Unemployment Claims Hit 474,000, World Food Prices Climb, and Tamny Reviews C.J. Maloney

From Mish:

The number of people filing initial unemployment claims soared to 474,000 this week, surpassing the most bearish forecast of all 46 economists in a Bloomberg economic survey.

A number of explanations have been offered (Oregon passing an emergency exemption, Spring Break for teachers in New York, and manufacturing slowdown caused by the disaster in Japan) but none can really be proven as Mish points out:

...the Oregon extension kicked in for the week ending April 23. This of course has me wondering what extended emergency benefits have to do with "initial" claims in the first place unless someone dropping off the list then coming back on a week later counts as an "initial" claim. 

As a point of reference, also note the Spring Break in New York City was as follows: Monday April 18 Through Tuesday April 26 including Good Friday, Easter and Passover. What kind of silly system allows teachers to file for unemployment benefits for a one-week recess? For that matter, why should they be able to file even for a whole summer?

My guess is that the increase in claims may be due to increasing gas prices (which may not cause layoffs, but may be reducing work hours for some who claim unemployment to make up for the loss) and the fact that it's budget time for many state governments who are looking at losing a majority of the stimulus funds that kept them afloat for the past few years.  I have witnessed this first-hand.

Next we have a new United Nations' Food and Agriculture Organization report showing rising food prices.  Via EPJ:

An index of 55 commodities rose to 232.1 points from 231 points in March, the United Nations’ Food and Agriculture Organization said in a report. The record high was 237.2 in February.

 The Index is 36% above the April 2010 level.

While the report shows that some food commodities have gone down (such as sugar and dairy), we are still experiencing a bull market in commodities.  Bloomberg had a good article today on Central Banks that are buying up gold:

Mexico, Russia and Thailand added gold now valued at about $6 billion to their reserves in February and March as prices advanced to a record, the dollar weakened and Treasuries lost investors money.

Central banks are expanding their gold reserves for the first time in a generation as purchases by billionaire investors including John Paulson contributed to bullion extending its longest winning streak since at least 1920. Countries were also boosting their holdings in 1980 when gold rose to a then-record $850 an ounce, only to fall for most of the next 20 years.
“Central banks have good reason to buy gold,” said Peter Morici, a professor of business at the University of Maryland in College Park and a former economic adviser to the U.S. government. “The dollar is no longer a safe asset for backing currencies. Treasuries are not a sound investment” and budget and debt issues mean central banks should buy gold, he said.

From Bloomberg BusinessWeek:

May 5 (Bloomberg) -- China’s top-performing fund manager is favoring resource and agriculture stocks as the country’s government intensifies its fight against the worst inflation in three years amid rising commodity prices.

Oil prices may extend this year’s surge amid concerns over supply disruptions in the Middle East, while demand for fuels will increase after Japan’s worst earthquake on record spurred countries to shelve plans to develop nuclear energy, Wang Cheng, co-manager of the China Southern Long Yuan Equity Investment Fund, said in a May 3 interview from Shenzhen.

Marc Faber has a surprising take on housing in his new Gloom, Boom, and Doom Report:

Buy Housing–While Faber thinks the US housing market has another 10% to fall, he would be a buyer because of attractive valuations. Faber compares the price of US housing to gold and concludes that housing has not been this cheap since the early 1980′s. But do not think there will be a quick recovery–there won’t be. The main point about housing is that it is a good inflation hedge and will likely keep its purchasing power of the next 10 years. In a serious inflation environment, Faber would rather own housing than paper dollars.

Can't disagree with owning housing rather than dollars.  And of course Faber makes the call for QE3:

In Faber’s opinion, QE 3 is a near certainty. The US will be running trillion dollar budget deficits for the next 10 years. There is no way they can finance all of this through bond issuance. The Fed will have to at least partially monetize this to keep interest rates low.

Jim Rogers is in agreement with Faber on commodities in an interview with the Economic Times.  The interview is highly recommended, though it is awkward at some points.  Rogers also responds to the recent assassination of bin Laden correlating to a dollar rally (the dollar has risen minimally, though it probably wasn't due to his death):

Let's talk some more about currencies and euro is off at 16-month highs, we have seen record highs in case of Swiss frank as well. So are you looking at this pattern in currencies continue or do you think they have run up quite strongly to take some profit out of the table right now?

I am not taking any currency profits at all. I sold a few US dollars last week or whenever it kept going down despite all the good news. This would be a good test. If the US dollar continues to go down because of the death of Osama Bin Laden and we would have to worry even more about the US dollar, the action in US dollar tells me that the situation is serious because there has been a lot of good news and it should have made the dollar go up, but the dollar continues to go down. It will be interesting to see if this news has a long lasting affect on US dollar, but a few hours is not a way to judge a market, not for me anyway.

With all the talk of silver's rise and recent correction, Peter Schiff offers some advice:

But none of the fundamentals have changed: the US dollar is still sinking, the emerging markets are still growing, and global interest rates are still negative in real terms. Whether the selloff was motivated by the CME raising margin requirements three times in one week or by some deluded notion that Bin Laden's murder would restore US greatness, there's only one way for an investor to view it: as an opportunity.

Sellers have taken the froth off the market, and now silver is an even better buy. For those who bought at higher prices, it's a good time to average in by buying lower. For those who were regretting not buying at all before silver hit $50, the market is giving you a second chance.

I don't mean to imply that silver can't go lower, but I think the lion's share of the correction is over. In fact, many traders have likely built up short positions on the assumption that this was a bubble about to pop; when the price resumes its climb, all these short-sellers are going to have to buy to cover their debts - perhaps driving a quick surge past the $50 mark.

It's tough to decide where to go on silver.  I think many are waiting to see what pans out and a few are buying the dip now.  Faber, Rogers, and Schiff are all long on silver, the question just comes down to when to short to earn a profit.

John Tamny has a great book review on C.J. Maloney's new book Back to the Land: Arthurdale, FDR's New Deal, and the Costs of Economic Planning on RealClearMarkets today.  The premise of the book:

...recounts the Roosevelt administration's (specifically Eleanor Roosevelt) attempt to craft a perfect, semi-autarkic community, all on the taxpayer dime. Maloney's book capably reveals the certain costs of central planning, thus making Back to the Land an essential story for the political class to understand better. As for the many who view government spending as an economic good in its own right, Maloney's tale of the costly creation of Arthurdale, West Virginia (a town built by the federal government as a model for the nation) will surely give them pause.

Once it comes out in paperback or is cheaper, I will definitely check it out.