As of 12/4/2013, the CPI adjusted 2000 dollar is worth 72.06¢, and the CPPI adjusted dollar is worth 41.39¢.



Page2RSS feed for this entire blog


Closed...

1/6/2013
Closed the rest of our S&P 500 short position at a decent profit. The apparent bull freight train is still on track.

Bears are still hiding behind the trees or hibernating since the recent S&P 500 peak around 1848 on Dec 31st. The CBOE put/call ratio has been mostly in the high .20s, and displaying a lack of significant follow through with new shorts on the drop so far to 1826.76. A belief that Dec 31st was not a significant top is part of what's needed for it to actually be a top. Time will tell... we're watching for another short entry point, after having exited too early.

Unusually large liquidity draining Temporary Open Market Operations (TOMOs) continue.



Update 1/10/2013 - Not a good unemployment report overall. Non farm payroll only +74k (non seasonally adjusted dropped 246k), although U3 dropped from 7% to 6.7% and U6 dropped to 13.1% from 13.2% (U6 without seasonal adjustment went from 12.7% to 13%). Participation rate was another large negative, dropping to 62.8% from 63%. Our U7 reconstructed unemployment rate grew to 20.3 from 19.4% (23.1% when participation rate corrected). Employed, usually work part time dropped 89k. Construction employment, not seasonally adjusted, dropped 216k after a drop last month of 91k. The household survey gained only 143k. Part time for economic reasons (could only find part time work) gained 93k. Not in labor force due to a disability, over 16, gained another 174k.
A mitigating factor - 273k people were counted as “Employed – Nonagriculture industries, Bad weather, With a job not at work”, the worst December for weather-related absence from work since 1977. They did not get counted in the payrolls figures even though they’re employed. But this does not address the 347k loss in the total labor force.



Update 1/11/2013 - Paul Volcker on the Fed's "dual mandate":
I know that it is fashionable to talk about a “dual mandate”—the claim that the Fed’s policy should be directed toward the two objectives of price stability and full employment. Fashionable or not, I find that mandate both operationally confusing and ultimately illusory. It is operationally confusing in breeding incessant debate in the Fed and the markets about which way policy should lean month-to-month or quarter-to-quarter with minute inspection of every passing statistic. It is illusory in the sense that it implies a trade-off between economic growth and price stability, a concept that I thought had long ago been refuted not just by Nobel Prize winners but by experience.

The Federal Reserve, after all, has only one basic instrument so far as economic management is concerned—managing the supply of money and liquidity. Asked to do too much—for example, to accommodate misguided fiscal policies, to deal with structural imbalances, or to square continuously the hypothetical circles of stability, growth, and full employment—it will inevitably fall short. If in the process of trying it loses sight of its basic responsibility for price stability, a matter that is within its range of influence, then those other goals will be beyond reach.
Source





Continuing crunch...

12/30/2013
Another large reverse repo day today (-$102.5 billion) after a $95 billion one on Friday.







Update 12/31/2013 - Chicago Purchasing Managers Index (PMI) New Orders measure came in very bearish, having fallen from 68.8 down to 43.9. The Employment sub-index also fell from 60.9 to 51.6, while the overall PMI index fell slightly from 63 to 59.1.

May everyone have a Happy and Prosperous New Year!







Update 1/2/2013 - As we've been noting for many weeks, good probabilities for a correction starting in early January and mid March to early April exist, we're now short the S&P 500 and will be following the trend downwards as far as it may go.



Update 1/3/2013 - Took profits on 1/2 of our S&P shorts, trend line break on the 30 minute chart.



Monday down?...

12/21/2013
Daily reverse repo TOMO data (-$26.5 billion on Friday) points at a down day on Monday



Update 12/26/2013 - Energy update: Brent oil (the one that US gasoline prices are more closely based on) is up about 1.4% since last year, West Texas Intermediate (WTI) is up 6.2% since last year, regular gasoline is up about .4% since last December and natural gas is up 22.9%, in spite of the huge shale oil and gas deposits being worked in Texas and North Dakota.

Another large reverse repo day today (-$46.97 billion).







Deleveraging and credit...

12/15/2013
Deleveraging is dead.

Household & non-profits credit growth (Fed chart) is up





Update 12/16/2013 - Odd item of the year: with various measures of consumer confidence having had substantial gains this year, why is monetary velocity still falling? chart



Update 12/17/2013 - CPI-U up to 1.24% from .96%, Consumer Purchasing Power Loss Index (CPPI) up tp 4.02% from 3.92%, Core CPI up to 1.72% from 1.68%, Household energy down to 2.3% from 3.0%, Food and Beverages down to 1.2% from 1.3%, Airline fares up to 4.2% from 2.5%, Food away from home up to 2.1% from 1.9%, Cleveland Fed median CPI unchanged at 2.0%. All are annual change rates.



Update 12/18/2013 - At least the Wall St. "taper tantrum" has been resolved today, and the Fed move has started. From the bearish side on the stock markets, today's large move could be the start of a blow-off before a substantial correction in early/mid January or March/April.

Best quote of the day: "Roses are Red and Dahlia's are Black. We're buying less bonds but we still got your back. Happy Holidays from the FOMC."
Josh Brown



Update 12/20/2013 - GDP Q3 revised to +4.1% from +3.6%, due to inventory growth which is now about 1/2 of the total gain.

Fed's balance sheet tops $4 trillion this week.

Trees Grow on Money (WSJ)







Imports from China...

12/4/2013
October data released today shows imports 21% higher than last October, augurs for a good retail Christmas season.



Update 12/5/2013 - GDP annualized growth moves up to 3.6% from 2.8%, but 1.7% (almost 50%) of it was just inventory growth and not as bullish as it may seem. Imports grew more and exports less than initial data, also not bullish. Initial claims down substsntially, but probably skewed by holiday factors as shown in non seasonally adjusted data.



Update 12/6/2013 - Quite bullish unemployment report. The official U3 rate dropped to 7% from 7.3%, and U6 dropped from 13.8% to 13.2%. The participation rate went up to 63% from 62.8%, while there were fewer people working part time by most measures. Total non farm payroll gained 203,000. Our U7 measure even dropped from 20.6% to 20.2%. With participation rate correction, it dropped from 24.2% to 24.1%. The only significant negative was median unemployment duration moving up to 17 weeks from 16.3 weeks.

PCE annual change rate inflation down to 1.11% from 1.22%. The combination makes a taper much more likely in December, but our best guess is that the conservative bankers at the Fed will wait for more confirmation.







Possible turn points...

11/27/2013
Our eclectic set of indicators point at stock turn points in both early January and mid March to early April.



Update 11/29/2013 - Weekly chart uploads will be late due to the holiday.







Retail sales and CPI...

11/20/2013
Large downward adjustment in last year's retail sales figures make this and last month's retail sales annual change rate jump up unrealistically.

October CPI-U drops from 1.18% to .96%, annualized seasonally adjusted CPI-U rate drops to -.71% from 2.16%. Core CPI (excludes food and energy) down to 1.68% from 1.73% annual growth. Energy contracting at -4.8%, Household energy still growing at 3.0% and Medical Care is supposedly only growing at 2.4% annually. Health insurance is also supposedly only growing at 1.9% annually, Housing growing at 2.1%.
Our Consumer Purchasing Power Loss Index (CPPI) growing at 3.7%, down from 3.9% last month. Disinflation remains the primary trend.

Will this decade be characterized by terms and emotions like offensive and outrage?







Vets...

11/11/2013
A sincere thank you to all U.S. veterans for their service and sacrifices.







GDP...

11/7/2013
GDP was up during the 3rd quarter at 2.8% annualized growth since last quarter (1.6% annual change rate), but when inventory build is subtracted growth dropped to only 2.0%, per Fred's FINSLC1. Not a great sign of economic strength.



Update 11/8/2013 - Large jump in non farm payroll to +204,000, expectations were around 125,000. Participation rate down big to 62.8% from 63.2%, not good, but next month will clarify the effect from the government shutdown. U3 official unemployment up to 7.3% from 7.2%, U6 unemployment up to 13.8% from 13.6%, our U7b unemployment measure which attempts to include all discouraged workers up to 20.5% from 20.3%. Part time for economic reasons, etc. gained 87,000 and up 2.6% since last year.

Overall, slightly better than expected considering the recent government shutdown.







Treasury International Capital report...

10/23/2013
TIC flows continue their downtrend, mirroring the dollar and confidence in it.

TIC major holders, including the Fed







M3 spike...

10/13/2013
M3 annual change rate now 8.9%, up from the mid 6's a few weeks ago. Total M3 now just above debt ceiling at $16.4 trillion.

Velocity still dropping (red line is our preferred measure).







Gold bearish...

10/11/2013
Gold head & shoulders formation pointing at $1200 and below.







Pain & misery, and failure to taper...

9/22/2013
Long term pain & misery index. The green line (CPI plus the U-6 unemployment rate) probably represents the best current picture of the "recovery", and also aligns with the Fed's failure to taper.



Update 9/27/2013 - Dollar index still bearish, bear flag breakdown currently currently. An initial target of the low 79 area seems reachable.







FOMC...

Our best guess; the market reaction to the FOMC taper decision this Wednesday will be like Y2K, in the sense of a relative yawner considering all the noise the last few months. 9/15/2013




Update 9/17/2013 - CPI-U SA 1.52%, CPI-U NSA 1.52%, Core CPI (w/o food and energy) 1.76%, Consumer Purchasing Power Index (CPPI) 4.36%.



Update 9/19/2013 - Fed attempting to bring down 10 year Treasury rates via the Securities Lending OMO. Today's operation was $23.7 billion, yesterday's was $24 billion. Last week's average was $14 billion.



Update 9/20/2013 - The major reason that the dollar bears have been winning - TIC flows.

Container import volume at both LA and Long Beach point at a decent Christmas retail season.







...

9/8/2013
Strong support in gold around $1345, silver around $21.25.

Weakness in Dataquick weekly median home price (blue line), probably at least a temporary price top is in place. Third week in a row showing price drops. Both the XHB homebuilder and the PHLX (HGX) housing indexes have also not been strong for a while.

Housing recovery perspective, still lower lows and lower highs when the Case Shiller 20 city average is just CPI adjusted, and definitely no new highs when CPPI adjustment is made.



Update 9/13/2013 - (Larry) Summers - his surname derives from the Old French "somier" meaning a "sumpter", a term describing one who drove pack horses or mules.







Banking system...

9/1/2013
Some stresses showing in Fed discount window borrowing
Long term, Discount Window borrowing

Real GDP changes per dollar added of credit since 1947, a major growth problem ahead



Update 9/4/2013 - Third day in a row where gold lease rates are no longer negative - bearish.



Update 9/5/2013 - China to allow free yuan exchange in Shanghai trade zone: draft plan



Update 9/6/2013 - Unemployment - U3 7.3% down from 7.4%, U6 13.7% down from 14%, U7b 20.8% down from 21.3%, Non farm payroll up 169k, Household survey down 115k, Participation rate 63.2% (lowest since August 1978) down from 63.4%, Part time for economic reasons down 369k (LNS12032195), Usually work part time down 234k, Self employed down 175k, All government employees up 214k. Overall, most of the gains were due to government hiring, a drop in the participation rate and a drop in part timers - a mixed report at best that has been interpreted as quite bullish by S&P 500 stock futures.







Light week...

8/29/2013
Guests in town, minimal posting and comments this week. Daily charts will be uploaded later than normally.







1970s rhyme...

8/18/2013
The possible rhyme with the 1976 gold bottom.

Repeating from last week: Treasury International Capital (all flows) is dollar negative

Fibonacci resistance levels on 10 year Treasury, based 5.22% high in late 2007:
100.0...5.22%
76.4....4.32%
75.0....4.26%
61.8....3.76% (longer term down trend line resistance)
50.0....3.31%
38.2....2.85%
25.0....2.35%
23.6....2.29%
0.00....1.39%




Update 8/19/2013 - Taking the day off tomorrow, fairly tight actual market stops in place on long gold & silver positions. We're tempting fate and aggressive black boxes.



Update 8/21/2013 - Exited almost all long gold & silver positions at a decent profit, insufficient follow through so far on the original moves.



Update 8/23/2013 - Exited remainder of gold & silver longs for the weekend, obviously a goof on the sale on Wednesday. May re-establish longs on Sunday when the market opens, but will have guests - likely a light blogging period next week.







August 9th turn call...

8/12/2013
Substantial moves up in precious metals started on the 9th, will probably go long gold on a decent break about 1345. Initial target around 1385.



Update 8/13/2013 - On the budget deficit, spin exists since the numbers do not include off budget spending. The budget deficit the last 12 months is about $722 billion, but the total Federal debt from last July through this July increased $959 billion. Many believe that Bill Clinton balanced the budget, but the record of total Federal debt increases show that it isn't true due to off budget spending not being reflected - the actual Federal debt increased every year of Clinton's terms. Beware of overly optimistic and incomplete or misleading reporting.

QotD: "I prefer rogues to imbeciles, because they sometimes take a rest." -- Alexandre Dumas

Exited long Treasuries at a loss.



Update 8/14/2013 - The gold/silver ratio hasd been dropping for a few days now, showing silver strength. The gold/silver ratio falling is also frequently a signal of inflation ahead. Add that into a jump in oil prices in July, plus another month of the BPP MIT inflation index being well above the BLS CPI measure, our best guess is that CPI will come in "unexpectedly" high tomorrow. We expect to go long gold & silver before the CPI report tomorrow morning, and currently have buy stops in the market.



Update 8/15/2013 - CPI-U 1.96% (both SA and NSA), Core CPI 1.70%, CPPI (Consumer Purchasing Power Loss Index) 5.21%. Overall, BLS inflation numbers were significantly less than expected. Miscellaneous - Household energy 4.3%, Water sewer & trash 4.4%, Education 3.8%, Educational boos & supplies 6.3%, Motor vehicle insurance 4.8%, Health insurance 5.3%, Airline fares 3.3%, Electricity 3.1%, OER 2.2% (most recent Case Shiller 12.2%), and Food 1.4%. All numbers are annual change rates.

Our buy stops were not hit on either silver or gold, and they're both down after the CPI release, although WTIC oil is up about 50 cents. S&P 500 also down, went short.

Substantial moves up in both soybeans and corn. We're treating it as a bull trap, with a small possibility of an upcoming inflation issue. But stops triggered on both gold & silver, using small trailing stops.

HUI Fibonacci, support and resistance:
100.0..634.00
76.4....533.23
75.0....527.25
61.8....470.89
50.0....420.50
38.2....370.11
25.0....313.75
23.6....307.77
0.00....207.00

The reverse head & shoulders formation in the HUI targets about 360.



Update 8/15/2013 - Took profits on 1/3 of the gold and silver positions based on both the upcoming weekend and the lack of follow through.

A stat that's being ignored: Treasury International Capital (all flows) is dollar negative







Nothing...

8/5/2013
With an expected turn point coming up around August 9th, we're being conservative and have not gone long the S&P 500 nor short precious metals. None of the agricultural commodities look bullish yet either.

Generally, the Fed's quarterly Senior Loan Officer Survey released today is pointing at stronger loan demand and loan standards slightly loosening.

The main problem with more debt and credit, chart of GDP/total credit since 1947. It's effectiveness has dropped severely over time.



Update 8/8/2013 - Long the 10 year Treasury, partly based on both a trend line break and a reverse H&S. Awaiting a trend line break to short the S&P 500.







Big data week...

7/29/2013
Unemployment (Friday), Case Shiller (Tuesday), GDP (Wednesday), Fed meeting (Wednesday), Personal Income and Outlays (Friday) all reported this week. Probable high volatility week.

Large changes in new home average monthly mortgage payment.



Update 7/31/2013 - Summary of GDP revisions by the BEA

The picture of the economy shown in the revised estimates is very similar in broad outline to the picture shown in the previously published estimates. The similarity and some of the differences can be seen in the following:

* For 1929–2012, the average annual growth rate of real GDP was 3.3 percent, 0.1 percentage point higher than in the previously published estimates. For the more recent period, 2002–2012, the growth rate was 1.8 percent, 0.2 percentage point higher than in the previously published estimates.

* For 2002–2012, the average rate of change in the prices paid by U.S. residents was 2.3 percent, 0.1 percentage point lower than in the previously published estimates.

* For 2009–2012, the average annual growth rate of real GDP was 2.4 percent, 0.3 percentage point higher than in the previously published estimates. The percent change in real GDP was revised up 0.1 percentage point for 2010, was unrevised for 2011, and was revised up 0.6 percentage point for 2012.

* For the period of contraction from the fourth quarter of 2007 to the second quarter of 2009, real GDP decreased at an average annual rate of 2.9 percent; in the previously published estimates, it decreased 3.2 percent.

* For the period of expansion from the second quarter of 2009 to the first quarter of 2013, real GDP increased at an average annual rate of 2.2 percent; in the previously published estimates, it increased 2.1 percent.

* In current dollar figures the revisions added nearly $560 billion to the overall figure 2012 GDP figure of $16.2 trillion.

* Transactions of defined benefit pension plans are recorded on an accrual accounting basis, which recognizes the costs of unfunded liabilities. (Translation: GDP increases are recorded when pension contributions are due, but not necessarily actually paid/funded.)

Source

GDP Q2 growth up to 1.66% from the revised Q1 prior quarter value of 1.14% (pre revision growth rate of Q1 was 1.77%, so it was worse than expected. Q4 last year is now .38%, up from .14% pre revision.)
GDP growth control/manipulation is alive and well. The last recession looks a lot better now, same as the Great Depression.

The ADP employment report came in little changed from last month's data, which was revised up. Our best guess is no change in the national unemployment rate, 7.6%.

US electricity generation versus real GDP, since 2000.

Velocity dropping again (red line).



Update 8/1/2013 - Leveraged long before the open on the S&P for the ride.

Very bullish ISM, claims and construction spending.







Update 8/2/2013 - We will be existing our S&P 500 leveraged long before the close, to avoid carrying an open position over the weekend.

Unemployment: non farm payroll +162k, part time workers +174k, U3 7.4% down from 7.6%, U6 14% down from 14.3%, U7 21.4% down from 21.8%, birth death model added 54k, participation rate down .1 to 63.4%, Household survery added 227k but Household Survey Employment Smoothed for Population Controls added only 35k, part time as percent of non farm payroll up to 20.8% from 20.5% - continuing the trend. Not as good a report as hoped for and expected.



4:07 PM ET, exited S&P longs.





Buy...

7/22/2013
Buy signal on silver, gold and miners.

Looking at longs in soybeans and/or rice.

Critical area on gold, it must hold above the 50 dma at $1335. Beware options expiration on Thursday.



Update 7/23/2013 - Pain Misery index update



Update 7/24/2013 - The upcoming GDP revision that will go back to 1929 and adds R&D and artistic creations will add an average of 2.7% to recent GDP, will change pension benefits to an accrual basis from actual cash payments to the pension funds, and removes our nearby recession expectations. It will also add about .07% annual growth to GDP during the period 1959-2007.

Lightened up on metals longs, need to be away from the trading desk for a while. Closed the rest of the positions, after return.

Watching the hourly chart on soybeans for a down trend line break.



Update 7/25/2013 - The HUI down trend line since January 2013 has been broken this week.



Summary of GDP revisions The picture of the economy shown in the revised estimates is very similar in broad outline to the picture shown in the previously published estimates. The similarity and some of the differences can be seen in the following: * For 1929–2012, the average annual growth rate of real GDP was 3.3 percent, 0.1 percentage point higher than in the previously published estimates. For the more recent period, 2002–2012, the growth rate was 1.8 percent, 0.2 percentage point higher than in the previously published estimates. * For 2002–2012, the average rate of change in the prices paid by U.S. residents was 2.3 percent, 0.1 percentage point lower than in the previously published estimates. * For 2009–2012, the average annual growth rate of real GDP was 2.4 percent, 0.3 percentage point higher than in the previously published estimates. The percent change in real GDP was revised up 0.1 percentage point for 2010, was unrevised for 2011, and was revised up 0.6 percentage point for 2012. * For the period of contraction from the fourth quarter of 2007 to the second quarter of 2009, real GDP decreased at an average annual rate of 2.9 percent; in the previously published estimates, it decreased 3.2 percent. * For the period of expansion from the second quarter of 2009 to the first quarter of 2013, real GDP increased at an average annual rate of 2.2 percent; in the previously published estimates, it increased 2.1 percent.



Inflation...

7/16/2013
CPI - 1.75% up from 1.36% last month, CPI SA annualized 5.76% up from 1.79%, our CPPI 4.83% up from 4.45%, median CPI from the Cleveland Fed was unchanged at 2.1%, Core CPI (excludes food and energy) at 1.64% down from 1.68% last month. The main change was in energy prices. All percentages are annual change rates.



Update 7/17/2013 - It's our basic belief that the final bottom won't be in on precious metals until real (inflation adjusted) Treasury rates change back to a down trend, barring black swans like war etc.



Update 7/19/2013 - 10 year to 2 year Treasury ratio bullish for gold







Recent interest rate record jumps...

7/7/2013
The large jump in interest rates prior to the stock market crash in 1987

Self employed, growth below zero since last year



Update 7/8/2013 - Temporary bottom in 10 year Treasuries as the Fed comes back in via the Securities Lending OMO?



Update 7/9/2013 - Per the bank participation report, the major banks in the US are not net long both gold & silver



Update 7/10/2013 - Biggest news today was no taper tantrum (HT: Cowpoke)



Update 7/11/2013 - Food price inflation is back. The UN Food price index up 5.4% from last year, and the IMF food price index is up 9.4% since last year.



Update 7/12/2013 - "I think you can only conclude that highly accommodative monetary policy for the foreseeable future is what’s needed in the U.S. economy."
Ben Bernanke, July 10

Gold 50 dma at $1349, silver at $21.62. If broken, we expect a large move up. The relative shortages of physical gold are real.







Gold sentiment...

6/30/2013
With all the negative press about the poor performance of gold this quarter, the queries at Google for 'Where to buy gold' are close to an all time high.

Proof of large major bank effects on the gold price lately, from COT & Bank Participation reports.





Update 7/1/2013 - Gold resistance around both 1330 and 1375, silver at 20.50 and 21.50. Gold 50 DMA around 1390, silver around 20.50. Yes, we're long. Exciting times...

Lightened up on 10 year Treasury longs, not moving as expected.



Update 7/2/2013 - Exited 75% of precious metal longs at a profit.



Update 7/3/2013 - Trade balance jumps abouts +$4 billion , $3.5 billion increase in China imports. Out of all positions for the holiday.



Update 7/5/2013 -