Steven Hansen's  Instablog

I am always struggling to how to convey what I see. When an event occurs - such as Europe's continuing bank driven economic death spiral - nothing has changed for me. This is not news. It amuses me that markets seem to react to each headline.

The situation is simple. The only headlines you should react to is that:

1. the EURO countries have decided to integrate fiscal and monetary policy in Brussels for some or all the countries, or;
2. the Euro experiment is over for some or all the countries.

The current structure of the Euro cannot successfully continue. Any solution other than integration or exit only kicks the can down the road. Market reaction to headlines is very revealing to me as it tells me the average Wall Streeter has no real concept of the economy - and little foresight.

Economies do not turn on a dime, and Europe is likely entering a long term economic slowdown while it rearranges itself. What is happening today is the delayed effect of actions taken since 2007. Europe will remain a global headwind for at least several years.

The Econintersect economic forecast for June 2012 shows continues to show moderate growth - although marginally weaker. There was degradation both in our government pulse point,and in some of our transport related pulse points. There are no recession flags showing in any of the indicators Econintersect follows which have been shown to be economically intuitive.

ECRI has called a recession. Their data looks ahead at least 6 months and the bottom line for them is that a recession is a certainty. The size and depth is unknown but the recession start has been revised to hit around mid-year 2012.

The ECRI's WLI index value has been jumping around due to backward revision - and this week it has solidly entered negative territory. The index is indicating the economy six month from today will be slightly worse than it is today.

Initial unemployment claims increased from 377,000 (reported last week) to 386,000 this week. Historically, claims exceeding 400,000 per week usually occur when employment gains are less than the workforce growth, resulting in an increasing unemployment rate (background here and here). The real gauge - the 4 week moving average - rose from 377,750 (reported last week) to 382,000. Because of the noise (week-to-week movements from abnormal events AND the backward revisions to previous weeks releases), the 4-week average remains the reliable gauge.

(click to enlarge)

Data released this week which contained economically intuitive components (forward looking) were rail movements (which is still indicating a moderate expansion if one ignores coal) and Industrial Production's manufacturing sub-index (which shows slower growth). Econintersect does not see any other data release this week as particularly intuitive in understanding future economic conditions.

Preliminary June 2012 Michigan Consumer Sentiment
Empire State Survey June 2012
Industrial Production May 2012
Obese: To Be or Not to Be
Muni Bond Disclosure Problems for JP Morgan?
May 2012 CPI Continues to Moderate, Core Inflation Again Unchanged
Hedging Against a Downturn
Nations: Decisions Under Stress
Can America Capitalize on Natural Gas?
Business Inventories Look Good In April 2012
Inflation is Disappearing in May 2012 Producer Price Index
Retail Sales Were Good May 2012
Germany: Deferred Consumption Lost?
Week in Review: 11 June 2012
Can America Capitalize on Natural Gas?
Deflation Underway? Export and Import Prices Contract in May 2012
Looking Globally: Investments for Later
Globalization and Minsky
Eurozone: Modern Day 'Merchant of Venice'
The Complicated U.S. Employment Picture
ETFs for Whatever Oil Price Moves Occur
Could Deflation Come to China?
May 2012 Rail Movements: Data Shows the Economy Is Healthy
The Week Ahead: Where's the Leadership?
What is U.S. Treasury's Largest Asset?
Gloomers and Doomers Still Twittering About Employment: So Why Does U.S. Exports Jobs?
Trefis Highlights: Week Ending 8 June 2012
Global Manufacturing Growth Shudders Towards A Halt
Will USA Import the European Recession?
Cooperative Banking in the Age of Enlightenment

Bhide and Papagianis: To Save Money Market Funds, Kill Them
New York Fed Loans to Maiden Lane Repaid
Week Ending 09June2012: Rail Growth Moderates If Coal Excluded
Nutritional New Offering by Burger King
Info Graphic: Jobs for New Grads
Japan: Machinery Orders Show Surprise Surge
Germany: Export and Import Numbers Declined in April 2012
May 2012 Small Business Index Remains Weak and Essentially Unchanged
Upside Down Home Equity Positions Now Driving Housing Market
New York Bank Indicted for Mortgage Fraud
There is No Systemic Mortgage Fraud and We Have the Proof
Spanish Banks Get $125 Billion
Livingston\ Survey: Bucks Sentiment and Sees Better 2012 Growth
China: Economic Numbers Weaken, Inflation Slows. Does Deflation Await?
Pakistan Detains U.S. Diplomats
Phishing is So Easy Even Hamsters Do It

Bankruptcies this Week: Allied Systems Holdings, Northstar Aerospace's U.S. subsidiaries [Northstar Aerospace (USA), Northstar Aerospace (Chicago), Derlan USA and D-Velco Manufacturing of Arizona]

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.