Blog Spotlight: Global Economic Analysis

Another edition of our new series:  Blog Spotlight.

We put together a short list of excellent but somewhat overlooked
blog that deserves a greater audience. Expect to see a post from a
different featured blogger here every Tuesday and Thursday evening,
around 7pm.

Up next in our Blogger Spotlight:  Michael Shedlock and Mish’s Global Economic Trend Analysis. Mike is one of the editors of The Survival Report, covering stocks and the economy. He also writes for the Daily Reckoning, and co-edits Whiskey & Gunpowder. He also runs stock boards on the Motley Fool, Silicon Investor, and TheMarketTraders. He is an avid photographer, when not writing about stocks or the economy, with over 80 magazine and book covers to his credit.





Earnings,  Confidence, and Boxes

third-quarter profit rose 2
percent, less than analysts expected, as demand for home loans slumped. The
company’s shares surged higher on plans to lay off more than 2,500 employees
and buy back up to $2.5 billion of stock, and as higher profits in other units,
including Countrywide Bank, cushioned the mortgage decline.

It seems the street just can’t get enough bad news. CFC
rallied 5% as investors warmly welcomed news of more layoffs. CFC is already
talking about the 2008
. It’s never too early to do that. “By 2008, surviving players will be positioned for ‘one hell of a year’”
said CEO Angelo Mozilo.

Ford lost $5.8 billion, or $3.08 per share, during the 3rd
quarter this year. Sales fell 10% to $36.7 billion. Excluding special charges,
Ford posted a loss from continuing operations of $1.2 billion or 62 cents per
share. Last year during the same period, Ford posted a net loss of $284
million, or 15 cents per share. Ford has now lost $7.2 billion for the year. 3Q
output was down 11% vs. 17% drop in overall North American sales and a 25% drop
in F-series pickups. The company plans
4Q North American output cuts of 21%.

Ford called those results “clearly
. Shares of Ford are also up since the announcement. Yes those
results are “unacceptable” but what is Ford doing about it? Ford’s “Way
Forward” plan, calls for eliminating 44,000 hourly and salaried jobs, closing 16 factories and making other
changes by 2012. Part of the “Way Forward” is to Kill Taurus and
along with it a lot of jobs at US assembly plants.

To be sure there have been some earnings successes with
Apple and Google and others, but in the end how many jobs are those companies
going to be able to provide to make up for housing and manufacturing related
losses?  People need jobs to be able to
afford their McMansions, not just any jobs but good jobs.

Is tech the savior? I think not.

A Challenger Report shows IT
job cuts up sharply in Q3

Just three months after U.S. IT job
cuts reached their lowest levels since 2000, a new study has found that planned
workforce cuts are again heading upward as recent corporate restructuring,
mergers and other events are reducing the number of available jobs.

The study, released today by
Chicago-based global outplacement consultancy Challenger, Gray & Christmas
Inc., found that planned IT job cuts increased 74% in the third quarter to
50,957, up from 29,226 this past June 30, when the number of IT job cuts had
dropped to its lowest level since the third quarter of 2000.

The seven-page study, "Tech
Spending Slowdown on the Horizon?" concludes that the third-quarter job
cuts are attributable mostly to cost-cutting and restructuring, which accounted
for 33,373, or 65%, of the cuts in the quarter that ended Sept. 30. Overall for
the year, corporate mergers have been cited for 29% of the tech job cuts
through September, according to the study. Also affecting job cut levels are
business competition, reduced sales and product demand, company closings and

Other related data from Challenger
shows that technology companies have announced plans to hire just 5,764 new
workers in the third quarter, down from 14,090 in the second quarter, according
to the study.

In the Box

Still more evidence is piling up that suggests the current
slowdown will go far beyond a housing bust. I received an email just yesterday
from the CFO of a major North American cardboard box manufacturer. He wished to
remain anonymous so I will honor that request. Here goes from “Mr. Jack I.

Mish, please do not use the name of
my company but I thought you might be interested in this letter. I have
received four other letters in the last 6 weeks that indicate pricing stress
and volume stress from major OEM’s. Some fault the housing market and others
don’t know who to fault for the fall off of business.

I am a CFO for a box
manufacturer. Our business, in my opinion, is a very good barometer of all
business. Everything comes in a box. Tomatoes, 3COM Switches,
television sets, hot water heaters, and everything from hot sauce to game
boys.  If these companies are feeling the stress with cheap foreign
labor I see a major problem in the future.

The following letter was from ****
Water Heaters. We have receive similar letters from Sanyo (Energy divisions),
Panasonic (Power tool division) and Sony (Television ). All of
our furniture accounts are gone except for Douglas Furniture.


Dear Supplier:

I regret to inform you that there
is a strong likelihood that beginning Wednesday October 18th we will
be asking you to reduce or stop shipments on all products associated with The
Home Depot. This could represent up to 50-60% of your supplied parts
volume.  The details will be communicated to you through each of the
Planners at the three plants.

This action was necessary due to
the large number of increases that we incurred from our supply base.

I understand that this will have a
profound impact on your business.

Please bear with us as we work
through this.


Doe” Purchasing Manager


Mr. Box’s company not only makes custom and generic boxes
but on occasion also boxes up stuff for clients and ships them out. As far as
Home Depot goes the problem can be on either end so do not assume there is any
problem with Home Depot itself. I had a followup question to Mr. Box about the
Home Depot situation and here was his reply:

More than likely Home Depot and ****
Water Heaters came to a standoff on price increases. What I am not sure of yet
is whether this is being forced due to a reduction in **** Water Heaters sales
volume with Home Depot.

We have also had a major brand TV
manufacturer (Not Sony) reduce all open PO’s
by 50%. I must assume this is a lack of demand for their product as we have not
lost any of this business to a competitor.


CEO Confidence Survey

The Conference Board is reporting The
Chief Executives’ Confidence Measure Fell to 44 in the Third Quarter

The Chief Executives’ Confidence Measure, which had
fallen to 50 in the second quarter of 2006, fell to 44 in the third quarter,
The Conference Board reports in its latest survey of CEOs. A reading of more
than 50 points reflects more positive than negative responses. The survey includes
about 100 business leaders in a wide range of industries. This is the first
time the Measure has dipped below 50 in nearly five years, when it was at 40 in
the final quarter of 2001.

Says Lynn Franco, Director of The Conference Board
Consumer Research Center: "The lack of confidence expressed by CEOs is a
result of the recent slowdown in economic growth, combined with expectations
that this lackluster pace of growth will carry over into the beginning months
of 2007."

CEOs’ assessment of current conditions weakened
further in the third quarter. Now, only 16 percent of CEOs claim the current
economic environment is better, down from about 27 percent in the second
quarter. In assessing their own industries, business leaders were less upbeat.
Approximately 28 percent say conditions are better, compared to 40 percent in
the last quarter.

CEOs are also less optimistic about the short-term
outlook. Now, only 16 percent of business leaders expect economic conditions to
improve in the coming months, down from 21 percent last quarter. Expectations
for their own industries were also less positive, with 20 percent anticipating
an improvement, down from 31 percent last quarter.

Of Boxes and

Given this is just one box manufacturer’s story it may not
be possible to draw conclusive proof but once again the anecdotal evidence is
piling up. Mr. Box’s story is consistent with what CEOs have been saying in the
Confidence Survey. I never thought about it much before today but boxes simply
have to be a leading indicator, and that leading indicator along with CEO
confidence is pointing South.

-Mike Shedlock/Mish, Global Economic Analysis

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What's been said:

Discussions found on the web:
  1. Eclectic commented on Oct 24

    Almost sounds like Bizarro World and the story of Bizarro Superman.

    -Earth a cube
    -good is bad; bad is good
    -Kryptonite makes Bizarro Superman stronger
    -Superman is a super villian
    -EBITDA pro-forma accounting is standard practice and reins supreme

    Those are all the facts about him I can remember right now. I doubt if many of you can remember Bizarro Superman.

  2. V L commented on Oct 24

    It is interesting how complacent saliva-drooling-bulls and nearsighted-market-cheerleaders have completely ignored The Richmond Fed Report.
    Thanks to professore Roubini from NYU for commenting about this “Canary in the Mine”.

    The Richmond Fed Report: the “Canary in the Mine” of the Coming U.S. Recession

    “… the new bullish spin is that we will have a growth rebound in Q4. Rebound based on what? Mostly wishful thinking. The first hard data from October from truly leading indicators – the Philly and Richmond Fed reports – suggest that the Q4 fourth rebound is only a dream in the mind of those talking and spinning about it…”

  3. wcw commented on Oct 24

    Yeah, I read Roubini and the Richmod Fed. I didn’t like the Richmod (not to mention the Philly) data, but it’s not showing up in the sales themselves — yet.

    I don’t have calls this month. Friday will tell us a lot — both how bad (or unexpectedly good) Q3 was, and how the market spins it. If we get a nice 1.3% advance GDP and the market winds down hard, I may pick up calls. Markets don’t like going down unless they have to, and of all the things Roubini says I think his prediction of a just-wait-for-Q4 spin ir most on-target. If market *rally* on said spin instead of dropping, I may start to add some puts.

    We’ll see. Just three days to go.

  4. V L commented on Oct 24

    It seems that any number will be a good number. So, you may start buying your calls before Friday.

    If GDP is minus 1% the cheerleaders will say it is a good number because it means ex-housing and ex-auto it is actually plus 2%.

    If GDP is 0% the cheerleaders will say it is a good number because it means the Fed will cut rates sooner than expected.

    If GDP is 1% the cheerleaders will say it is a good number because it means the Fed has engineered “goldilocks” economy.

    If GDP is 2% the cheerleaders will say it is a good number because it means the economy is still strong. (and some people in Washington will add “and we intend to keep it strong)

    If GDP is 3% the cheerleaders will say it is a good number because it is better than most expected. (and some TV characters even will be pounding on a table and telling us that this is the best story never told)

  5. calmo commented on Oct 25

    U B right VL, the MSM knows how to cheer. The secretary treasurer knows too: that sagging housing market is going to be revived by the latent commercial/industrial side just in time for the housing market’s 2nd wind.
    There is no room for whiners and sour pusses esp as Iraq increasingly looks like a full scale civil war and we need any distraction ( like basking in the DOW 12,000).
    Fed Ex and UPS sharing this same light as the box man? Mish might have supported his piece with a reference.

  6. ken commented on Oct 25

    Barry, do you really think this guy received an e-mail from the CFO of a major North American box manufacturer that wasn’t somehow related to a spam scam?

    You have to ask yourself would a real CFO of a major North American box manufacturer send this kind of information, out of the blue, to some guy who runs a blog?

    I don’t. The dead giveaway was this line: “I never thought about it much before today but boxes simply have to be a leading indicator…”

    When someone who purports to offer a global economic trend analysis doesn’t already know that containerboard demand is a leading indicator then how can you take him seriously?

    There are only a half dozen major box producers in North America. I bet Mish cannot name a single one. Their plants are all running at 100% capacity to build inventory for seasonal shutdowns for maintenance.

    Their biggest problem has been getting enough scrap wood for fiber as sawmill have shut down due to falling lumber prices. Prices have risen and are expected to go up again in ’07.

    I am really disappointed in you Barry. I thoght you would know enough to see right through Mish’s story.

  7. toddZ commented on Oct 25

    Is this rally an end run before the Dow falls off this wall of worry? I haven’t traded in two-three weeks, waiting for this thing to play out.

    I’m starting to see a ton of serious short bashing. This is going to play havoc when there’s no buying reserve left as traders decided to take profits.

    I’m a short seller by nature, and this huge run has just been amazing to watch (and thankfully not trade).

  8. Barry Ritholtz commented on Oct 25


    I spoke with Mish before this posted, and he informed me he had just gotten off the phone with the un-named party.

    I have no reason to believe he is not being forthright. If you have any evidence that this is a fabrication, bring it forth.

    Mish, feel free to jump in . . .

  9. bushsux commented on Oct 25

    not saying Mish is a liar but Iam inclined to agree with Ken that a CFO who doesn’t know that boxes are a leading indicator may not have much wisdom to add to the discussion. IMHO.

  10. bushsux commented on Oct 25

    scratch that. Mish wrote that not the CFO. Ken you steered me wrong. sorry Mish.

  11. Schahrzad Berkland commented on Oct 25

    I’ve been reading Mish’s blog for a year now, and his blog is one of the best! I’m a very analytical and skeptical person, and have not found any reason to doubt him. I love reading the letters he publishes from realtor Mike Morgan in Florida. Mish is a true professional and the blogosphere is better because of him.

  12. ken commented on Oct 25

    Mish’s Gobal Economic Trend Analysis is the name under which he writes yet he never knew until now that containerboard is a leading indicator? What else doesn’t he know?

    Perhaps he is unaware that containerboard plants are all running at 100% capacity?

    Perhaps he doesn’t know that companies have been successful in making price rises stick?

    Read Mish’s bio and then tell me why a CFO of a ‘major ‘North American box manufacturer would contact someone of Mish’s competence with such information instead of a legitimate stock analyst?

    Barry, his original post says that he received this information in the form of an e-mail. I get dozens a day myself from people claiming sensitive inside knowledge but willing to divulge important information. Now you say he claims to have talked to the CFO on the phone. Sure.

    But again Barry you have to ask yourself before you lend your credibility a guy like Mish: why would a CFO provide such sensitive insider information to a swell headed blogger? Shouldn’t information like this, if material, be announced publicly to all at the same time? That’s how legitimate operators do it.

  13. ken commented on Oct 25

    bushsux, sorry for my poor writing. I see how it would be easy for someone to think I was saying was the CFO instead of Mish who was ignorant of such basic knowledge as the importance of containerboard as an indicator of economic activity.

    No it was Mish who admitted to that, even as he offers us his Global Economic Trend Analysis. That is what triggered my doubt about this entire story.

  14. Barry Ritholtz commented on Oct 25

    Some of you are misreading this post — Mish is specifically writing about boxes BECAUSE of their impact as a leading indicator of the economy.

    Further, it is obvious the CFO understands this, via his statement: “Our business, in my opinion, is a very good barometer of all business.

    Lastly, I have seen the email from CFO of the box firm, which is:; the Box Company is a North American (private not public) firm with not insignificant sales.

  15. Mike Shedlock / Mish commented on Oct 25

    Barry, sometimes I wonder if ridiculous attacks are just a disguise to get someone to name the source. As you said I have a whole collection of emails from this guy at
    I have a valid webaddress for that company and have checked that out as well.

    I wrote that story, as you say because boxes are a leading indicator. Look I have never written about boxes before as about 70% of the stuff I write about is housing. Now I am being criticized for not thinking about boxes before. Well I never had any information before on boxes so I never gave it much thought before!

    I recognized the significance of this story and wrote it up. People send me stuff all the time. You should see the Emails I got from a Major in the Airforce. They would knock your socks off. I verified those emails as well. I have not written the story as I do not want to go too much into politics.

    But as I see it, several people here owe me a big time apology.


  16. ken commented on Oct 25

    Ok Barry

    So it is a private company that bends cardboard into boxes. Hardly a ‘major’ North American box manufacture. Probably used to fill in when the large guys cannot fill the order.

    The majors have been running their pulp plants at 100% capacity so it is reasonable that some shortage would be filled by the smaller guys once in a while. Following a period of consolidation there are only a small handful of major containerboard manufactures left in North America so his claim that a ‘major’ was providing him with inside information caught my eye.

    Secondly it was Mish who said he was unaware that this industry is a leading indicator of economic activity. Yet Mish is the one writing under the banner of ‘Global Economic Trend Analysis’.

    How in the world can you take seriously someone who writes about such a heady topic who doesn’t already know that the containerboard industry is a significant trend indicator?

    I read your blog because I find you credible, even when I disagree. If you are going to lend your credibility to another blogger you might want to make sure they have the bona fides to make it worth your while. Otherwise you might consider a disclaimer to establish your non-endorsement of what you are featuring.

  17. Mark commented on Oct 25

    I hope Mish shares what the USAF major wrote to him about. You may not be interested in politics, but politics is interested in you.

  18. ken commented on Oct 25

    Mish, stop digging the hole.

    If you are writing about a private company losing some business why do you think anyone would care who your source is or the name of the company?

    If you were talking about a publicly traded company you could probably expect a visit by the FBI before the day was up.

    But you really should know this, global economic trend analysis and all that.

  19. wunsacon commented on Oct 25


    Your critique doesn’t sound spurious. But, I’m sure you can think of plenty of reasons Mish wouldn’t want to name his source.


  20. Mike Shedlock / Mish commented on Oct 25

    Your critique doesn’t sound spurious. But, I’m sure you can think of plenty of reasons Mish wouldn’t want to name his source.


    My reason is simple.
    I was asked not to.
    Furthermore I am talking about a large company not some fly by night operation.
    Finally, Barry has seen the emails and can (and has) vouched for them.

    Instead of giving me a much owed apology, Ken carried on with personal attacks, taking statements made out of context.

    I have not written about boxes before simply because I had no information before. In fact I do not recall anyone writing much about boxes before. Not here, not by any other well respected economic blogs, not on Bloomberg, not really anywhere at least that I have seen. So I make a statemant that I had not thought much about boxes and all of a sudden the integrity of emails is attacked, my integrity was attacked, and Barry’s integrity was attacked simply because he believed me.

    It is of course ridiculous. The attacker has not even seen all of those emails as I did not post them all and I have much more information that I did not post because it ran the risk of disclosing my source.

    So people can either believe me personally, or believe Barry who is vouching for me, or someone can believe Ken who attacked both of us out of the blue. That is the bottom line.

    The more I think about it, Ken not only owes me an apology he owes Barry an apology as well.


  21. David commented on Oct 25

    Hi gang,

    Mish, I just wanted to say that I’ve checked out some of your interesting writing in the past at your blog and over at

    Liked that article on your hometown of Danville, IL that you did not too long ago. I remember thinking there was a lot of sense in that piece, and it still sticks out in my mind. Keep thinking and writing,


  22. ken commented on Oct 25

    Mish, do you even understand the meaning of the words contained in the title of your blog? It says you provide global economic trend analysis. That is a mighty tough topic and a worthy undertaking by someone with knowledge of the various micro components that can have an effect on such large macro trends.

    Barry was kind enough to raise your blog out of obscurity by featuring it on the front page of his well respected blog. By doing so, Barry was lending his credibility to you, saying in effect to his readers that if we found him (Barry) useful that here is another guy also worthy of a read.

    But the last sentence of your post reads: ” I never thought about it much before today but boxes simply have to be a leading indicator, and that leading indicator along with CEO confidence is pointing South.”

    Well duh? Boxes have to be an indicator? Who knew? You didn’t. And yet you offer global economic trend analysis.

    Your story in short is this: The CFO of a ‘major’ North American box manufacturer just gave you some inside information. You cannot tell anyone his name or the name of his company but you can tell us that the company just lost a significant number of orders for their product and that this will have ‘profound impact’ on the company’s business.

    Wow! I mean WOW!!

    We are to believe that the CFO of one of the few containerboard manufactures left in all of North America is providing you, a part time pundit, photographer and blogger with airs of offering insights on global economic trends, information not available to the investing public?

    Yeah right.

    Then when challenged Barry tells us that this is a private company.OK, but you could have made that clear to begin with. It might have taken some of the mystery out but if you are going to offer such anecdotal evidence of a developing global trend it is best to be honest about the subject of the story.

    And seriously, no one cares to wheedle out of you the name of a private company that loses some customer business. What would be the point?

    So there is really no reason for you to get all huffy when you get called on sloppy writing or on having aspirations to offer global economic trend analysis that is beyond your apparent ability.

    I think you owe the readers of this blog, as well as its proprietor an apology.

  23. Movie Guy commented on Oct 26

    I believe that Ford should have kept the Taurus. The most recent body design is quite good.

  24. zcream commented on Oct 26

    Ken, I think you need to get a reality check..”Barry was kind enough to raise your blog out of obscurity”
    Mish’s message boards have been among the most trafficked at and on silconinvestor. I actually started reading Mish’s post 2 years before I starting reading Barry’s. I have both on my Firefox toolbar now.

    Easy, mate! Look before you shoot!

  25. Schahrzad Berkland commented on Oct 26

    I get my share of attacks on, so I’ve learned that it is in the nature of some people to attack others, while offering no worthwhile content of their own. ken is such a guy. The nature of anonymous posting allows anybody to write whatever they want. Professional behavior means we debate an idea instead of attacking a person, and if we have doubts we ask for proof. In the end, ken ends up looking foolish.

    I’ve read Mish’s blog long before I discovered Barry. I’ve followed the economy since I learned about the housing bubble in San Diego from Rich Toscano at I spend hours every day studying this stuff and am getting ready to launch my own webtite about Southern California housing and employment data.

    In none of my reading have I encountered anything about boxes. Not on Bloomberg, economist blogs, main stream media, bloggers… It’s not as if everybody was talking about boxes, but Mish was not.

    Actually, we should congratulate Mish as he was the first person to mention the slowdown in the box industry.

    We should also ask ourselves how he got to be so successful to be featured on Barry’s site, and to earn the confidence of CFOs to share their business prospects with him.

    BTW, today I asked the UPS delivery man how his business is going, and he said the residential customers are still getting the same number of orders (mainly QVC and amazon), but manufacturing deliveries are down, esp. in electronics and mainframe companies. He said both pickup and deliveries are down. Where he once had 100 boxes, he now has 50 to deliver.

    keep up the good work Barry and Mish!

  26. Max commented on Oct 27

    Ken, seriously – get lost. Thou protesth too much, therefore I think it is you who is clueless about economic forecasting, and if it wasn’t for Mish, you too wouldn’t know that boxes are an indicator. You do it because you are a loser and a troll, desperately wanting attention.

    Mish’s blog is pretty good, even though I don’t agree with him on some important issue. I started reading it regularly a couple of years ago, the quality of his writings is only improving.

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