Economic Indicators

The weekly leading indicator data sets fell very sharply from
06/07 through the end of Feb. but have stabilized since. In
line, the monthly data -- built primarily around new order
measures -- has moved up some off the Jan. - Feb. lows.

The weekly data indicates a US recession is a lead pipe cinch
based on historical comparison. The monthly data is holding
well above recession levels so far. The monthly lead indicators
suggest a slightly weak economy with a large and growing
export book offsetting much of the pronounced weakness in
housing and autos.

As mentioned earlier in the week, global supply management
surveys indicate sweeping increases in costs. Productivity
remains strong, but indications are that profit margins are
continuing under pressure.

The underlying economic power measure for the US -- yr/yr real
wage growth plus total employment growth -- looks to be around
-0.3%. This number understates potential now because it does
not factor in the current round of tax rebates and because the BLS
admits it may be overstating job weakness for seasonal reasons.
All that said, short term growth potential remains very subdued.

A massive short squeeze and some dumb, threatening remarks
by Israel's transport minister Mofaz directed at Iran pushed the
oil price to a record $138 today. This gets the inflation thrust
measure off to a strong start for June. Isn't it interesting how
quickly folks come out to kite the price when there is some
weakness? Not long back Goldman's guy did it and this week it
was Morgan Stanley's guy with a $150 call for July 4. If I was not
such a supremely dispassionate and logical guy, I'd be inclined to
say there is a concerted effort to push oil higher.