Whither 2012 GDP? Comparing the WSJ Survey and Fed Projections
May 16, 2012 Doug Short
Earlier this week the Wall Street Journal posted the results of its May Survey of economists. Naturally I charted some of the data, focusing on GDP, but I held off on sharing it until we got the latest Federal Reserve GDP projections, published at 2 PM today.First, some context: The BEA's Advance Estimate for Q1 GDP came in at 2.2 percent, a decline from the 3.0 percent Final Estimate for Q4 2011. The average GDP since the inception of quarterly GDP reporting in the late 1940s is 3.3 percent, which is nearly double the 1.7 percent 10-year moving average of GDP through the end of 2011.
More...
S&P 500 Snapshot: Tenth Decline in 13 Sessions
May 16, 2012 Doug Short
The S&P 500 continued is in relatively slow but persistent downward trajectory. Today was the fourth consecutive decline and the 10th of the last 13 sessions. The index popped up at the open on better-than-expected Industrial Production data and strong housing starts. But the positive mood began waning after the first hour of trading. The index steadily declined, ignoring the 2 PM Fed minutes, to close 0.01 off its intraday low with a loss of 0.44%. The VIX closed the day at 22.27, its highest level since the first day of 2012.
More...
Buy and Hold: Is It Still the Way to Go?
May 16, 2012 Dominic Cimino
The last four years have ushered in a debate that questions the effectiveness of the buy-and-hold investment strategy. Here is my humble opinion on the subject. Buy-and-hold is a fine approach during a secular bull market since time will generally be on the investor's side and cyclical market corrections should be negated in relative short order. But as the world continues to grow during the nuclear age, buy-and-hold will be questioned more and more as the potential for deleterious geopolitical risks become more inherent.
More...
Fed Intervention and the Market: New Update
May 16, 2012 Doug Short
Note from dshort: After posting my update yesterday on Treasury yields, I received several request to update this snapshot of Fed intervention and the market.
We're well into our sixth month since the latest Federal Reserve intervention, Operation Twist, was officially announced on September 21. We've now seen several bouts of aggressive Fed attempts to manage the economy following the collapse of the two Bear Stearns hedge funds in mid-2007 about three month before the all-time high in the S&P 500.
More...
Best Stock Market Indicator Flash Update: OEXA200R is now at 65%
May 16, 2012 John F. Carlucci
The OEXA200R closed out the day at the critical 65% level, the point at which it is advisable to sell all long positions in anticipation of a major market decline. See the "Background" section below for a fuller explanation of the significance of this metric.
What is particularly disturbing is the velocity with which the indicator has crashed - from 89% to 65% in just the past 14 days.
More...
Treasuries Update: 10-Year Yield Near Its Historic Low
May 15, 2012 Doug Short
Note from dshort: The market selloff in recent days prompted me to update my Treasury yield data. The yield on the 10-year note hit an interim high of 2.39 on March 19. Today it closed at 1.76, which is only four basis points above its historic closing low of 1.72 on September 22 of last year.
More...
A Long-Term Look at Inflation
May 15, 2012 Doug Short
The May 2011 Consumer Price Index for Urban Consumers (CPI-U) released today puts the April year-over-year inflation rate at 2.30%, which is well below the 3.95% average since the end of the Second World War.
Let's take a step back and look at the history of inflation over the past 140 years.
More...
Inflation: A Five-Month X-Ray View: New Update
May 15, 2012 Doug Short
Here is a table showing the annualized change in Headline and Core CPI for each of the past five months. I've also included each of the eight components of Headline CPI and a separate entry for Energy, which is a collection of sub-indexes in Housing and Transportation.
We can make some inferences about how inflation is impacting our personal expenses depending on our relative exposure to the individual components.
More...
What Inflation Means to You: Inside the Consumer Price Index
May 15, 2012 Doug Short
Let's do some analysis of the Consumer Price Index, the best known measure of inflation. The Bureau of Labor Statistics (BLS) divides all expenditures into eight categories and assigns a relative size to each. The pie chart below illustrates the components of the Consumer Price Index for Urban Consumers, the CPI-U, which I'll refer to hereafter as the CPI.
More...
Two Heads are Worse than One
May 15, 2012 Dominic Cimino
Back on March 7th, I presented a potential head and shoulders formation for the Euro currency. Here is an update of that chart. After 'popping and dropping' back below the neckline (seen in red), the Euro has begun moving lower beneath the 130.00 Euro/USD area. The head and shoulders topping pattern remains in place and suggests a lower Euro/USD. In addition, the consolidation area placed along the neckline has elicited a second smaller potential complex head and shoulders pattern. It could be that two heads are worse than one.
More...
Watching the Wilshire and Shanghai
May 15, 2012 Chris Kimble
Back in February I shared a commentary suggesting that the Wilshire 5000 and the Shanghai Composite peaked at the same time in 2011 and could well be doing the same again in 2012.
These two indexes were reflecting that from a portfolio allocation perspective, lower risk asset exposure should be beneficial to protecting values.
More...
L'Entente Fragile
May 15, 2012 Eric Schaefer
After forty years, this special relationship between the German Chancellor and the French President is an accepted fact. That is until the last French Presidential election. Germany and France may have become more economically entwined over the past forty years, but they have very different economic personas. Since the onset of the great recession those differences -- between a resurgent Germany and a lagging France -- have grown more pronounced; the widening gap between the two threatens to tinge the Franco-German entente.
More...
Retail Sales: Up 0.1% in April
May 15, 2012 Doug Short
The Retail Sales Report released this morning shows that retail sales in April were up 0.1% month-over-month from a downwardly revised 0.7% in March (from 0.8%). Today's number is below the Briefing.com consensus forecast of 0.2%. The year-over-year change is 6.4%. This is the weakest monthly change since the 0.0% reading for December. Now let's dig a bit deeper into the "real" data, adjusted for inflation and against the backdrop of our growing population.
More...
Two Measures of Inflation: New Update
May 15, 2012 Doug Short
Note from dshort: I've now updated the charts below to include today's Consumer Price Index data from the Bureau of Labor Statistics. The annualized rate of change is calculated to two decimal places for more precision in the side-by-side comparison with the PCE Price Index.
The BLS's Consumer Price Index for April, released today, shows core inflation above the Federal Reserve's 2% target at 2.31%. Core PCE, at the end of last month, is fractionally below the target at 1.96%.
More...
Inflation Watch: Headline and Core are Neck-and-Neck at 2.3%
May 15, 2012 Doug Short
The Bureau of Labor Statistics released the CPI data for last month this morning. Year-over-year Headline CPI came in at 2.30%, which the BLS rounds to 2.3%, down fractionally from 2.65% last month. Year-over year-Core CPI came in at 2.31%, which the BLS rounds to 2.3%, up fractionally from 2.26% last month.
More...
Weekly Gasoline Update: The Fifth Week of Price Declines
May 14, 2012 Doug Short
Here is my weekly gasoline chart update from the Energy Information Administration (EIA) data with an overlay of West Texas Crude (WTIC). Gasoline prices at the pump, rounded to the penny, declined over the past week: regular is down four cents and premium is down three. This is the fifth week of declines. Regular is up 53 cents and premium 52 cents from their interim weekly lows in the December 19th EIA report.
More...
Sex, Money and Largesse: The Hidden Depression
May 14, 2012 Lance Roberts
"Sex" and "Money" are probably two of the most powerful words in the English language. First, those two words got you to look at this article. They also sell products, books and services from "How To Have Better Sex" to "How To Make More Money" — ostensibly so you can have more of the former. Unfortunately, they are also the two primary causes of divorce in the country today.
More...
Adaptive Asset Allocation: A True Revolution in Portfolio Management
May 14, 2012 Adam Butler and Mike Philbrick
Modern Portfolio Theory (MTP) has been derided by practitioners, academics, and the media over the past ten years because the dominant application of the theory, Strategic Asset Allocation, has delivered poor performance and high volatility since the millennial technology crash.
The problem with Strategic Asset Allocation is not the math of MPT - the problem is with the assumption that the best estimates for returns, volatility and correlations are the long-term averages. Garbage In: Garbage Out (GIGO)
More...
Weighing the Week Ahead: Any Help from Housing?
May 13, 2012 Jeff Miller
In a light week for economic data, we can expect more attention to elections both in Europe and the US.
Economic growth continues at weak, below trend levels just at the time the stimulus programs are wearing off. For some this implies that the next recession is just around the corner.
From another perspective the current economic growth has occurred in spite of a major drag from reductions in government programs.
More...
World Markets Review: Major Declines for the Week
May 12, 2012 Doug Short
All eight indexes on my world watch list declined last week, with an average loss of 2.42%. Despite the ongoing turmoil in Europe, the worst declines were in the Asia-Pacific markets. The Hang Seng dropped 5.32%, the Nikkei 4.55%, the SENSEX 3.20 and the Shanghai Composite 2.33%. The financial backbone of the Eurozone, Germany, fared the best during last week's selloff, with the DAXK losing a mere 0.37%. France's CAC 40 placed second for the week, down 1.02%, but it has the worst year-to-date record and is the sole index on my watch list with a negative YTD return.
More...
The ''Real'' Mega-Bears: Weekend Update
May 11, 2012 Doug Short
Note from dshort: Here is an update in response to a request from Geoff in Phillip Island, Victoria, Australia.
It's time again for an update of our "Real" Mega-Bears, an inflation-adjusted overlay of three secular bear markets. It aligns the current S&P 500 from the top of the Tech Bubble in March 2000, the Dow in of 1929, and the Nikkei 225 from its 1989 bubble high.
More...
Getting Technical: Weekend Update
May 11, 2012 Serge Perreault
Here's the latest weekend update from Serge Perreault, a Chartered Accountant and market technician located near Montreal, Canada. Serge has been following the U.S. market in a series of weekly charts. Here is his update on the S&P 500.
More...
ECRI Update: Reaffirming the Recession Call ... Again
May 11, 2012 Doug Short
The Weekly Leading Index (WLI) growth indicator of the Economic Cycle Research Institute (ECRI) is now at 0.1 as reported in today's public release of the data through May 4. This is essentially unchanged from last week. The big news this week, however, is not the weekly data update but ECRI's latest reaffirmation of its recession call in a Bloomberg interview with ECRI's Lakshman Achuthan earlier this week. I've embedded a link to the nine-minute video on the Bloomberg website.
More...
Michigan Consumer Sentiment: Highest Since January 2008
May 11, 2012 Doug Short
The University of Michigan Consumer Sentiment Index Preliminary for May came in at 77.8, which is the highest reading since January 2008. Today's number was above the Briefing.com's consensus forecast of 76.0. See the chart below for a long-term perspective on this widely watched index.
More...
Producer Price Index: Core Exceeds Headline Inflation
May 11, 2012 Doug Short
Today's release of the April Producer Price Index (PPI) for finished goods shows a drop in headline inflation but a jump in core inflation. The seasonally adjusted finished goods number declined 0.2% month-over-month and a moderate 1.9% year-over-year, down from last month's adjusted 0.0% MoM and 2.8% YoY. Core PPI (ex food and energy) rose 0.2% MoM, down from last month's 0.3%. The YoY 2.8% was slightly lower than last month's 29%. Briefing.com had posted a MoM consensus forecast of 0.0% for Headline PPI and 0.2% for Core PPI.
More...
Gasoline Prices and Sales: What They Tell Us About the Economy
May 10, 2012 Doug Short
The Depart of Energy's Energy Information Administration (EIA) data on volume sales is over two months old when it released (the latest numbers from mid-February), so the near-term correlation between gasoline prices and volume sales isn't available. However, it remains an interesting rear-view mirror on a fascinating aspect of the US economy. Because the sales data are highly volatile with some obvious seasonality, I've added a 12-month moving average (MA) to give a clearer indication of the long-term trends.
More...
Weekly Unemployment Claims: Slight Drop From an Upward Revision
May 10, 2012 Doug Short
The Unemployment Insurance Weekly Claims Report was released this morning for last week. The 367,000 new claims is a decrease of 1,000 from an upward revision of 3,000 for the previous week. The less volatile and closely watched four-week moving average came in at 379,000. Here is the official statement from the Department of Labor:
More...
The Pain in Spain: A Turn for the Worse
May 09, 2012 Doug Short
Last month I posted an overlay of Spain's benchmark index, the IBEX 35 and the S&P 500. Today's news that the Spanish 10-year yield closed north of 6% prompted me to take another look at the IBEX. The index closed the day with a loss of 2.77%, setting a new low, 57.28% off its 2007 high -- fractionally below the -57.25% trough on March 9, 2009.
Here is an update of the overlay.
More...
Diversification: Still the Only Free Lunch
May 09, 2012 Adam Butler and Mike Philbrick
Diversification is a familiar term to most investors because it refers to the age-old concept of "don't put all your eggs in one basket." But the benefits of diversification can only be understood through a deeper understanding of the concept of correlation.
Correlation Defined
Imagine a flock of birds in the sky, or a school of fish swimming together in the ocean.
More...
Kiss of Death for the S&P 500?
May 09, 2012 Chris Kimble
On March 29th a "Power of the Pattern" indicator suggested that the S&P 500 would fall at least 7% in value. This indicator is the Australian Dollar/U.S. Dollar ratio. When it breaks support, the 500 index often follows. The last three times this index broke support the 500 index fell 8% twice and 15% once. See the link above for past S&P 500 declines.
More...
Is the Russell Sending a Warning? New Update
May 09, 2012 Dominic Cimino
Back on March 14th I wrote an article, Is the Russell Sending a Warning? I had previously noticed a strong divergent indicator posed by the Russell 2000 Index and the Nasdaq 100 Index. In July of 2007, the Russell had topped. It later placed a lower high in mid-October of that year, before moving substantially lower with the rest of the indices. Meanwhile, the Nasdaq 100 Index had continued to make new highs until finally relenting sometime in late October. The Russell had been an early divergent indicator.
More...
Obesity in Banking
May 08, 2012 Eric Schaefer
Judging by the drumbeat of recent comments, the Dallas Federal Reserve Bank President, Richard Fisher, is on the warpath against the trend towards ever bigger banks. Fisher's view is, despite the reams of legislation (the Dodd-Frank Wall Street Reform and Consumer Protection Act the most prominent) enacted in the aftermath of the 2008 financial market debacle, the "too big to fail" mentality in the financial sector remains the single most dangerous systematic risk to the security markets and to the real economy.
More...
Forecasting the Market: A Thought Experiment Revisited
May 08, 2012 Chris Turner
As we approach the end of the Q1 earnings season, here is the latest update of my ongoing "thought experiment" for forecasting the S&P 500 price based on earnings fundamentals.
The chart below is based on the latest trailing twelve-month earnings (TTM) data published on the Standard & Poor's website as of May 3.
More...
Volatility Management for Better Absolute and Risk-Adjusted Performance
May 08, 2012 Adam Butler and Mike Philbrick
In financial markets, few things are as predictive as volatility; it has been well documented that the best predictor of tomorrow's or even next month's volatility is today's volatility. The importance of this becomes evident when we consider how this fact can help keep portfolio risk levels constant throughout the investment horizon.
More...
Small Business Sentiment: Best Level Since December 2007
May 08, 2012 Doug Short
The latest issue of the NFIB Small Business Economic Trends is out today (see report). The May update for April at 94.5 is 2 points above the March number. This is the best month-over-month increase in 18 months. The index hit this level previously in February of 2011. For a higher score, we have to look back to December 2007, the month settled on by the NBER as the beginning of the last recession.
Here is the opening summary of the report:
More...
Japan's Post-Bubble Rallies: New Update
May 07, 2012 Doug Short
Note from dshort: On this day after the elections in France and Greece, Euro Zone indexes have rallied. In contrast the Nikkei 225 opened the week with a whopping 2.78% decline. I've updated the charts below in response to a reader's request.
More...
How to Beat the Market, and Why Most Investors Don't
May 07, 2012 Adam Butler and Mike Philbrick
Despite the thousands of mutual funds and advisors all purporting to offer a better approach to investing, it is universally acknowledged by practitioners and academics alike that two factors represent the most persistent and universal methods of capturing excess returns in markets: Value and Momentum.
More...
Weighing the Week Ahead: Here Come the Candidates!
May 06, 2012 Jeff Miller
In a light week for economic data, we can expect more attention to elections both in Europe and the US.
Political activity provides both an opportunity and a trap for most investors. It is so easy to use our own electoral preferences in forming conclusions about economic and investment prospects.
More...
The Breakdown in Crude Oil and Gasoline
May 04, 2012 Chris Kimble
Would a decline in Crude Oil prices be good for the S&P 500? The "Power of the Pattern" asked this question on February 27 when Crude Oil stood at $109. In the past 60 days, Crude Oil has declined around 8% and the 500 index has become fairly choppy.
More...
Unemployment Rate at 8.1%, But Only 115K New Jobs
May 04, 2012 Doug Short
Here is the lead paragraph from the Employment Situation Summary released this morning by the Bureau of Labor Statistics: Nonfarm payroll employment rose by 115,000 in April, and the unemployment rate was little changed at 8.1 percent....
Today's numbers numbers are well below than the briefing.com consensus, which was for 162K new nonfarm jobs and Briefing.com's own estimate of 140K nonfarm jobs.
More...
Pulse of Commerce Index: April Gain, But a 3-Month Annualized Decline of 1.2%
May 03, 2012 Doug Short
The latest Ceridian-UCLA Pulse of Commerce Index (PCI), a measure of the economy based on diesel fuel consumption, is now available. The published report highlights the third consecutive month of fractional increase, but the three months from February to April is below the previous three months by 1.2 percent at an annualized rate.
For an understanding of the long-term implications of this index, let's take a close look at the PCI three-month moving average adjusted for population growth.
More...
Likely Triggers of the Next Recession
May 03, 2012 Lance Roberts
The conjecture about the next recession has raged ever since the end of the last one. Will it be in 2012 or 2013 or, if you believe the many mainstream economists' estimates, never? Historically speaking, recessions have occurred on average of about every 6-8 years regardless of monetary or fiscal policies, the strength of the economy or global peace - they occurred nonetheless.
More...
Rebutting Paul Krugman: The Rest of the Story
May 03, 2012 Chris Turner
I recently read an interesting, if rather puzzling article over at Barry Ritholtz's blog (one of my daily mandatory reads after Advisor Perspectives) regarding one of Paul Krugman's recent commentaries, The Secret of Our Non-success. Krugman showed the following chart from FRED:
More...
The S&P 500, Dow and Nasdaq Since Their 2000 Highs
May 02, 2012 Doug Short
Here is a update in response to a standing request from David England, a professor who has developed a popular college level stock market classes at John A. Logan College in Carterville, IL. In his presentations, he likes to disprove the standard message of Wall Street, "Don't worry! The market will always come back." I furnished David with some charts, and I now share them with regular visitors to my Advisor Perspectives pages.
More...
Secular Bull and Bear Markets
May 02, 2012 Doug Short
Was the March 2009 low the end of a secular bear market and the beginning of a secular bull? Without crystal ball, we simply don't know. One thing we can do is examine the past to broaden our understanding of the range of possibilities. An obvious feature of this inflation-adjusted is the pattern of long-term alternations between up-and down-trends.
More...
Consfused About China's Growth Prospects?
May 02, 2012 Mike Shedlock
China manufacturing is reported to be in contraction and expansion simultaneously. The Chinese government reports expansion. The HBSC PMI says China is in contraction for the 6th consecutive month.
Obviously this is impossible, so the question is "who to believe?"
More...
Weighing the Week Ahead: An Economic Turning Point?
May 02, 2012 Jeff Miller
This is an especially important week for financial markets, so I am doing my weekly update, even though it is late, and more focused on the future than last week.
Going into this week, the recent economic reports have all been a bit disappointing -- nothing terrible, but a little worse than expectations.
More...
Can the US Skirt a Global Recession?
May 02, 2012 Dwaine van Vuuren
With many parts of the Euro-zone entering or already in recession, and the OECD recently putting Australia, Germany and Italy into recession, one has to wonder if the feeble U.S recovery can skirt a global recession. Many mainstream pundits have been pointing to countries around the globe slipping into recession as a reason why a U.S recession in the near future is a done deal.
More...
Market Valuation Indicators: Overvaluation Relatively Unchanged
May 01, 2012 Doug Short
Here is a summary of the four market valuation indicators I updated at the beginning of the month. As I've frequently pointed out, these indicators aren't useful as short-term signals of market direction. Periods of over- and under-valuation can last for years. But they can play a role in framing longer-term expectations of investment returns.
More...
The Q Ratio and Market Valuation
May 01, 2012 Doug Short
The Q Ratio is a popular method of estimating the fair value of the stock market developed by Nobel Laureate James Tobin. It's a fairly simple concept, but laborious to calculate. The Q Ratio is the total price of the market divided by the replacement cost of all its companies. Fortunately, the government does the work of accumulating the data for the calculation. The numbers are supplied in the Federal Reserve Z.1 Flow of Funds Accounts of the United States, which is released quarterly.
More...
Crestmont Market Valuation Update
May 01, 2012 Doug Short
The May 2011 article P/E: Future On The Horizon by Advisor Perspectives contributor Ed Easterling provided an overview of Ed's method for determining where the market is headed. His analysis is quite compelling. Accordingly I include the Crestmont data to my monthly market valuation updates.
More...
Au Revoir, Nicolas
May 01, 2012 Eric Schaefer
Recent political developments in Europe are taking their toll. The equity market gains of the 1st Quarter have been lost so far into the 2nd. All Eurozone equity markets saw their 1st Quarter gains partially erased or the price slide continued (in the case of Spain) in US Dollar terms. In small part, the Dollar's 1.1 percent gain (versus the Euro) since the end of the March is to blame. But in Euro terms the tone is decidedly negative. Each of the eleven Eurozone equity markets tracked by MSCI has fallen thus far in the 2nd Quarter.
More...
Is the Stock Market Cheap?
May 01, 2012 Doug Short
Here is a new update of a popular market valuation method using the most recent Standard & Poor's "as reported" earnings and earnings estimates and the index monthly averages of daily closes for March 2012, which is 1386.43. The ratios in parentheses use the monthly close of 1,397.91. For the earnings, see the table below created from Standard & Poor's latest earnings spreadsheet.
More...
Regression to Trend: A Perspective on Long-Term Market Performance
May 01, 2012 Doug Short
About the only certainty in the stock market is that, over the long haul, over performance turns into under performance and vice versa. Is there a pattern to this movement? Let's apply some simple regression analysis (see footnote below) to the question.
More...
Measuring the Performance of the Ivy Portfolio
Apr 30, 2012 Doug Short
I've been posting a monthly moving average update for the five ETFs in featured in Mebane Faber and Eric Richardson's Ivy Portfolio since the spring of 2009, when I featured my review of the book. Investing strategies are not the primary focus of my website, and I don't personally track the performance of the Ivy Portfolio other than to highlight the monthly signals.
For ETF performance tracking and backtesting, I use ETFReplay.com, an excellent website for analyzing the performance of individual ETFs and ETF portfolios based on customized moving-average strategies.
More...
Moving Averages: Month-End Update
Apr 30, 2012 Doug Short
The S&P 500 closed April with a loss of 0.75% from the March close. All three index signals indicate an invested position. See the specifics here.
The Ivy Portfolio
The table below shows the current 10-month simple moving average (SMA) signal for each of the five ETFs featured in The Ivy Portfolio.
More...
Will the 'Real' GDP Please Stand Up?
Apr 30, 2012 Doug Short
How do you get from Nominal GDP to Real GDP? You subtract inflation. The Bureau of Economic Analysis (BEA) uses its own GDP deflator for this purpose, which is somewhat different from the BEA's deflator for Personal Consumption Expenditures and quite a bit different from the better-known Bureau of Labor Statistics' inflation gauge, the Consumer Price Index.
Let's take a look at what "Real" GDP would look like if it were calculated with these other gauges.
More...
''Real'' Disposable Income Per Capita: Still Flatlining
Apr 30, 2012 Doug Short
Note: I've now revised this update to include a chart of the year-over-year percent change in DPI to help us evaluate the recession risk at the current level.
Earlier today I posted my monthly update of the year-over-year change in the Bureau of Economic Analysis (BEA) Personal Consumption Expenditures (PCE) price index since 2000. My focus was on the PCE index as a measure of inflation. Now let's look at the PCE data to understand what the latest numbers are telling us about a key driver of the U.S. economy: "Real" Disposable Income Per Capita.
More...
Moving Averages: Month-End Preview
Apr 30, 2012 Doug Short
Here is a preview of the monthly moving averages I track early on the last business day of the month. All three S&P 500 and all five Ivy Portfolio ETF monthly moving averages are currently signaling "invested". The S&P 500 signals are unchanged from last month's invested position. The 12-month alternative to the Ivy Portfolio, discussed below, has one pending sell signal.
More...
Real GDP Per Capita and the Year-over-Year Change
Apr 27, 2012 Doug Short
This morning we learned that the Advance Estimate for Q1 real GDP came in at 2.2%, a decline from the 3.0% final reading for Q4 2011. The latest data does not significantly change the long term view of real per-capita GDP, but it did slightly reduce the recession warning implicit in the latest real GDP year-over-year percent change, now at 2.08%, an increase over the Q4 YoY 1.61%, which was an improvement over the 1.46% YoY of Q3 2011.
More...
Visualizing GDP
Apr 27, 2012 Doug Short
Note from dshort: The charts in this commentary have been updated to include the Q4 GDP Third Estimate.
The chart below is my way to visualize real GDP change since 2007. I've used a stacked column chart to segment the four major components of GDP with a dashed line overlay to show the sum of the four, which is real GDP itself. As the analysis clear shows, personal consumption is key factor in GDP mathematics.
More...
GDP Q1 Advance Estimate Disappoints at 2.2%
Apr 27, 2012 Doug Short
The Advance Estimate for Q1 GDP came in at 2.2%, down from 3.0% in the previous quarter, which was below most mainstream media estimates. The consensus at Briefing.com was for 2.5%, and Briefing.com's own estimate was for 2.9%. However, today's number exactly matched the median and mean of the forecasts of 51 economists who responded to the Wall Street Journal April survey, which I reported on last week.
Here is an excerpt from the Bureau of Economic Analysis news release....
More...
The Bernanke-Krugman Smackdown
Apr 26, 2012 Mike Shedlock
Bernanke Calls Krugman "Reckless"; Krugman and Bernanke Both in Academic Wonderland Somewhere Deep in Outer Space
Paul Krugman is now so far into outer space with ridiculous economic proposals that even Helicopter Ben Bernanke recognizes Krugman's proposals as "reckless".
More...
Understanding the CFNAI Components
Apr 26, 2012 Doug Short
The Chicago Fed's National Activity Index, which I reported on earlier today, is based on 85 economic indicators drawn from four broad categories of data:
* Production and income
* Employment, unemployment, and hours
* Personal consumption and housing
* Sales, orders, and inventories
More...
Chicago Fed: Economic Activity Decreased in March
Apr 26, 2012 Doug Short
According to the Chicago Fed National Activity Index, March economic activity decreased from February. This is the third consecutive monthly decline. Here are excerpts from the report:
Led by declines in production-related indicators, the Chicago Fed National Activity Index (CFNAI) decreased to –0.29 in March from +0.07 in February. All four broad categories of indicators that make up the index deteriorated from February....
More...
The ''Real'' Goods on the Latest Durable Goods Orders
Apr 25, 2012 Doug Short
Earlier this morning I posted an update on the April Advance Report on March Durable Goods Orders.
This Census Bureau series dates from 1992 and is not adjusted for either population growth or inflation. Let's now examine the same data adjusted for both population growth and producer price inflation, which gives us the "real" durable goods orders per capita. The snapshots below offer a rather sobering corrective to the standard reports on the nominal monthly data.
More...
Durable Goods Orders Fell 4.2 Percent: Far Below Expectations
Apr 25, 2012 Doug Short
The April Advance Report on March Durable Goods was released this morning by the Census Bureau.
The new orders at -4.2 percent came in substantially below the Briefing.com consensus estimate of -1.7 percent. Similarly, the ex-transportation -1.1 percent was below than the consensus forecast of 0.5 percent.
If we exclude both transportation and defense, the core durable goods orders declined 1.5 percent in March following a 1.3 percent increase in February, and a 3.5 percent decline in January.
More...
Mind the Approach
Apr 24, 2012 Eric Schaefer
A topic for retirement planning chatter is the Siegel+Gale survey results (Investor Testing of Target Date Retirement Fund Comprehension and Communications) of investors' understanding of what exactly they purchased when investing in target date mutual funds. The study was sponsored by the Securities and Exchange Commission (SEC) and conducted by Siegel+Gale, a market research firm.
More...
Impatience Will Lead To Our Demise
Apr 24, 2012 Lance Roberts
It seems that political leaders in Europe, particularly Germany, may be giving up on the idea of austerity measures to reign in the excessive debt levels that have run amok in these countries, as well as in the U.S., over the last 30 years. Angela Merkel, Germany's Chancellor, has been a driving force on the insistence of tough debt cutting measures and fiscal targets in exchange for bailout funds since the beginning of the Greek crisis.
More...
US-China Trade as an Economic Indicator
Apr 24, 2012 Craig Eyermann
Currently, international trade data suggests that both China and the U.S. are undergoing significant, near-recessionary slowdowns in economic growth, if not outright recessions, which we strongly suspect is already the case for China, but not the U.S., which we believe will only skirt the edge this quarter.
More...
April Consumer Confidence: The Recessionary Mindset Remains
Apr 24, 2012 Doug Short
The Latest Conference Board Consumer Confidence Index was released this morning based on data collected through April 12th. The 69.2 reading was slightly below the consensus estimate of 69.5 reported by Briefing.com and further below Briefing.com's more optimistic forecast of 71.0. This is a small decline from last month's 69.5, which is a downward revision from the Conference Board's previously reported 70.2.
More...
The Four Totally Bad Bears: New Update
Apr 24, 2012 Doug Short
Note from dshort: At the request of Greg Patterson of The Advisory Group in San Francisco, I've updated this snapshot of our totally bad quartet through the market close on April 23.
The chart series features an overlay of the Four Bad Bears in U.S. history since the market peak in 1929. They are: 1) the Crash of 1929, 2) the Oil Embargo of 1973, 2) The 2000 Tech bust and 4) the post-2007 Financial Crisis. The series includes nominal, real, total-return and real total-return comparisons.
More...
S&P 500 at 25-Year Resistance
Apr 23, 2012 Chris Kimble
A resistance line that ties in the highs of 1987 and the lows of 2003 impacted the S&P 500 last May. Now this line is coming into play again at (1) below.
When it comes to portfolio construction, sometimes it pays to harvest some risk assets at long-term resistance lines. Pulling back on exposure last May paid off as the 500 index was hitting this 25-year line.
More...
Today's Dow Remains in Fourth Place
Apr 23, 2012 Doug Short
Here is the latest look at the "Sweet Sixteen" Dow recoveries adjusted for inflation/deflation I've been illustrating from time to time over the past two years. The charts below compare the current Dow recovery since the March 2009 low with fifteen other major recoveries dating from the origin of this legendary index in 1896. (See the footnote for my selection criteria.)
At this point the Dow is 789 market days beyond the 2009 low. The index remains in fourth place in our Sweet Sixteen competition with a real gain of 83.2% off the low.
More...
Weighing the Week Ahead: Will the Fed Disappoint the Markets?
Apr 22, 2012 Jeff Miller
Get ready for a week of renewed focus on the Fed. No one expects a policy change, but there is plenty of room for disappointment.
In the new era of Fed communications there will be plenty to analyze, including the following:
More...
Vehicle Miles Driven And the Economic Contraction
Apr 20, 2012 Doug Short
The Department of Transportation's Federal Highway Commission has released the latest report on Traffic Volume Trends, data through February. Travel on all roads and streets changed by 1.8% (3.9 billion vehicle miles) for February 2012 as compared with February 2011. The 12-month moving average increased by 0.14%. This is the third month of increase after nine consecutive months of decline.
For a deeper understanding of this metric, we're going to adjust it for population growth.
More...
Car Sales, Gasoline and Demographics
Apr 20, 2012 Mike Shedlock
Note from dshort: For the past few years I've been analyzing the Department of Transportation's monthly updates on Vehicle Miles Driven, and I also have a keen interest in demographics. So naturally I was fascinated by this Mike Shedlock commentary I spotted earlier today.
More...
Profit Margin Squeeze: New Update
Apr 19, 2012 Doug Short
The two charts below offer clues for evaluating the risk of profit margin squeeze in the current economy. One is the ratio of crude to finished goods in the Producer Price Index. The other is an indicator constructed from two data series in the Philadelphia Fed's Business Outlook Survey through today's release. It is the spread between the Philly Fed's prices paid (input costs) and received (prices charged) data. A major risk factor for margin squeeze had been the increase in commodity prices over the past several months with the price of oil and gasoline as the dominant factor.
More...
Conference Board Leading Economic Index: Sixth Consecutive Monthly Gain
Apr 19, 2012 Doug Short
The Conference Board Leading Economic Index (LEI) for March was released this morning. The index increased 0.3 percent in March to 95.7 (2004 = 100). This was the sixth consecutive month of growth. The Briefing.com consensus had been for 0.2%.
Earlier this year the Conference Board has subjected the LEI to a major overhaul, which was reflected in the January update for December.
More...
Philly Fed Business Outlook Survey: Expanded Modestly
Apr 19, 2012 Doug Short
Note from Doug: Having lived for two years in a Paoli, PA, a suburb west of Philadelphia just south of Valley Forge, I have a special interest in this regional indicator. But, more importantly, it gives a generally reliable clue as to direction of the broader Chicago Fed's National Activity Index.
More...
Huge Dilemma: Do You Protect Your Job or Your Clients' Money?
Apr 19, 2012 Mike Shedlock
Every day I face the question: Do You Protect Your Job or Your Clients' Money?
It is very tough preaching caution, when caution is routinely tossed to the winds. Yet history has proven time and time again, that such times are precisely when caution is warranted, even though timing the precise moment is simply impossible.
More...
WSJ Economists' GDP Forecasts: 2.2% in Q1, Rising to 2.4% in Q2
Apr 18, 2012 Doug Short
On Friday of next week (April 27th) we'll get the Advance Estimate for Q1 GDP from the Bureau of Economic Analysis. Meanwhile, the Wall Street Journal's April Survey of economists is now available. Let's see what their crystal ball is telling them about Q1 GDP.
More...
Variable Withdrawals in Retirement
Apr 18, 2012 Wade D. Pfau
To get up to speed on using variable withdrawals in retirement, I've been studying "Variable Withdrawals in Retirement" from Bob's Financial Website, among other resources. His article is the best overview I've seen so far.
The classic 4% withdrawal rate rule is about constant inflation-adjusted withdrawal amounts. The benefit of this approach is that it provides a smooth and predictable income stream for as long as wealth remains. But this method also has disadvantages.
More...
Trends in Nonfarm Employment, Civilian Employment and Weekly Unemployment Claims
Apr 17, 2012 Mike Shedlock
Initial unemployment claims have generally been trending lower, but in a very choppy manner. One way to smooth out the weekly claims reports is to use seasonal adjustments. Another way is to use 4-week moving averages. However, both methods are subject to fluctuations around floating holidays such as Thanksgiving and Easter. Adding a couple of extra weeks to the moving averages and comparing not-seasonally-adjusted numbers to the same six weeks in prior years helps even more. Here are a couple of charts to consider.
More...
10 More Years of Low Returns
Apr 17, 2012 Lance Roberts
Ten more years of low returns in the stock market. If you are one of the millions of baby boomers headed into retirement -- start saving more and spending less because the stock market won't bail you out. Now that I have your attention I will explain why this is the likely future ahead for investors.
More...
Many Unhappy Returns?
Apr 16, 2012 Eric Schaefer
Title 26 of the United States Code (26 U.S.C.), also known as the Internal Revenue Code, is the section of the law of the land dealing with the subject of taxes. In total, the Internal Revenue Code consists of 102 different chapters, organized in nine over-arching subtitles. However, it is measured -- by words or by pages -- Title 26 is voluminous. The Taxpayer Advocate Service (TAS), an independent organization within the Internal Revenue Service (IRS), estimated in 2010 that the full tax code contained 3.8 million words: enough words to cover over eleven thousand single spaced pages.
More...
How The Economy Churns
Apr 15, 2012 Karl Smith
I've been playing with the JOLTS data and I don't have anything too too solid to report but I did want to reinforce some of my earlier points about how different the US economy as a whole is from the economy we have in our minds. We usually think of a worker as a breadwinning head household in a career job. He or she has a steady life that may be rocked by recession. However, one of our most job heavy sectors is Leisure and Hospitality. Look at its basic dynamics.
More...
Weighing the Week Ahead: Will Q1 Earnings Disappoint?
Apr 15, 2012 Jeff Miller
Game time! Earnings season -- with special significance. It is always important.
* Owners of growth stocks can be especially vulnerable to a missed quarter, since an earnings miss affects both the "E" in the P/E ratio and may also lead to a lower multiple.
* Owners of cyclical stocks
* Even owners of dividend stocks need enough growth to provide support for current and future yield.
More...
Friday the 13th: Unlucky for High Yield Funds
Apr 13, 2012 Chris Kimble
Four days ago the first chart below illustrated that high yield ETF JNK appeared to have created a bearish head and shoulders topping pattern of late (see post here).
More...
Large Potential Patterns for the Euro and the Dollar
Apr 12, 2012 Dominic Cimino
The Euro currency and the Dollar both have possible patterns in place that suggest potentially large moves. Below is the current chart of the Euro currency. You can see the continued development of the potential head-and-shoulders topping pattern as the market consolidates beneath the neck-line that I presented back on March 7. This pattern is still in play, and will be unless the market rallies up through the neck-line with momentum. If the pattern were to complete itself, the Euro/USD would trade down to the 112.00 area minimally.
More...
The Fed Balance Sheet: What is Uncle Sam's Largest Asset?
Apr 11, 2012 Doug Short
Pop Quiz! Without recourse to your text, your notes or a Google search, what line item is the largest asset on Uncle Sam's balance sheet?
A) U.S. Official Reserve Assets
B) Total Mortgages
C) Taxes Receivable
D) Student Loans
More...
The Return of Economic Weakness
Apr 10, 2012 Lance Roberts
Here is a number for you: 70% That is roughly how many economic reports have missed their mark in the last month. Why is this important? Believe it or not - It has a lot to do with the weather. We have written many times recently about the weather related effects skewing the seasonal adjustment figures in everything from the leading indicators and retail sales to employment numbers. Now those weather related boosts are beginning to run in reverse as weather patterns return to normal and realign with the seasonal adjustments.
More...
Clues from the Commodity Rollover
Apr 10, 2012 Chris Kimble
When looking for clues on how to build a portfolio, the Morgan Stanley Commodity Related Equity Index (CRX) and the Commodity Research Bureau Index (CRB) sent quality messages to protect risk asset values and offered clues that the global economy was going to soften some back in 2008 and 2010. As we can see in the accompanying chart, they broke below key rising support lines (1) and (2).
More...
The Real Consumer Credit Story
Apr 09, 2012 Mike Shedlock
The Real Consumer Credit Story: Virtually No Recovery in Revolving Credit, No Recovery in Non-Revolving Credit
Bloomberg reports Consumer Credit in U.S. Rose Less Than Forecast in February.
More...
High Yield Topping Pattern?
Apr 09, 2012 Chris Kimble
High Yield/Junk Bonds are often quality leading indicators for the future direction of the equities markets and can help investors shape portfolio construction.
Did Junk Bond ETF (JNK) create a "Head & Shoulders" topping pattern?
More...
From Theory to Practice: How Much Will You Leave on the Table?
Apr 09, 2012 Wade D. Pfau
Wade -
Thanks for your colleagues and your for this research. As someone in the real world who will be retiring in the very near future I appreciate practical research and advice. I understand the need for theory but how does that get applied? Maybe Scott Burns over simplifies these ideas but people in the real world want to know how to apply something to their specific situation.
Thanks Matt Bly
More...
Weighing the Week Ahead: More Excuses for Selling?
Apr 08, 2012 Jeff Miller
Experienced traders understand that markets rarely move in a straight line.
Staying with a long and strong trend -- either up or down -- is often the most difficult trade.
We expect stair steps and corrections since fundamentals rarely support such rapid changes. The result is that as a move gets more extended, even traders who have played the trend are poised to react.
More...
Indian Quarter
Apr 07, 2012 Jason Leach
First quarter 2012 was an "Indian Quarter" with the fourth warmest winter in U.S. history coinciding with the best quarter for U.S. equities since the iMac, Palm V and internet IPOs were warming things up back in 1998. That didn't end well, but I do hear the sock puppet dog is making a comeback. The S&P 500, Dow Jones Industrial Average, and NASDAQ Composite were up 12%, 8%, and 19% for the first quarter of 2012.
More...
Too Many Dollar Bears?
Apr 05, 2012 Chris Kimble
Public opinion towards the U.S. Dollar has grown to be rather Negative/Bearish of late at (1). At the same time the Dollar-Euro ratio is moving a little higher off of support and moving to the upside this morning, breaking above a multi-month flag/pennant pattern at (2). At the same time the S&P 500 finds itself on a steep support line.
More...
The P/E Report: An Excerpt From Crestmont Research
Apr 04, 2012 Ed Easterling
The following commentary and analysis is an excerpt from Crestmont's quarterly review of the price/earnings ratio titled The P/E Report....
The stock market increased significantly over the past quarter. As a result, P/E has increased further into the range of "fairly-valued." The reported P/E is distorted well below the normalized P/E due to currently high and unsustainable profit margins.
More...
Forget about the VIX; Long-Term Volatility is High
Apr 04, 2012 Dominic Cimino
I'm tired of hearing about low volatility as measured by the VIX. Media outlets refer to this gauge as if it's definitive when assessing risk. But what they may not realize, and certainly don't often share with you, is the shorter-term nature of its appropriate application. The CBOE's own website describes the VIX as, "a key measure of market expectations of near-term volatility conveyed by S&P 500 stock index option prices." It's great for traders who are moving money daily or weekly; but what about long-term investors?
More...
Wave 5 Of The Cyclical Bull Market
Apr 03, 2012 Lance Roberts
Let me start off with this disclaimer: I am a neophyte when it comes to Elliott Wave theory so please forgive my rudimentary analysis and labeling especially to those that are far more sophisticated in EW analysis than I. However, the point I want to make here is not so much about the technical analysis itself but the underlying "psychology" of the current cyclical bull market and the fact that this time "is not different."
More...
A Repeat of Spring 2011?
Apr 03, 2012 Chris Kimble
Last May key markets in the United States and around the world were creating patterns that two-thirds of the time suggested to pull risk off the table. Why? Rising wedges were taking place around the world, and if one support line broke, they should all fall like dominoes, since correlation was so high
More...
No ''Ratio-cination''
Apr 03, 2012 Eric Schaefer
Unnoticed by many, an important barrier was breached in the past two weeks -- a development which merits mention and consideration. On March 16th the ratio of spot oil to natural gas prices, on a BTU (British Thermal Unit) equivalent basis, temporarily reached a new historic high before retreating. At more than nine times the price of an equivalent amount of natural gas (measured in BTUs), oil prices by another measure once more defied gravity or reason.
More...
Weighing the Week Ahead: Can Job Growth be Improved?
Apr 02, 2012 Jeff Miller
Many current economic and policy questions share a common theme: Jobs!
Employment is a crucial indicator of the current economic situation, but future consumer spending also depends on jobs growth. Corporate profits and stock prices are similarly linked. And finally, we can depend on politicians to keep the issue in focus, especially in an election year.
More...
Jobs and Demographics
Mar 30, 2012 Mike Shedlock
Question on Jobs: How Many Does It Take to Keep Up With Demographics?
John Mauldin pinged me with a question on jobs and demographics from one of his readers: Hello John. In past letters you have cited the need to create 125,000 jobs per month to stay even with the growth rate in the labor force....
More...
The Consumption Dysfunction
Mar 30, 2012 Lance Roberts
The latest reports from the Bureau of Economic Analysis on economic growth and personal income and spending have, on the surface, appeared to show improvement. Spending is up more than expected and economic growth is clipping along at a 3% annual growth rate in the fourth quarter. That is the good news. As we have discussed in the past, the consumer is the key to this whole economic equation. Consumption is 70% of the economy and, as long as the consumer has the ability to consume, the economy can chug along. However, therein lies the dysfunction as well.
More...
2277 Stocks and Still Not Diversified?
Mar 30, 2012 Adam Butler and Mike Philbrick
The single greatest misperception we encounter with clients, and many advisors as well, is the idea that material diversification can be achieved with a large number of individual stocks or stock mutual funds. This just isn't true; further, it is less true now than ever because of high average stock correlations within and across markets.
More...
Personal Consumption Expenditures: Price Index Update
Mar 30, 2012 Doug Short
The monthly Personal Income and Outlays report was published today by the Bureau of Economic Analysis. The first chart shows the monthly year-over-year change in the personal consumption expenditures (PCE) price index since 2000. I've also included an overlay of the Core PCE (less Food and Energy) price index, which is Fed's preferred indicator for gauging inflation. The latest Headline PCE price index YOY rate of 2.36% is a decrease from last month's 2.55%. The Core PCE index of 1.88% is a decrease from the previous month's 1.91%.
More...
Commodities Giving Mixed Signals
Mar 28, 2012 Chris Kimble
The S&P 500 and the Morgan Stanley Commodity Related Index (CRX) have had a pretty decent correlation over the past few years. Their tops and bottoms have taken place close to the same time frames. That's no longer the case. The S&P 500 finds itself around 3% above last April's highs, while the CRX is truly reflecting relative weakness, currently 18% lower than its April 2011 highs!
More...
Surprise! Jobs Drive Consumer Confidence
Mar 27, 2012 Lance Roberts
With the release of the Conference Board's consumer confidence survey this morning, we find that the index ticked down slightly in March to 70.2 from 71.6 in February. While the media sloughed off the decline by pointing to the increase in the present situation component, which rose to 51 from 46.4, what was less widely discussed was the decline in future expectations about the economy, which fell from 88.4 to 83.
More...
Keep the Champagne Corked
Mar 27, 2012 Eric Schaefer
Over the past twelve months, payrolls have expanded by slightly more than 2.0 Million positions. This compares to roughly 1.4 Million jobs in the preceding twelve months ending February 2011. Investors generally interpreted this trend as good news, emphasizing the uptick in the pace of job creation.... For both equity and bond investors, the payroll report, on balance, augurs well for the economy's future.... Although we prefer not to spoil the party, we must beg to differ.
More...
Is the Bond Bull Market Over?
Mar 27, 2012 Chris Kimble
The past 90 days haven't been favorable to the price of longer dated Government bonds and notes, as the popular government bond ETF (TLT) is down over 10% since Christmas. Many an article has been written declaring the end of bull market in government bonds.
More...
ECRI WLI Growth Confusion & Forecast
Mar 27, 2012 Dwaine van Vuuren
More recently, ECRI has switched from the use of smoothed 6-month growth rates (as calculated by their WLIg growth metric) to annual (52-week) growth numbers of its Weekly Leading Index (WLI) to prop up a recession scenario. The reason cited is "...a widespread seasonal adjustment problem that economists have known about for some time." Another native Capetonian, Prieur du Plessis, who regularly tracks the WLI, has posted an excellent analysis of the rationale behind this decision....
More...
Is It Decoupling or Dangerous Divergences?
Mar 27, 2012 Dominic Cimino
As a follow-up to my March 14th commentary, Is The Russell Sending a Warning?, I want to share a set of additional market charts that have established interim highs in place. These markets may be sending a divergent warning message about U.S. stocks.... I ask this question because previously, some of these markets have led the S&P; that is, they made the first move, either up or down.
More...
US Economy Almost Back to Par Growth
Mar 26, 2012 Dwaine van Vuuren
Note from dshort: Shortly after posting my update on this morning's Chicago Fed National Activity Index, Dwaine van Vuuren sent me a link to his latest RecessionAlert.com US Coincident SuperIndex update, which appeared yesterday. Dwaine's analysis and the CFNAI are clearly singing in close harmony.
More...
Weighing the Week Ahead: Time to Worry about China?
Mar 25, 2012 Jeff Miller
Last week featured more than the usual quota of Dueling Experts.
Goldman Sachs grabbed headlines with a long report proclaiming this to be a "generational opportunity" to buy stocks. Here is a good summary from Joe Weisenthal. Several other top strategists are pretty bearish and sticking to their calls.
Market Watch rounded up the usual suspects to explain why the markets will soon crash and what you should do about it.
More...
Where is the Unemployment Rate Headed?
Mar 23, 2012 Mike Shedlock
Where is the Unemployment Rate Headed? Interactive Mapping Lets "You" Set the Parameters, and Plot a Graph
I have a pretty cool interactive map below that will let you graph the unemployment rates based on parameters that you can choose. First let's take a look at the current unemployment rate and a discussion of the parameters that define it.
More...
The ''Fly'' In Ryan's Budget Ointment
Mar 22, 2012 Lance Roberts
In the last few days there have been a litany of articles written both in favor of and against Paul Ryan's proposed budgetary plan. (See here, here, here, here) Before I get into the major overriding "fly" that no one is addressing, let me just say the Ryan's proposal, while far from perfect, is at least a plan - which is more than we have today.
More...
Bonds, Gold and the Dollar: The Macro View
Mar 22, 2012 Dominic Cimino
I believe that when assessing implications and observations based upon charts, the macro, or longer term perspective, must be the starting point, and any shortening of the observed time frame should be viewed within the context of the macro perspective.
Here is a monthly chart of 30-year T-Bond futures, Gold futures and the US Dollar Index dating back to the late 70s.
More...
Seasonal Change
Mar 21, 2012 Chris Kimble
Note from dshort: Market technician Chris Kimble emailed me the chart below without comment -- other than the text on the chart itself. My own reaction is comparable to that of the little guy on the chart. But I'm posting this for future reference. At some point during the dog days of summer, we'll take another look at this chart and see what happened in the intervening months.
More...
The Twilight of Retirement's Golden Age
Mar 20, 2012 Eric Schaefer
On Tuesday, March 13th, the Employee Benefits Research Institute (EBRI) released its annual retirement confidence survey (entitled, The 2012 Retirement Confidence Survey: Job Insecurity, Debt Weigh on Retirement Confidence, Savings). Since 1990, EBRI has been measuring American households' self-assessment of their financial preparedness for retirement. In the almost four years since the 2008 financial crisis, only a minority of workers (14 percent) feel "very confident" in the provisions they have made for life during their golden years.
More...
Is There a Bubble in Treasuries?
Mar 19, 2012 Mike Shedlock
Both Sides of the Case; Explaining the 2011 Treasury Rally (It's Not What You Think); Where to From Here?
People have been calling a bubble in treasuries for at least a decade. The shocking result, especially to hyperinflationists, has been a stair-step decline in yields for 30 years. That's quite a long time.
More...
Weighing the Week Ahead: Seeking Safety?
Mar 19, 2012 Jeff Miller
If you are looking for safety, you are not alone. Many people who lost money in stocks and real estate have become more risk averse. The problem?
They are looking for safety in all the wrong places!
Owners of (formerly AAA-rated) US debt experienced this last week. If you own a ten-year Treasury note, you lost 2.5% in market value as the yield increased 30 basis points in a few days.
More...
Is Silver the Great Trading Opportunity of 2012-2013? New Update
Mar 15, 2012 John F. Carlucci
Silver tends to form a very periodic, predictably shaped asset bubble. Silver is also relatively volatile compared to most assets like large cap stocks and gold. These two factors – predictability and volatility – offer a potentially very lucrative trading opportunity for silver. I believe that window is opening right now. In this article, we will examine silver's predictability and volatility in great detail so as to prepare for this trade.
More...
Why Our Recession Call Stands
Mar 15, 2012 Lakshman Achuthan and Anirvan Banerji
Note from dshort: The commentary below is a reprint of a new post on the ECRI website. This is a most welcome expansion on ECRI's rationale for repeatedly affirming its bold recession call despite numerous signs in the intervening months of a seemingly improving economy.
Many have questioned why, in the face of improving economic data, ECRI has maintained its recession call. The straight answer is that the objective economic indicators we monitor, including those we make public, give us no other choice.
More...
Is the Bond Price Breakdown/Rally in Yields Suggesting a Growing Economy?
Mar 15, 2012 Chris Kimble
An across-the-board breaking of support is taking place in a wide variety of bonds in the 6-pack chart below. Could this decline in price/rally in yield actually be a sign that growth in the economy is starting to take place?
More...
No Tsunami
Mar 14, 2012 Eric Schaefer
In most cases, in most states, fiscal straits do not lead inevitably to bankruptcy. Long before that point is reached, states have often already intervened by constituting a fiscal control board to manage the distressed municipality’s finances and repair its credit. In most instances this intervention works forestalling a recourse to Chapter 9. So, while we may yet see a storm surge as a result of the recession, we doubt there will be a tidal wave.
More...
Is The Russell Sending a Warning?
Mar 14, 2012 Dominic Cimino
You have probably already heard how the cash-heavy Tech sector is leading the way in this cyclical bull market run. Some of the giant tech companies have had sizable rallies. But is the Tech sector's little brother, the Russell 2000 Index, sending a warning message?
More...
O Dollar, Where Art Thou? New Update
Mar 14, 2012 Chris Turner
Given the precipitous rise of the S&P 500 Index in the last few months, I thought it would be interesting to update the November chart showing the value-adjusted S&P 500 to the dollar index. See my November 8th commentary O Dollar, Where Art Thou? Using the Trade Weighted US Dollar data available from the Federal Reserve's Economic Data Repository (FRED), we see the dollar continues a downward trend.
More...
Home Prices and Inflation, Part 1
Mar 13, 2012 Mike Shedlock
How Far Have Home Prices "Really" Fallen? HPI Upcoming Changes; HPI and the CPI
Various charts show home prices are now back to levels last seen in September-October 2002. I posted such a chart constructed from the LPS Home Price Index (HPI) in LPS Home Price Index Shows U.S. Home Prices Accelerated Decline.
More...
The Employment Report and the Market
Mar 12, 2012 Lance Roberts
If you listen to the bleating of the mainstream media and economists there is absolutely nothing to worry about and Friday’s employment report proves it. The official unemployment rate remained steady at 8.3 percent, and 227,000 jobs were added. Just don't look at the number of long-term unemployed, or those without jobs for more than six months, that stayed the same at 5.4 million. Don't talk about the number of those working part time but wanting to work full time, at 8.1 million, which remained unchanged as well.
More...
Retirement's Volatility Bogeyman
Mar 12, 2012 Adam Butler and Mike Philbrick
Investment marketing is like watching a talented magician ply his trade. While the marketing geniuses keep everyone focused on the hottest new funds and stocks in an effort to chase strong returns, people forget about the single most important thing that matters to your retirement portfolio: volatility.
So let's be crystal clear: retirement sustainability is extremely sensitive to portfolio volatility. Further, volatility is the only portfolio outcome that we can actively control.
More...
Can Apple Push the Nasdaq 100 Past 10-Year Resistance?
Mar 12, 2012 Chris Kimble
Apple represents an ever increasing percentage of the Nasdaq 100 index. Recently Apple broke above 20-year and 30-year resistance lines as well as a key Fibonacci extension level, at $525 per share. After the breakout, Apple tested the old resistance as support, which is a positive for Apple.
More...
Weighing the Week Ahead: The Energy Price Spike
Mar 12, 2012 Jeff Miller
While this has been a regular topic for many, the following factors combine to make inflation the focus for the coming week: The continuing rise in gasoline prices, increased attention to Iran and policy reactions, official data on PPI and CPI, and the FOMC meeting. I'll offer my own forecast of how this will play out -- and what it means for traders and investors -- in my conclusion. First, let's do our regular review of last week's news and economic data.
More...
Household Net Worth: The ''Real'' Story
Mar 08, 2012 Doug Short
Note from dshort: The last two charts below are some of the ones I'll be including in a broader perspective on economic, market and demographic trends at the Retirement Industry Income Association (RIIA) Spring Conference in Chicago on March 19-20. I hope to see some of you there.
More...
Euro Currency Sporting a Potential Head and Shoulders Top
Mar 07, 2012 Dominic Cimino
To say the least, the last four years have been a wild and volatile ride for the Euro currency. As the implications rendered from Eurozone debt continue to evolve, economists the world over debate the Euro's fate daily. Below is a chart of the Euro, which has a potential head-and-shoulders-top formation in place. This is a potentially bearish formation that I will now explain.
More...
Weighing the Week Ahead: How Worried Should We Be?
Mar 07, 2012 Jeff Miller
[Note to Readers. Thanks to all those who have written. All is well. I have been, as always, actively following the markets and trading every day. There have also been some major opportunities for clients, and that is my first duty....]
This week has brought together what we might call a confluence of concern. How worried should we be?
I will abbreviate the micro data points a bit in order to emphasize broad themes. The main current worries are the following:
More...
ECRI's Recession Call: ''Is There Something Magic About 2 Percent?''
Mar 06, 2012 Georg Vrba
The question in the title above was raised by Mike "Mish" Shedlock in his article The Disingenuous ECRI Recession Call.
Is there any reason to believe that when the ECRI's U.S. Coincident Index year-over-year growth rate (which I will designate as USCIyoy) dropped below 2% a recession always follows, as ECRI's Lakshman Achuthan has recently been at pains to expound.
More...
Estimating Future Returns: New Update
Mar 06, 2012 Adam Butler and Mike Philbrick
Long-time readers will know that we do not make predictions in the normal sense. That is, we endorse the decisive evidence that markets and economies are complex, dynamic systems which are not reducible to normal cause-effect analysis. However, we are willing to acknowledge the likelihood that the future is likely to rhyme with the past. Thus, we apply simple statistical models to discover mean estimates of what the future may hold over meaningful investment horizons (10+ years), while acknowledging the wide range of possibilities that exist around these averages.
More...
Respecting Junk Bonds and Basic Materials
Mar 06, 2012 Chris Kimble
When it comes to portfolio construction, it can pay to respectful of certain indicators. In quality bull markets you want basic materials to at least keep up with the broad market. Of late the basic materials ETF (IYM) was 14% below its highs of last spring. If history is a guide, this is a sign of weakness, not strength. The first chart shows that on Jan-31, IYM and FCX were making bearish patterns and that a breakdown in these two would be sending a negative message for the future direction of the market.
More...
The Immediacy Trap
Mar 06, 2012 Lance Roberts
When I was growing up my father told me more than once that "if you do that, son, you aren't going to like the consequences." Generally, those words were spoken to me just before I wanted to do something to fill an immediate desire - such as spending all my yard mowing money to buy my first car. It was cool, it looked fast and it was the first car I saw on the lot. Nothing else mattered - that car was mine and I have to have it right then and there. I was too young to know it then but I had fallen victim to the "immediacy trap."
More...
Empty Explanations
Mar 06, 2012 Eric Schaefer
Unless you do not own a car, or you are a stranger to the evening news, then it will come as no surprise that the price of a gallon of gasoline has risen steadily over the past several weeks. The Energy Information Agency (EIA), a division of the U.S. Department of Energy (DOE), reported gasoline averaged $3.698 a gallon in the week ending February 27th. Over the past week, the price is up 14 cents per gallon; during the new year, the price is almost 43 cents higher per gallon, or roughly 13.1 percent.
More...
The Disingenuous ECRI Recession Call
Mar 05, 2012 Mike Shedlock
Late last month in "ECRI Sticks with Recession Call on CNBC; More than a Bit of an Exaggeration by Achuthan to Make His Call?" I questioned the ECRI's use of coincident indicators to make a claim regarding recession....
In spite of all the above, I happen to like the ECRI recession call. Yes, I am biased, but it is hard to find anyone who is not....
To go out on a limb, I think GDP in 2012 is going to hugely surprise on the downside, and 1st Quarter GDP may be as low as zero to .5%. A negative number (or more likely a revised negative number) would not shock me in the least.
More...
The Elusive 2012 Recession: When Can We Expect It?
Mar 03, 2012 Georg Vrba and Dwaine van Vuuren
Since last Friday there has been a flurry of further TV interviews and newspaper reports covering ECRI's Lakshman Achuthan recession call. Here are links to two more TV appearances since we heard him on CNBC Squawk Box last Friday. Recession forecaster: "Prepare for a new one", and "GDP Data Signals U.S. Recession", Achuthan Says.
...
So when can we possibly expect this elusive recession? Our analysis shows that the earliest date is the beginning of October 2012.
More...
What Are 30-year Treasury Yields Suggesting?
Mar 02, 2012 Dominic Cimino
Below is a chart of 30yr T-Bond yields, dating back to late 1993. Notice the down-trending channel formation that the yields have formed as they have steadily moved lower. This channel is depicted as the downward running parallel blue lines. Also notice the large wedge formation (e.g. the green triangle) that was formed when the global financial crisis began to unfold. You can see how in August of last year yields broke out of the wedge formation and began moving lower, a very bearish signal for yields.
More...
Real Personal Consumption Expenditures and Recessions
Mar 01, 2012 Doug Short
Today's release of Personal Consumption Expenditures, following yesterday's release of the Second Estimate of Q4 GDP, gives us an opportunity to analyze consumption at a monthly granularity, in contrast to the quarterly data in GDP.
The US economy is mostly about consumption, which accounts for about 70% of Gross Domestic Product. In fact, if we study the quarterly reporting of GDP from its inception in 1947, Personal Consumption Expenditures (PCE) have ranged from a low of 60.5% in Q3 1951 to a high of 71.2% in Q3 2009. As of Q4 2011, PCE is an even 71% of GDP.
More...
Currencies and the Odds of a Risk-Asset Reversal
Feb 29, 2012 Chris Kimble
The first chart reflected that a bearish pattern was at hand in the U.S. dollar, suggesting in the neighborhood of two-thirds odds that the Dollar would fall in price. From a portfolio construction angle, this pattern suggested overweighting towards the risk assets.
More...
Adding Natural Gas into the Energy Equation
Feb 29, 2012 Stephen J. Morton
The price of gasoline has made the headlines many times in recent weeks. The theme that goes with the headlines is generally the same: Gasoline has never been more expensive for this time of year, and the rise in price will deliver a blow to disposable income that can set back our recovery. But the impact of high gasoline prices is a lot more complicated than that, and often the analysts haven't factored in the offsetting drop in the price of natural gas.
More...
Can Gold ''Leap'' Above Multi-Year Resistance?
Feb 29, 2012 Chris Kimble
Gold has had a nice rally of late. Gold broke below 4-year old support line (1) this past December. Now, on this Leap Year day, Gold is testing this line as resistance at (3), at the top of a horizontal channel.
Much higher prices in Gold should take place if it can "Leap" these resistance lines!
More...
Commonsense is not so Common
Feb 28, 2012 Eric Schaefer
Or, so quipped Voltaire, the French philosopher and satirist, well over 250 years ago. Because that innate, practical compass to distinguish the right from wrong action in most day-to-day situations is not broadly (nor uniformly) spread throughout the human race, governments are constituted, laws enacted, and courts appointed to provide the necessary guidelines for men in order to forestall anarchy.
More...
A Key Spread to Watch
Feb 28, 2012 Dominic Cimino
I share with you a spread relationship that has previously provided me with some powerful analysis. Since we entered this crisis with an economy that was 70% dependent upon consumer spending, I decided back in 2007 to look at a spread relationship that would theoretically provide indirect insight into consumer spending habits -- and therefore perhaps into economic and market trends as well.
What I discovered has been, as the present day cliché suggests, "priceless."
More...
Deconstructing ECRI's Defense of its Recession Call
Feb 27, 2012 Georg Vrba
There were two incorrect statements that Lakshman Achuthan made at his TV appearance last Friday on CNBC. First he claimed that "GDP growth year-over-year fell down to 1.5% by Q2 2011." This statement is wrong. Check the GDP numbers and you will find that the GDP growth year over year fell to 1.63% by Q2 2011. Second, and more worrisome is this Achuthan claim:
More...
''Sleepwalking Toward a Precipice'': Our Observations and Outlook, Part I
Feb 26, 2012 Jason Leach
Foreword from dshort: Jason Leach, the Director of Research/Portfolio Management at Craven Brothers Wealth Advisors, sent me a PDF of his latest research -- Sleepwalking Toward a Precipice: Our Observations and Outlook, Part I. Jason kindly granted me permission to share with the Advisor Perspectives audience. The illustrations in the PDF are priceless, so be sure to download and view the PDF format. Below is a snapshot of one of the PDF pages followed by a reprint of the full text without illustrations.
More...
The Housing Recovery In One Index
Feb 25, 2012 Lance Roberts
There have been numerous media stories out over the last couple of weeks about the recovery, at long last, in housing. Of course, this is the same housing bottom call that we heard in 2009, 2010 and 2011. So why not drag it out again for 2012? Eventually, the call will be right, and they will be anointed with oils and proclaimed to be the gurus who called the bottom. In the financial world you only have to be right once.
More...
S&P 500 Update: Where's the Volume?
Feb 24, 2012 Doug Short
The S&P 500 closed the week at a new interim high, up 8.60% in the first 37 days of trading versus 2.69% over the same timeframe in 2011.
But what about volume? I've posted comparisons with 2011 after the first 12, 24 and 34 days of trading. Here is an updated comparison after the first 37 days.... We're 18.6% below the volume for the equivalent period last year.
More...
Economic Risk: The Gasoline Wild Card
Feb 23, 2012 Doug Short
Of the many risks facing the US economy, the one I find most immediately concerning is the rapidly increasing rise in gas prices. My latest weekly gasoline update showed a 36-cent rise in gas prices, regular and premium, over the past nine weeks. In fact, it was about nine weeks ago that I filled the tank on our Prius at $2.98 a gallon just south of Myrtle Beach. Today the best price I can find in this area is $3.42.
More...
The Philly Fed ADS Business Conditions Index
Feb 23, 2012 Doug Short
Note from dshort: A new release of the Philadelphia Fed's ADS index was made available today with data through February 18th.
The Philly Fed's Aruoba-Diebold-Scotti Business Conditions Index (hereafter the ADS index) is a fascinating but little known real-time indicator of business conditions for the U.S. economy, not just the Third Federal Reserve District, which covers eastern Pennsylvania, southern New Jersey, and Delaware. Thus it is comparable to the better-known Chicago Fed's National Activity Index, which is updated monthly (more about the comparison below).
More...
Charting Down Under: The Australia All Ordinaries Index
Feb 22, 2012 Doug Short
Note from dshort: Chris Kimble's technical look at the Australian Dollar posted earlier today (here) reminded me that several months have passed since my last look at the benchmark All Ordinaries Index. The All Ords is currently 13.8% below its interim high, set on April 11th of last year, and 36.3% below its all-time high in 2007. Here is an update of my All Ords S&P 500 overlay.
More...
The Aussie Dollar and Risk Management
Feb 22, 2012 Chris Kimble
Over the past year when the Australian Dollar reached certain levels, the S&P 500 happened to be at a peak in prices as well. The Aussie $ is now back at the key level that also saw the 500 index at a short-term peak in prices over the past nine months.
More...
Media Headlines Will Lead You To Ruin
Feb 21, 2012 Lance Roberts
It's quite amazing actually. Two weeks ago Barron's ran the cover page of "Dow 15,000". Over the weekend Alan Abelson ran a column titled "Everyone In The Pool". Today, CNBC leads with "Dow 13,000 May Finally Lure Investors Back Into Stocks". Unfortunately, for most investors, the CNBC headline is probably right. Investors, on the whole, have a tendency to do exactly the opposite of what they should do when it comes to investing: "Buy High and Sell Low."
More...
Will Greece Survive the Ides of March?
Feb 21, 2012 Mike Shedlock
As a point of curiosity, the Greek 1-Year Bond Yield touched 682% today, now down to a mere 666%. Bloomberg quotes the open as 566%, if correct, the one year yield soared 116 percentage points from the open to the high.
Deal "Really" Finalized?
Open Europe says Many questions around the second Greek bailout remain unanswered.
More...
No Other Choices?
Feb 21, 2012 Eric Schaefer
In a recently released NY Times/CBS poll, the pollsters told us of what most already are feeling in their gut: the choices for the Oval Office in this coming November are less than compelling. Perhaps, some new faces are what the American electorate needs to reinvigorate the contest.We think of political battles as waged between two parties. Indeed, for most of our nation's history, two parties have dominated the stage.
More...
Weighing the Week Ahead: Time for a Turn in Housing?
Feb 20, 2012 Jeff Miller
Since the start of the Great Recession there has been little reason for enthusiasm about the US housing market. The home construction industry and related sectors have been a continuing drag on the recovery. In my circle of friends I know of several first-time home purchases in the last couple of years. I was reminded of this last night when visiting my niece and her husband, seeing their beautiful new urban home and enjoying a wonderful "Restaurant Week" dinner at a place new to us all.
More...
No Wonder ECRI's Weekly Leading Index Data is Free
Feb 17, 2012 Kishor Bhatia
This commentary reports the findings of a study that compares the S&P 500 with ECRI's Weekly Leading Index (WLI), which is published every Friday on ECRI's website.
My analysis shows that WLI is very highly correlated (0.95) with S&P 500. I also discovered that by applying the formula used to compute ECRI's WLI growth index to S&P 500, we can establish an S&P 500 growth index -- one that, interestingly enough, leads the WLIg in identifying turning points.
More...
Producer Price Index: Core Inflation Higher Than Expected
Feb 16, 2012 Doug Short
Today's release of the Producer Price Index (PPI) for January shows a smally month-over-month increase in headline inflation pressures. The seasonally adjusted finished goods number was up 0.1% MoM and up 4.1% year-over-year, a decline from last month's 4.8%. The interim YoY high was 7.2% in September of last year. However, Core PPI (ex food and energy) was up 0.4% MoM, the biggest monthly gain since last July. The YoY 3.0% was unchanged last month. At this level Core PPi is the highest since June 2009.
More...
Taxes, Entitlements and the Growing Federal Debt Crisis
Feb 15, 2012 Doug Short
Earlier this week I shared my historical perspective on Debt, Taxes and Politics. Let's now take a closer look at Uncle Sam's balance sheet for last year and the official government projections for 2012 and the decade beyond. With the intensifying election year debates on the federal budget, it seems particularly appropriate to understand the broader context.
More...
The Shanghai Composite and Wilshire 5000 at Resistance
Feb 15, 2012 Chris Kimble
In April of 2011, we shared that the Shanghai Index was up against the top of its Flag/Pennant pattern in the 3-pack below (see post here). This resistance was sending a message to either harvest gains in the key global index or protect risk trade assets. The Shanghai index peaked at this time and fell in prices, as did stock prices around the world.
More...
Consumer Confidence Has Everything To Do With Retail Sales
Feb 14, 2012 Lance Roberts
Recently, Brian Wesbury released his latest economic commentary, one that paints a rather optimistic spin on the economy: "Be Confident In The Economic Recovery." It took me a little time to wrap my head around what Brian had written. Really? All you have to do is pull a chart of Consumer Confidence overlaid against automobile sales and the result is quite telling. Voila! Consumer confidence DOES MATTER. Then again why shouldn't it?
More...
At What Price the Presidency?
Feb 14, 2012 Eric Schaefer
If the projections are accurate, there will be no escape. Even if you decide to unplug your television or cancel your cable contract from now until the morning after Election Day, there is no sanctuary from the blizzard of attack ads expected as campaign season moves forward. A combination of money and technology, old and new, will be sure to find you where-ever you are. Junk mail and annoying "robo-calls" will be aided by internet tracking cookies, texting, and social media to deliver a candidate's message wherever you may seclude yourself.
More...
Debt, Taxes and Politics: The President's Budget for 2013
Feb 13, 2012 Doug Short
Earlier today President Obama released his Budget for Fiscal Year 2013. Let's take a moment to reflect on the history of U.S. federal debt and personal taxation, the latter of which began in 1913.
The first chart is a snapshot of federal debt based on data from the U.S. Treasury and the 2013 Federal Budget issued by the Office of Management and Budget (OMB). The chart also shows the OMB six-year forecast through 2017.
More...
