkers who are probably charge less than $5000... LOL

    Don't give a damn a/t each & every politician currently alive in the US. Last time i voted for the top part of the ballot was 1972. Never missed SB election

    by Mutual Assured Destruction on Wed May 27, 2009 at 02:34:26 PM PDT

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