The Fed Releases: The Beige Book, December 1, 2010, Summary of Economic Conditions. And I don�t know what we�d do without them.

For those that enjoy a good summarizing… The forecast in this December 1, 2020 edition is for continued overall beige-ness, I suppose, with some areas possibly becoming a slightly darker beige while others may favor a somewhat lighter shade of beige by the end of 2011.  Besides all that, let me just say that this is the biggest collection of politically expedient clap-trap that I have ever had the displeasure of reading.

The Beige Book, as it’s commonly known, is a report published eight times each year. Each of the 12 Federal Reserve Banks, which are located throughout the country, “gathers anecdotal information on current economic conditions in its District through reports from Bank and Branch directors and interviews with key business contacts, economists, market experts, and other sources.”

The report also goes out of its way to say of The Beige Book:

“This document summarizes comments received from business and other contacts outside the Federal Reserve and is not a commentary on the views of Federal Reserve officials.”

In other words, no one is to be held accountable for anything said in The Beige Book, in fact, no one can even be quoted for any statements found inside The Beige Book.  Why does the Fed even bother publishing The Beige Book?  I have no idea, other than the obvious reason that they think we’re all morons.

I’m thinking of publishing my own “book” on the economic conditions, only I’m thinking of calling it “Mandelman’s Mauve Report.”  Not bad, right?  Well, we’ll see…

Okay, so let’s jump right in and see how nobody specific thinks were all doing, economically speaking.  Here’s how the December 1, 2010 issue of the Fed’s “The Beige Book” summary starts off:

“Reports from the twelve Federal Reserve Districts indicate that the economy continued to improve, on balance, during the reporting period from early/mid-October to mid-November. Economic activity in the Boston, Cleveland, Atlanta, Dallas, and San Francisco Districts increased at a slight to modest pace, while a somewhat stronger pace of economic activity was seen in New York, Richmond, Chicago, Minneapolis, and Kansas City. Philadelphia and St. Louis reported business conditions as mixed.”

Dear Lord, I do love these guys in a lot of ways.  I mean, there aren’t many that can write a document that clocks in at roughly 30 pages of 12-point type, comprised of 16,888 words, magnificently displayed in 186 paragraphs… all to say absolutely nothing.

So, between sometime in early to mid October, and up until mid-November… our economy continued to improve… “on balance,” did it?  Whew… well, that’s certainly a relief, wouldn’t you say?  I can’t wait to tell my unemployed and under-employed friends about that sparky-good news.  And if you’re among the all-time record breaking 42 million Americans on food stamps… well, you’re just not on the right side of the “balance,” that’s all.  Get with the program, would you please?  I’m not sure how… maybe try standing on the other foot.

“Manufacturing activity continued to expand in almost all Districts, with relatively strong growth seen in metal fabrication and the automotive industries.  Reports also showed steady to increasing activity for professional and nonfinancial services.”

Strong growth in metal fabrication and in the automotive industries?  I’m thinking “gun sales are up,” and GM finally emerged from  bankruptcy and started making some small number of cars and trucks again.  I’m wrong?  Fine, then you tell me what types of metal fabrication we’re doing more of in this country, if not we’re making more guns.  Office furniture?  Bathroom fixtures?  Yard tools?  Hahahahahaha!  We may be selling more of those “abs machines,” but I’m guessing they’re made in China.

Let’s move on…

“Two Districts noted a decline in demand from government agencies due to budgetary shortfalls.”

They’re kidding, right?  The government is spending less somewhere?  Where might that be?  Memo to someone in government… please cut a check to whoever is coming up short, would you please?  I mean, at our current level of deficit spending, and seeing that the government is the only entity spending at all, I see no reason for a shortfall here.

“Reports on consumer spending tended to be positive. Nonetheless, several Districts noted that households remain price sensitive and focused on buying necessities.”

Don’t you want to find the individual who penned that sentence and stone him or her to death in the town square where he or she was born?  Maybe it’s just me.  Well, at least we’re still able to buy “necessities,” because when that stops, we’re going to find out what all those guns we bought are really good for.  (Don’t question my grammar there… I know what I did, and I stand behind it.)

“Expectations for the holiday shopping season were generally positive, with several Districts expecting higher sales when compared to year-ago levels.”

Expectations for the holiday shopping season were “generally” positive, I suppose with the exception of those that weren’t?  I find that interesting.  You see, I awoke on Black Friday to check things out, shopping-wise and besides the fact that my daughter reported having no real problem finding parking at our mall, I went online to visit CNN.com, SmartMoney.com and the UK’s Guardian.uk, to see what their online polls were reporting.  Here’s CNN.com’s shopping poll from right around 2:00 PM on Black Friday:

Are you shopping on Black Friday? (CNN)

NO – 77% (103,647)

Online – 11% (15,288)

In stores – 6% (8,727)

Both – 6% (7,479)

Total votes: 135,141

CNN also mentioned that “This is not a scientific poll,” as opposed to the incredibly scientific polls the network is so famous for conducting.  I figure it’s okay for my purposes, however, as I’m not really much of a scientific shopper, although I have been known to stop in at the Discovery Channel store in my local mall.  And one year I even got suckered into spending something like $400 on a telescope with which I have never even managed to find the moon.  We leave it on display in our home, however.  We think of it as “intellectual living room furniture,” and proof that we are good parents.

Here’s the Black Friday survey from across the pond:

Poll closes in 2 days, votes are counted every 60 seconds.

So, first of all, let me just say that I’ll bet the Brits are pip-pip-jolly over our exporting our “Black Friday” tradition to their culture.  And in case anyone living in the UK is reading this, and I do get quite a few lately, I’m so very deeply sorry, and I personally had nothing to do with it.

And here’s the obviously “scientific poll” published by the oxymoronically named “Smart Money” showed the situation:

Will Shoppers Come Through?

2010 holiday sales expected to be more robust.

YEAR          % CHANGE          TOTAL/BILLIONS

1999          +8.3%            $343.60

2000         +2.5%            $352.20

2001         +3.6%            $367.70

2002         + 1.3%           $369.40

2003         +5.2%            $388.60

2004        +6.7%            $414.60

2005        +6.1%            $435.60

2006        +4.6%            $457.40

2007        +2.4%            $460.20

2008        -3.4%            $441.97

2009        +1.1%            $446.80

2010        +2.3%            $447.10

Don’t you love the title of that chart?  Will WE come through?  Come through with what, exactly?  Why I oughta’…

And… MORE robust?  More robust than what, exactly?  I mean, that chart shows that we dropped by 3.4% in 2008, made up 1.1% in 2007 and then hope to make up 2.3% this year.  More robust than when?  Gee, folks… we’re HOPING for a 2008-type holiday shopping season?  Or, purely numerically, something between a 2005-2006 one?  Well, woo-friggin’-hoo.  Now there’s some economic growth you can make a robust chart about, right, SmartMoney people?

But SmartMoney did have a silver lining forecast to report:

“For two tough years the luxury-goods market has been struggling as well, with 2009’s decline of 8 percent the worst ever recorded for the nearly $230 billion category, according to consultants Bain & Co.  And yet 2010 could end up being the year of the comeback for all things upscale: Bain is predicting an increase of 10 percent for worldwide sales of luxury goods.”

Well, isn’t that a relief?  Maybe the bankers will finally be able to spend some of their outrageous, taxpayer funded bonuses they were cautioned not to spend on ostentatious crap last year.  I certainly hope so, because it’s got to be tough to still be cruising around in a 2007 yacht while sporting a pre-crash diamond encrusted Patek Philippe wrist watch.  Oh, to think of it… the sheer embarrassment.  Mortified, I think I’d be absolutely mortified.

Okay, I just threw-up in my mouth a little bit, so back to The Beige Book…

“Sales of new cars and light trucks were largely higher than in our last report. Tourism improved in all reporting Districts.”

Oh great.  So, it’s not enough that I have to read this piece of Beige B.S.  Now I have to go see what they wrote last time out?  Well, fine… but if it’s what I think it is, someone at the Fed is going to get called a nasty name the next chance I get.

Here’s what the October 20^th Beige Book had to say in its summary of auto sales:

“Most Districts reported that sales of new vehicles held steady or rose during the reporting period. Sales of used vehicles were strong as well. Inventories remained tight, particularly for popular vehicles. Used car prices rose, reflective of solid demand and lean inventories. Respondents’ outlooks were for slight growth in sales through year-end.”

What does that mean?  I have no idea.  But here’s what else the summary had to say about the subject in a later section titled, “Nonfinancial Services”:

“Demand for transportation services appears to have slowed, although reports were mixed. Freight companies in the Cleveland District noted steady to declining volumes over the past six weeks, and Kansas City’s report said transportation firms saw unexpected weakness. Rail companies in the Atlanta District reported positive, but slower growth of automobile and industrial goods shipments, while port activity in the Richmond District was mixed.”

Hmmm… slower growth in automobile shipments seems at odds with the idea that sales are doing so well.  But, what do I know, really?  Not that much… I’m just a guy with a computer who likes to make trouble, right?

The October report also acknowledged that:

“Retail spending was flat to moderately positive in most Districts, with the exception of the Richmond and Atlanta Districts, which noted declining traffic and sales. Contacts in the Kansas City District noted sales were stronger than expected; back-to-school spending boosted sales in the Philadelphia and Dallas Districts. Retail spending grew modestly in the Minneapolis and San Francisco Districts, and was flat in the Cleveland, Chicago, and St. Louis Districts. Retailers said consumers are slowly regaining confidence, but remain price-conscious and were largely limiting purchases to necessities and nondiscretionary items.

Yeah, you know what?  It’s making me dizzy too.  Let’s just move on and pretend lots of people that none of us know are all buying new cars all of a sudden.  I’ll believe it if you will… deal?

So, moving on to housing, the issue nearest and dearest to my heart because not only do I still own one or two of those house things, but I also live in one and would prefer my neighbors to continue living in theirs as well.  Here’s what the report had to say about the housing markets… it’s gotta’ be a huge section in the report, wouldn’t you think?

“Housing markets remain depressed, with several Districts reporting further weakening during the past six weeks. Conditions in commercial real estate were mixed, and activity stayed at low levels.

That’s it?  That’s all you’ve got?  Twelve Federal Reserve Banks located throughout the United States of America… the biggest meltdown of home values since The Great Depression… and that’s all you number-crunching idiots can come up with for a statement on the housing markets?

Hold everything… I want credit for not swearing here and I want it now, damn it.  I expect emails of appreciation… lots of them.  Otherwise, I’m seriously considering rating my blog ‘R’ in future months.  Matt Tiabbi swears like a sailor, and people like him.  Of course, that may also be because he’s a better writer than I am, a point that I hate to admit as it sometimes bums me out for the better part of an afternoon.  Of course, then I have a cocktail or two, and become Hemingway, once again.  Not Ernest, silly… Margaux… but that’s another story for another time.

Wait, where was I?  Oh yeah… The Beige Book… there was some additional detail offered on the housing market, further down in the summary under “Real Estate and Construction.”

“Residential real estate and construction activity remained at a low level in all Districts. The Philadelphia, Atlanta, St. Louis, and Minneapolis Districts reported some further weakening in home sales. Boston, New York, and Richmond characterized the market as soft; while Cleveland, Kansas City, Dallas, and San Francisco described the market as sluggish. The Chicago District reported that high inventories of unsold homes continued to be a drag on new residential construction and home prices. Residential house prices were mixed. Price declines were observed in New York, Philadelphia, Atlanta, and Kansas City; prices were flat to up in Minneapolis, and prices edged up in Boston. The Dallas District reported that home prices increased on a year-over-year basis. The rental market continued to offer incentives to tenants in New York, while strong demand for rental units was reported in Richmond and Dallas. Outlooks for 2011 were mixed.”

Does anything bad ever happen in the lives of people that work at the Federal Reserve Banks?  I mean, does someone’s grandmother get diagnosed with Stage 3 liver cancer,” and someone from the Fed writes: “Grandma’s health, although not stellar this quarter, was not catastrophically bad either, and forecasts for her future condition were mixed”… is that about right?

Okay, not so funny… so let’s move on…

“Lending activity remained stable across most Districts. Credit quality has been steady to improving for most of the Districts that commented on it. Prices for final goods and services were fairly stable, despite rising input costs, especially for agricultural commodities, metals, and fuel. Hiring activity showed some improvement across most Districts. Wage pressures were contained.”

Let’s see… last Beige Book they said: “Lending activity was stable at low levels across most Districts.” So, I suppose that this edition’s claim that “lending activity remained stable,” makes all the sense in the world.  And “credit quality” improving in “most” of the Districts willing to comment on it with a straight face, would just seem to mean that the only people or entities getting loans were those sporting gold testicles.

Now, as to “prices” being “fairly stable, despite rising input costs,” to me says DEFLATION, but you’ll never hear the Fed utter that word… ever.  As proof of that, consider that Ben Bernanke just printed $600 billion… or was it $900 billion… either way… and why he didn’t just go ahead a print a trill, I’ll never know… so he could engage in some quantitative easing, which is another way of saying he needs to pump money into the insolvent banks to keep them afloat, and because he was concerned with troubling levels of decelerating inflation… which also means: DEFALTION… and that he’s a boob.

So, we’ve got rising input costs, but stable prices.  Hmmm… sounds not so good.  If your input prices are rising but you keep your prices of goods sold the same, what happens next?  Anyone?  Anyone?  Come on… I know some of you did the reading assignment… And I don’t want to keep seeing the same old hands.

But at least, according to the Book of Beige, the input prices that have been increasing are only things like “agricultural commodities, metals, and fuel.” Whew… just food, metal, oil and gas.  Is that all?  Well, we sure dodged a bullet or two there, wouldn’t you say?  I mean, can you imagine what would happen if really important things were going up in price?  I shudder to think.

There was some good news price-wise mentioned by this month’s report:

“Prices of petrochemicals rose in the Dallas District.”

So, very well done there.  I knew I felt something improving, but just couldn’t put my finger on it.  Now I’ve got it… it was the petrochemicals.  I should have seen that coming because the last time I couldn’t figure out what was going good in the world it turned out to be petrochemicals too!  It’s kismet, right?

And, last but not least, hiring activity showed some improvement across most Districts, proving that the holiday season does occur in most of the Federal Reserve’s 12 Districts, but wage pressures were contained… meaning that if you don’t like minimum wage, well… that’s just tough cheese.

And while we’re talking about wages, the report did note that:

“There were widespread reports across Districts that firms anticipated increased costs of employee benefits as a result of healthcare reform.”

And… “Some manufacturers in the Atlanta District noted rising costs of materials and employee benefits would likely be passed on to customers in the near-term…”

Oh, so very good there, as well.  I’m so glad we took time out the last couple of years to get that health care “reform” bill passed.  I know the President sure is fond of it.  Me, not so much.  Not because I don’t think we need to reform our health care system, it’s just that I define “REFORM” differently than he does.  It’s really just a question of semantics and priorities, I suppose.

You see, I see the word REFORM, and I think costs will somehow come down, not increase.  Like “tax REFORM?”  Didn’t that used to mean taxes were going down in some way?  Welfare “REFORM,” too?  When we REFORMED defense spending, did we increase it?  And as far as priorities go, well… I’m just saying that we could have stopped the free fall in the housing markets and done something to create something besides a temporary minimum wage job, that’s all.  Other than that, I’m in complete agreement with everything the administration has accomplished, whatever that might be.

Yet, here’s how The Beige Book summarized the hiring situation:

“Hiring remained limited, with many firms reluctant to add to permanent payrolls given economic softness. Reports from staffing firms were mixed. Staffing firms in the New York and Dallas Districts noted a slowdown in demand for their services, and contacts in the Cleveland District said new job openings declined. Richmond’s report noted demand for temporary workers picked up slightly since the last report, and staffing contacts in the Philadelphia District said clients were adding positions as workloads increased. The Atlanta report noted a preference for increasing staff hours and using temporary help rather than hiring additional full-time staff.”

And: “Wage pressures remained minimal. Most District reports found little evidence of wage increases in general.”

Don’t worry too much about that stagnant wage thing, though… it’s almost banker bonus season on Wall Street once again and the new Mandelman’s Mauve Report is forecasting yet another year of record bonuses for the “smartest guys in the room”.

So, all-in-all, I’d have to say things are going quite well here in the good ole’ U.S. of A.  I don’t know what we’d all do without the Federal Reserve Board of Governors to keep us informed as they do in their vigilant publishing of The Beige Book, eight times a year.  And some of you have been complaining about a lack of transparency… now don’t you feel ashamed about that?

I don’t know about you, but I’d say that this report by the Fed is about as transparent as it could be… and quite clearly… we’re fucked.  (Sorry about that.)

Mandelman out.

Want to read the whole thing in its entirety… go ahead, as they say, it’s your funeral:

The Beige Book, December 1, 2010