Cheers! It's party time as Japan economy recovers
Some 63 percent of Japanese workers in a survey plan to let their hair down at traditional year-end parties with their colleagues this year, up from 49 percent last year, an indication that if not exactly rolling, the good times may be back

Housing Bubble Bursts in the Market for U.S. Mortgage Bonds
Bonds backed by home loans to the riskiest borrowers, the fastest growing part of the $7.6 trillion mortgage market, have lost about 2.5 percent since September on concern an 18-month rise in interest rates may force more than 150,000 consumers to default.

Quick Overview

• The Labor Department said that business productivity was up an annual rate of 4.7% in the third quarter, the best quarterly gain in two years. The U.S. productivity growth is surging, but the wage increases that typically come with such gains have eluded American workers.
  
  

• U.S. factory orders were up 2.2% in October. Excluding transportation, orders were up 0.6% on the month.
  
  

• Industrial production in the U.K. was down 1% in November. YoY retail sales were p 4.6% in November.
  
  

• The Bank of Canada increased its overnight rate from 3.00% to 3.25%.

Five Risks
Stephen Roach

The annual year-end forecasting ritual has begun. For us, it is always sparked by the extension of our forecast horizon to another year -- in this case, our first official glimpse at 2007. We also take an in-depth look at our calls for the year nearly completed (2005) as well as for the 12 months lurking just ahead (2006). It is as close to soul searching as the heartless macro prognosticator ever gets.

Quick Overview

• The Institute for Supply Management's services index fell to 58.5 in November from 60.0 in October, below forecast of 59.0
  

• President Bush called on American businesses on Monday to live up to their pension promises.
  

• FedEx Corp. announced it will raise the standard rates for FedEx Ground services next year by an average of 3.9%.
  

• Gasoline pump prices continued to drop in the two weeks ended Friday, falling 11 cents to an average $2.16 a gallon for all grades, analyst Trilby Lundberg reported in her latest survey of filling stations.
  

• A European index of services increased from 54.9 to 55.2 in November, the best reading in over a year.
  

• Gold finished near a 23-year high on Monday spurred by worries over inflation.

Is Mankind a Mistake?
When we are functioning as individuals – whether at work, in the marketplace, among friends, or driving on the freeways – our behavior toward one another tends to be peaceful and respectful. Few of us would be willing to personally inflict, even upon strangers, the brutalities that so many eagerly cheer on when performed by agents of the state with which we identify ourselves. We would quickly find ourselves without friends were we to behave toward them in ways that emulate Dick Cheney’s or Donald Rumsfeld’s recommended treatment of Iraqis. How welcome would a Madeleine Albright be in your community were she to announce that the brutal deaths of neighborhood children was a price she was willing to pay for the advancement of her career? How long would you continue working for an employer who hired Lynndie England as your immediate supervisor?

The Greatest Debt-Beat President in History
In a letter to James Madison, Thomas Jefferson asked how, "one generation of men has a right to bind another." He concluded by saying, "No generation can contract debts greater than may be paid during the course of its own existence."

G-7 Central Bankers Pledge Not to Hurt Growth
Dec. 2 (Bloomberg) -- Central bankers from the world's richest nations sought to defuse criticism from finance ministers that they risk imperiling economic growth by raising interest rates.

Quick Overview

• The Federal Reserve is not yet finished raising interest rates and must fight any temptation to adopt policies that would stoke inflation, top central bank officials said on Friday

• The U.S. job market rebounded last month from a hurricane-induced slowdown as nonfarm employers added 215,000 workers.
  
  

• The unemployment rate in the Euro-zone was 8.3% in October. The unemployment rate for the EU-25 was 8.5%.
  

• Current exchange rates between the dollar and yen are in line with economic fundamentals, Japanese Finance Minister Sadakazu Tanigaki said on Friday.
  
  

• Canada's unemployment rate improved from 6.6% to 6.4% in November.
  
  

• The USDA increased its estimate of world coffee ending stocks for 2005-2006 from 14.9 to 20.3 million bags. The production estimate was unchanged at 113.2 million bags -- world consumption was lowered from 119.4 to 116.6 million bags.

Alarm over dramatic weakening of Gulf Stream
Researchers on a scientific expedition in the Atlantic Ocean measured the strength of the current between Africa and the east coast of America and found that the circulation has slowed by 30% since a previous expedition 12 years ago.

China worries local doctors can't spot bird flu
"I am not worried about governments at various levels covering up an epidemic," Gao told a news conference. "But I am worried about the inability of our medical and quarantine personnel at the local level to diagnose and discover epidemics in a timely fashion due to their low abilities and relatively backward equipment."

The little yellow god
The dull truth is much less bullish for gold. Investors have put money into a wide range of metals, and precious metals' prices, including gold's, have risen with the base. Meanwhile, gold remains fundamentally unattractive. It yields nothing and central banks are sitting on vault fuls of the stuff that they want eventually to sell.

Good Old Economist Mag. Bullish on War -- Bearish on Gold

Asian central banks likely to increase gold reserves
It is only a question of time for Asian central banks to follow and buy in gold: they hold 2.6 trillion US dollars in foreign exchange reserves, and able to change more of them into gold as a hedge against US dollar falls.
The US dollar will inevitably slip further. Some budget deficits of the seven major industrial countries are at a record level, and central banks are "printing banknotes" to devalue their currencies. Huge amount of budget deficits and debts in Europe, America and Japan will finally force them to increase real interest rates in an effort to drag economies back to the right track

Quick Overview

• The U.S. Commerce Department said that personal incomes rose 0.4% in October and consumer spending went up by 0.2%.
  

• YoY the core rate of personal consumption expenditures, was up just 1.8% in October, the smallest gain in six months.
  

• U.S. jobless claims were down by 17,000 last week to 320,000.
  

• An index of U.S. manufacturing fell from 59.1 to 58.1 in November following the two fastest-growing months of the year, the Institute for Supply Management reported Thursday
  

• Construction spending rose 0.7% to an annual rate of 1.13 trillion in October for a fourth straight month, the Commerce Department reported Thursday.
  

• Sugar closed at the highest level in nine years – an other production deficit is forecast for 2006 and 2007
  

• Gold closed at the highest level (above $500) for 1st time since 1987
  

• The DoE said that natural gas supplies were down 49 billion cubic feet to 3.225 trillion cubic feet. YoY supplies are down 2%.
  
  

• London inventories of copper now are at 72,600 tons,
  

• The Bank of Japan needs to not only make sure the economy does not fall back into deflation but should conduct monetary policy in a way that ensures a steady rise in prices, a government report said on Friday.
  
  

• The European Central Bank increased its interest rate, from 2.00% to 2.25%, for the first time in five years.
  

Quick Overview

• U.S. GDP was up 4.3% in the third quarter, stronger than expected. YoY GDP was up 3.7%.
  

• The U.S. economy bounced back following the two big hurricanes in August and September, but lingering high fuel prices were pushing up shipping rates in some regions of the country, the Federal Reserve said Wednesday.

• The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity for the week ended November 25 declined 1.8 percent to 624.1.
  

• The Chicago Purchasing Management Association's index dropped from 62.9 to 61.7 in November
  
  

• Overall for-hire trucking freight volumes rose 0.3% in October from a month earlier, the American Trucking Associations said.
  
  

• The U.S. Department of Energy said that:
  Crude oil supplies were down 4.2 million barrels last week to 317.6 million barrels.
  Supplies of unleaded gasoline were down 500,000 barrels
  Supplies of heating oil supplies were up 1.5 million barrels..
  
  

• Retail sales in Australia rebounded from a 0.3% drop in September to gain 0.5% in October.
  
  

• Canada's GDP was up 0.9% in the third quarter and up 2.8% YoY.
  India's GDP was up 8% YoY.
  
  

• Argentina's trade surplus widened more than expected to $916 million in October from $854 million a year ago as export volumes increased, the Economy Ministry said on Wednesday.
  

• YoY housing starts in Japan rose 9.1% in October to 115,769 units. With increases in starts on housing units for rent and for sale, such as condominiums, the Ministry of Land, Infrastructure and Transport said Wednesday.The rise followed a 0.2% fall the previous month.
  

2005 Hurricane Season Ends Today as the Worst in 150 Years
Thirteen hurricanes formed in the Atlantic, starting with Dennis in July and ending with Beta last month. There were also 13 tropical storms, which are named once winds reach 39 miles per hour (63 kilometers per hour). The previous record of 21 was set in 1933, according to U.S. National Hurricane Center data. Next year may be more active than usual, some forecasters say.

US paying Iraqi press to run favourable stories
As part of an information offensive in Iraq, the U.S. military is secretly paying Iraqi newspapers to publish stories written by American troops in an effort to burnish the image of the U.S. mission in Iraq.

Co-conspirators’ largesse extended to many
In a plea agreement with prosecutors, Cunningham named four people who had conspired with him to commit the crimes. Although the plea agreement does not refer to the co-conspirators by name, they are widely believed to be Mitchell Wade, the former president of defense intelligence firm MZM Inc., Brent Wilkes, president of defense contractor ADCS Inc., Tom Kontogiannis, a New York real-estate developer, and an unnamed family member of Kontogiannis.

Costly Withdrawal Is the Price To Be Paid for a Foolish War

Maintaining an American security presence in the region, not to mention withdrawing forces from Iraq, will involve many complicated problems, military as well as political. Such an endeavor, one would hope, will be handled by a team different from — and more competent than — the one presently in charge of the White House and Pentagon.

Quick Overview

• The Commerce Department reported that new home sales rose by 13 percent in October to a record 1.424 million and more than expected. The big jump came from the western and northeastern regions. YoY, new home sales are up 7.6%.
  

• U.S. Durable goods orders were up 3.4% in October, more than expected. Excluding transportation however, orders were up 0.3%, less than expected.
  

• The Conference Board, said its consumer confidence index rose to 98.9 this month, the biggest rise in more than two years.
  

• The Chicago Federal Reserve's manufacturing index increased from 104.7 to 106.6 in October.
  

• Australia upped the estimate of its 2005-2006 wheat crop to 24.1 from 19.7 million tons. Last year Australia harvested 20.4 million tons of wheat.
  

• Japans household spending increased 1.2% in October.
  Japans industrial production was up 0.6%.
  Japans October unemployment rate increased from 4.2% to 4.5%.
  

• Gold prices closed above $500 an ounce in Asian trading for the first time since late 1987, driven by investor demand for the metal as a diversifying asset.
  

• Calpine Corp. replaced its longtime chief executive as well as its chief financial officer in a shake up that sent the company's stock price below $1.

• The USDA said that U.S. Cotton stocks for 2005/06 are forecast to rise 1 million bales to 6.5 million by season’s end, resulting in a stocks-to-use ratio of 29 percent and the highest in 4 years.

• YoY Surface trade among the United States, Canada and Mexico rose 11.4% in September to $61.2 billion, a second straight all-time monthly record, the DoT said Tuesday.