As of 6/29/2014, the CPI adjusted 2000 dollar is worth 70.74¢, and the CPPI adjusted dollar is worth 39.92¢.
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The Dallas Fed Manufacturing index dipped to 4.1 from 10.5 last month. It was also below the 9.0 estimate.
Employment fell to 9.2 from 9.6 last month. New Orders fell to 1.3 from 5.6 last month
Update 12/31/2013 - Total claiming unemployment benefits, non seasonally adjusted, are up from 2.153 million week ending Nov 22nd to 2.54 million in today's data. Seasonally adjusted data not available from the BLS.
Happy New Year to one and all! May 2015 truly be happier and more successful than 2014 has been.
Update 1/2/2015 - ISM manufacturing report comes in very soft, another potential sign of slowing
An oil TA exercise with uptrend line since 1999 points at an oil bottom in the mid to high 40s/
GDP Q3 adjusted up to 4.9% annualized growth, while durable goods which is based on more recent came in "unexpectedly" low and is another potential slowing indicator (Durable Goods Orders: -0.7% vs 3.0% est, Ex Transportation: -0.4% vs 1.0% est, Cap Goods Orders Non Defense Ex Air: 0.0% vs 1.0% est, Cap Goods Shipments non Def Ex Air +0.2% vs 1.3% est - all are changes since last month). Time will tell, from our contrarian hole...
Update 12/24/2013 - Latest data from the China Banking Regulatory Commission says non-performing loan ratio for China’s commercial banks rose to 1.31% at the end of November, up from 1.16% at the end of September. So, up 0.15%, compared with a rise of only 0.09 pct pt in the third quarter Source
The Market flash services PMI was at a 10 month low, and the job creation index was at an 8-month low. New orders 53.1 vs. 55.8 prior, Employment 52 vs. 53.8 in Nov, Composite flash 53.8 vs 56.1 prior.
Unusual spike up in the total claiming unemployment benefits to 2.576 million from 2.153 million (not seasonally adjusted).
Philadelphia Fed business index 24.5 vs. 27 expected, prior 40.8. New orders 15.70 vs. 35.70 prior, Employment 7.20 vs. 22.40 prior, Prices paid 14.00 vs. 17.30 prior.
Update 12/19/2014 - Report: All Net Jobs Growth Since 2007 Has Gone to Immigrants BLS data link
Wage inflation is alive...12/1/2014
Wage inflation evidence from the BLS. Civilian hourly compensation is up to $21.95 during 2014 2Q, which is a 2.4% gain from 2013 and is up from the 1% annual gain area in 2009-2011. Civilian hourly *total* compensation (including benefits) is up to $31.96 during 2014 2Q, which is a 3.1% gain from 2013 and is up from the 1% annual gain area in 2010-2011. State & local gov't, hourly total compensation (including benefits) is up to $43.07 during 2014 2Q, which is a 2.3% gain from 2013 and is up from the 1% annual gain area in 2009-2010 ($39.74 in 2010 2Q).
Update 12//2014 - U7 reconstructed unemployment rate unchanged at 20.9%, rest of data overall positive, especially of nonfarm total payroll growth of 321,000.
M3 money supply still slowing...11/23/2014
While total M3 m3 money supply annual growth is still above zero, it has dropped from above 9% growth in September 2013 to just above 5% currently. In our opinion, this is related to recent drops in the oil price.
Last month's CPI for airline fares was down 3% since last year, but the Airlines Reporting Corp.says that fares were actually up 3.1% since last year ("The average domestic airline ticket during the first nine months of this year rose 3.1 percent to $374.96, according to an Associated Press analysis of data from the Airlines Reporting Corp., which processes ticket transactions for airlines and travel agencies. That figure doesn't include another $56.32 in taxes and fees that passengers pay.")
Update 11/18/2014 - PPI finished energy goods annual change rate higher than expected at -2.5%, PPI final demand annual change rate higher than expected (-1.1% expected) at +1.6%. PPI finished goods annual change rate down to 1.67%, down from 2.13% last month.
Update 11/19/2014 Using Excess Reserves as collateral - From FOMC minutes today: "... potential arrangements that would allow depository institutions to pledge funds held in a segregated account at the Federal Reserve as collateral in borrowing transactions with private creditors and would provide an additional supplementary tool during policy normalization... "
Update 11/20/2014 - CPI annual change rate showed no change from last month at 1.66%, although core inflation (CPI less food and energy) rose from 1.73% to 1.81% and the Cleveland Fed Median CPI also rose to 2.3% from a long period at 2.2%. Our Consumer Purchasing Power Loss Index (CPPI) dropped from 5.04% to 4.94% on an annual change rate basis, mostly due to slower housing price gains.
Update 11/5/2014 - U7 unemployment rate unchanged at 20.9%.
Our M3 reconstruction's annual change rate has broken down out of its long term channel, and is pointing at disinflation.
Update 10/26/2014 - QE Timeline
Fed's 5 year breakeven inflation rate, daily
Budget deficit spin...10/10/2014
Per the Treasury report today, the budget deficit during the last 12 months was $515.225 billion. But, the actual total debt growth during the last 12 months was $1,043 billion ($1.043 trillion) which is almost double the budget deficit... and extremely misleading. Last October, the 12 month budget deficit was $650.926 billion which seems to show the deficit was down. But total 12 month debt growth last October was $723.3 billion, and it grew this year to $1,043 billion. In other words, per the total debt growth the US spent 44% more than last year where the budget deficit change was minus 26%.
In other words, the deficit was $519 billion higher (or over double) than what was reported due to the 'off budget' games, and was actually up over last year. What a crock of BS spin!
$300 billion reverse repo today...9/30/2014
Very unusual Fed action per a $300 billion reverse repo today (a reverse repo withdraws liquidity from the system) since stocks have been down the last few weeks and the average reverse repo has been roughly $150 billion.
Tinfoil hat future moments - you decide
Probable bottom in world monetary velocity
U.S. jobs pay an average 23% less today than they did before the 2008 recession, according to a new report released on Monday by the United States Conference of Mayors.
Closed the dollar long at a small profit, the trend is not in our favor and our entry was late. But most of the S&P 500 short from last Thursday is still open, although the 5 minute chart down trend line is close to being broken as of 9:00PM ET. If it breaks, we'll take profits on 2/3 of our open position.
Update 8/7/2013 - A new Federal Reserve survey found 34% of households said they were “somewhat worse” or “much worse” financially in 2013 compared to 2008. Only 30% reported being better off to some degree. It also found found 23% reported “living comfortably” and 37% said they were “doing OK.” Less than 40% said they were “just getting by” or otherwise struggling.
Update 8/8/2013 - We exited the remainder of the S&P short on a trend line break, and expect a bounce to as high as the 1950-60 area.
An S&P 500 pattern...7/28/2014
The pattern today in the S&P 500 has been a frequent one for many months. The market opens slightly down, then drops for a few hours and then recovers to close slightly to significantly up. That of course makes establishing a short position that will have legs quite difficult. The way we're playing it is to go short early, especially if there are other signals like a poor economic report or rougher geopolitical events, and then watch the 5 minute chart for likely trend reversals towards bullish, and then take profits. It's certainly not our preferred trading method and YMMV, but it will hopefully keep us in play when one day we do get a big short follow through, as is virtually inevitable. Whether it happens within our predicted window, as noted in our 7/21 blog post, who knows?... but all markets do correct and drop eventually. Our current trading approach should catch it.
Update 7/31/2013 - A decent break below $1280 gold will cause us to open some shorts. We did open a small long on the dollar yesterday, quite a jump in open interest over the last week.
Our weekly preferred velocity measure has been quite level for roughly the last four months and is possibly signalling that it has bottomed. The large jump in GDP growth this week also adds credence to the bottoming possibility.
Update 8/1/2013 - Unemployment: U3 up to 6.2% from 6.1%, U6 up to 12.2% from 12.1%, our U7 reconstructed rate up to 21.4% from 21.2%. NFP 209,000 down from an adjusted 298,000 but still decent (non seasonally adjusted NFP down 1,095,000). S&P 500 up, reflecting lessened worries about a more imminent rate hike. Mean unemployment duration down to 32.4 from 33.5 but median unemployment duration up to 13.3 from 13.1 weeks. Participation rate stable for the third month at 62.8%. Employed usually part time up to 28,018 from 27,219 and continuing the trend of part timers being a larger part of Non Farm Payroll. Smoothed household employment only up 18,000, with SA household total employed up 131,000. Self employed up very slightly to 9,133 from 9,104. NSA unemployment total up to 10,307 from 9,883 (highest since March). Janet is generally pleased...
ISM PMI up to 57.1 from 55.3, prices paid up to 59.5 from 58.0, new orders up to 63.4 from 58.9 - generally bullish.
PCE inflation rate, after revisions, is still in an uptrend since January but only up to 1.49% on an annual change rate basis.
Another large cluster of turn signals exist between today and roughly August 12th, ideal date August 9. We're watching for stock shorting opportunities. Other short term signals point at a potential one tomorrow.
Update 7/22/2013 - Very slight drops in CPI-U (SA) from 2.14% to 2.08%, CPI-U (NSA) from 2.13% to 2.07%, and our CPPI (NSA) went from 5.53% to 5.48%. Core CPI down to 1.93% from 1.96%. All are annual change rates. Household energy remained stable at a fairly high level, going from 4.6% to 4.5%. Food and beverages remained unreasonably low and unchanged at 2.2% with housing also unrealistically low at 2.5%, while motor vehicle insurance remained in a high range and up to 4.9% from 4.8%. The BLS shows health insurance down to -.7% from -.1%, but our calculations show it significantly higher at 1.8%. Airline fares jumped to 5.3% from 4.7% last month. Overall services inflation remained at 2.8%, displaying again that the BPP inflation measure (which only measures goods) is very likely substantially underestimating inflation.
No break in the uptrend lines on the S&P500 yet today, so we're still on the side.
Finished energy goods, annual change rate up again from 2.4% to 3.2%, finished consumer goods also up to 4.9% from 4.4%, all finished consumer goods up to 2.8% from 2.5%, final demand slightly down to 1.9% from 2%. Core PCE inflation (the one the Fed watches closely) up to 1.9% from 1.7%.
Not a good picture of employment...7/6/2014
The Household survey in June this year shows total full time jobs down 523,000, while part time jobs are up 799,000 which was the biggest monthly jump since 1993.
Computer power supply replaced and all last week's charts have been uploaded.
Update 6/30/2013 - Our various signals are showing a good probability of tomorrow being a down day in US stock markets. We may open a short position early tomorrow morning, or late today, depending on chart pattersn.
Update 7/1/2013 - Obviously the market doesn't agree with our short call, and we never got the trend reversal that we expected so we're still on the side. "It's all good" remains strong.
Wages vs. inflation...6/24/2014
Real wages do not have to go up during significant inflation, as the 1970s experience shows.
Update 6/26/2013 - PCE inflation, the Fed's favorite inflation measure, up again in May. The last 4 months annual change rate for PCE inflation: 1.08%, 1.20%, 1.42% and 1.48%.
Update 6/27/2013 - Computer hardware problems today, the weekly upload may be delayed.
Huge Monterey shale downgrade...5/22/2014
"The U.S. Energy Information Administration (EIA.gov) is planning to release a major 96% reserve downgrade to the amount of oil and gas recoverable from the Monterey Shale formation, one of the largest oil/gas reserves in the United States. After several years of intensified exploration the Monterey oil shale play seems to have much less recoverable oil and gas then previously hoped. This is due to multiple factors such as the more complex rippled geology of the shale and over-hyped recovery estimates by investors. By official estimates the Monterey Shale formation makes up 2/3 of the shale reserves in the US and by some estimates 1/3 of all crude reserves in the US. Not a drop in the bucket. Next Month the EIA.gov will be announcing cutting it's estimates for Monterey by 96%. That's a huge blow to the US energy portfolio, trillions of dollars, oil and gas the US might have used for itself or exported. Presently the White House is evaluating making changes to US oil export restrictions so this downgrade may result in changes to US energy policy. As well as have a significant impact on US economy and the economy of California."
Update 5/30/2013 - PCE inflation, annual change rate, up to 1.4% from 1.2% in April.
Large jumps in most Producer Price Index (PPI) numbers, helping to confirm our earlier call for an inflation bottom. On an annual change rate basis, finished goods went from 1.7% to 3.1%, consumer goods from 2% to 3.7%, finished energy goods from 1.7% to 4.5%, finished consumer foods from 2% to 5.2%, and final demand from 1.4% to 2.1%.
Update 5/15/2013 - CPI-U, SA, annualized 3.13%, Core CPI 1.83%, CPI-U NSA 1.95%, CPPI (Consumer Purchasing Power Index) 4.58%, Household energy 4.4%, Tenants and household insurance 4.5%, Childcare 3.3%, Services 2.7%. All are annual change rates, and all are up.
Low wage recovery (external pdf)
- Lower-wage industries constituted 22 percent of recession losses, but 44 percent of recovery growth.
- Mid-wage industries constituted 37 percent of recession losses, but only 26 percent of recovery growth.
- Higher-wage industries constituted 41 percent of recession losses, and 30 percent of recovery growth.
The State Tax Calculator is free from the National Center for Policy Analysis. The NCPA notes that it computes the difference in the federal and state income taxes, property taxes and sales taxes one can expect to pay over the rest of your life when you move from one state to another.
Update 4/30/2013 - Poor Q1 GDP performance numbers, growth at only .11%. But the April Chicago PMI (Purchasing Managers Index) came in significantly higher than expected at 63, up from 55.9 in March. New Orders were also strong at 68.7, up from 58.8. It partly offsets the poor GDP report and adds strength to the weather having been bad view. ADP came in higher than expected at 220,000 jobs added for April. Overall, we don't expect a big move today in the S&P 500, but the business equipment component of GDP did fall by 2.1% which doesn't look good for next quarter.
Update 5/1/2013 - We expect, best guess wise, a "Happy days are here again" stock market response to the unemployment reports tomorrow morning."
Update 5/2/2013 - Very bullish unemployment report as expected even though participation rate dropped from 63.2% to 62.8%, but not much stock market reaction yet (as of 10:30AM ET). Our reconstructed U7b unemployment rate was up to 20.3% from 20.1%, and ran counter to the drops in U3, U5 and U6.
Credit & money supply growth...4/20/2014
Here's the total picture of credit growth (from the Fed's Z1 report) and anyone can easily see the huge growth drop since 2000, but do note the large relative growth since late 2013 - from 3% YoY to just under 5% YoY. It's a substantial bullish factor for stocks.
Total credit growth with both the non-financial and financial sectors, in annual change rates.Only recently has the financial sector (green line) actually shown an annual growth rate above zero.
M3 is growing at an increasing rate
Note that velocity is still falling and offsetting much of the broad money supply growth. Low and dropping velocity is by far the major reason that we don't currently have high inflation. It's also quite likely the basic reason for the taper... the Fed is freaked out about inflation probabilities. It's also in my opinion the basic purpose behind the huge Fed reverse repo operations lately, i.e. to have another tool to slow down velocity suppressed total money supply growth.
Update 4/21/2013 - U.S. inflation has likely bottomed.
- Latest CPI-U up to 1.5% from 1.1%
- PPI "unexpectedly" up from 1.3% to 1.7%
- ECRI's USFIG US future inflation has switched to positive on a year on year basis.
- The Reuter's Continuous Commodity Index is over 10% off its bottom in early 2014.
- Housing, gas and natural gas prices are substantially higher lately.
- Credit growth has spurted recently as noted above in the 4/20/2014 post.
- Average hourly earnings annual growth rate have been above CPI-U for a few months.
- Possible bottom forming in the employment poarticipation rate.
- The prediction is against the existing consensus, and contary opinion theory is on our side.
- The food & beverages segment of CPI-U have increased substantially since January, and some items like beef and coffee have skyrocketed. That should significantly affect current inflation expectations.
- Our Greed Fear index has been above the line for quite a while.
- A trend change in velocity in the next few months will confirm it. Velocity growth rate is the wild card on how high inflation will become. The latest work on our Consumer Purchasing Power Loss Index (CPPI) shows inflation to be about 4.57%, which was over a 1/2% increase since February.
Update 4/24/2013 - World Trade index, dollar based, is not looking very bullish/
End of quarter...3/31/2014
End of quarter today, likely to be quite an up day for stocks.
Whopper sized money draining one day Temporary Open Market Operation today, $242 billion.
Update 4/2/2013 - A tetrad of total lunar eclipses, the first one on April 15th (youtube, about 4 minutes)
The daily amounts of the Fed's Securities Lending Open Market Operation have substantially increased lately, going from $10-11 billion per day to over $17 billion today. This strongly suggests lower Treasury interest rates in the near future. Daily Securities Lending
Update 3/27/2013 - GDP up to 2.6% from 2.48% and deflator down to 1.6% from 1.57%. Non seasonally adjusted GDP virtually unchanged. In other words, changes only occurred in the seasonal adjustment factor.
Directional Movement Index, a good article on how to use it
Update 3/18/2013 - CPI-U 1.13% (down from 1.58% last month), Core CPI 1.57% (down from 1.62% last month)), CPPI 4.03%, Housing 2.5% (Case Shiller most recent 13.42%), Rent 2.5% (Census Bureau most recent median rent 3.1%), Electricity 3.8%, Household energy 5.5% but overall energy -2.5%. General disinflation continues, with certain elements growing much faster. All are annual change rates.
Update 3/19/2013 - Meat futures prices: Live cattle up 8.1% since January, feeder cattle up 4.2% since early February and lean hogs up 45% since early February. Coffee futures are also up 86% since early February, and is currently correcting from its peak of about $2.07 a week ago, now down to $1.86. The Reuters Continuous Commodity Index (CCI) is also up 8.3% since early February. Milk futures hit an all time high price on Monday source
Less spin on Federal spending...3/10/2014
The total of the last 12 months of on budget Federal outlays, per the Treasury is $3.42 trillion. The all time record is $3.705 trillion during the 12 months ending in September 2009. So much for the "huge" savings... and those numbers don't include any off budget spending.
Update 3/14/2013 - (political) Gender gap in the White House, women only make 88% of what males make Source
We're currently in the likely turn period (mid March-mid April) that we noted last year. The early January turn period noted at the same time resulted in a nice gain on some S&P 500 shorts.
CPI-U 1.58% up from 1.5% last month, Core CPI 1.62% down from 1.72%, Electricity up 4.4% from 3.2% last month. Motor vehicle maintenance and repair 1.5%, down from 1.6%. Note that per the AAA, it's up 11.3% in 2013, thanks to rising labor and parts costs and a "major increase in the price of extended warranty policies due to high loss ratios by underwriters". Source. All are annual change rates.
Real Median Household Income in the United States
Update 2/21/2013 - CPI adjusted housing in the 1990s... Is the current CPI adjusted recovery an echo?
Looking for another entry point for an S&P 500 long. S&P 500 and dollar futures are slightly up as of 9:00PM ET.
Shorted the S&P right after the poor ISM manufacturing report this morning. What if it isn't just about weather issues?
Long term - work hours to buy: Gold, commodities, the S&P 500 index, Food, Gasoline and a Car. So much for many of the 'It's all good' crowd.
Our medium sized S&P short is still open and we have market stops in to protect the profits, about half around 1750 and the other half around 1762.
Update 2/4/2014 - Exited 2/3 of our S&P short at a nice profit.
Update 2/6/2014 - Reversed position on the remaining 1/3 of our S&P shorts at a decent profit, and have gone long with the same sized position. Risk on.
Update 2/7/2014 - U3 SA, down to 6.6% from 6.7% (NSA up to 7% from 6.5%). U3 SA, down to 12.7% from 13.1% (NSA up to 13.5% from 13%). Our U7 fully inclusive rate, up to 20.5% from 20.3%.
Non farm payroll SA, up 113k. Unemployed total, unadjusted was up 871k. Unemployed part time for economic reasons, unadjusted, down 479k; Seasonally Adjusted rate was also down 219k. Participation rate, up to 63% from 62.8%. Usually work part time, SA, up 168k; NSA down 10k. Household Survey Employment Smoothed for Population Controls and Adjusted to a Payroll Concept, SA, up 911k. Not in Labor Force with a disability, 16+ years old, NSA, up 191k. Want a Job Now + reasons other than discouraged, up 576k. Part-time employment for economic reasons, thousands, SA, up 638k. Overall, an apparently decent report but with large negatives in areas like "want a job now" and "disability" and another "unexpectedly" low number in non farm payroll. Time will tell on how much weather has affected the numbers.
Will be exiting all our S&P longs by market close, so we avoid any negative weekend news risk.
Inflation vs. deflation...1/26/2014
An oldie & goodie long term chart showing GDP, M3, CPI-U plus corrections and velocity based on 10 year moving averages. It's pointing at a mild increase in inflation in the near to intermediate term.
Update 1/27/2014 - Small long position in live cattle
Per the BLS, the self employed have been in a large downtrend since peaking in early 2005.
Update 1/29/2014 - Exited live cattle long at a small loss. Entered small short on the S&P 500, will exit prior to FOMC meeting results.
Update 1/31/2014 - Another likely day trade, short the S&P 500 with a medium sized position.... exited trade on the trend line break, at a decent profit. Intraday volatility is quite substantial!
Per prices from the EIA and in spite of some hope and media spin, gasoline prices for the last six weeks have averaged slightly above last year's prices. US crude oil (WTIC) price averages for the last 6 weeks are 3.2% above last year. Peak Cheap Oil is alive and well.
There's a large cluster of turn signals in our eclectic forecast model for mid March through mid April that we noted a number of times last year. We'll be watching quite closely during that period for S&P 500 shorting opportunities. Precious metals could also get quite interesting and bullish during that period. The early January signal was a false alarm for a significant stock drop, although we did have decent short term profits.
Update 1/22/2014 - Pain Misery index update, since 1900
Same, since 1970
The problem with glowing forecasts
Update 1/23/2014 - Huge drop in the Baltic Dry index, a world wide shipping freight index, during the last week - down from 1826 to 1322 today (a 27% drop - crash territory). The Panamax (for larger ships) was also down substantially - from 1645 to 1468 today (down 11%).
Update 1/24/2014 - Short S&P 500 early this morning, likely as a day trade.
3:48 PM ET, exited all S&P shorts at a nice profit.
Gold up, S&P 500 down...1/12/2014
Opened another short S&P 500 position, will add on weakness. 9:16 PM EST
Update 1/13/2014 - 2014, in our opinion, the year of higher volatility and unpleasant surprises for the consensus followers.
We'll be buyers of gold on a clean break above around $1280.
Update 1/14/2014 - December retail sales - SA +4.1%, NSA +4.3%. An OK, if not barn burner, Christmas season... as expected.
Exited S&P 500 short position at a profit.
Update 1/15/2014 - December Producer Price Index (PPI), most items show gains in annual change rates since last month: Core PPI 1.4% vs. Nov. 1.3%, Finished Goods 1.2% vs. Nov. .7%, Consumer Goods 1.3% vs. Nov. .6%, Finished Energy Goods 1.3% vs. Nov -.7%, Finished Consumer Goods unchanged at .6%.
Update 1/16/2014 - December CPI-U annual change rate up to 1.5% from 1.24%, Core CPI-U unchanged at 1.72%, CPI-U SA up to 2.49% from 1.22%, Consumer Purchasing Power Loss Index (CPPI) up to 4.42% from 4.02%. Energy including gasoline up to .5% from -2.4%, Household energy up to 2.5% from 2.3%, Airline fares down to -1.4% from 4.2%, Electricity up to 3.2% from 2.9%, Tuition, fees and choldcare unchanged at 3.4%.
Update 1/17/2014 - "Two years ago gold bugs ran wild as the price of gold rose nearly six times. But since cresting two years ago it has steadily declined, almost by half, putting the gold bugs in flight. The most recent advisory from a leading Wall Street firm suggests that the price will continue to drift downward, and may ultimately settle 40% below current levels.
The rout says a lot about consumer confidence in the worldwide recovery. The sharply reduced rates of inflation combined with resurgence of other, more economically productive investments, such as stocks, real estate, and bank savings have combined to eliminate gold's allure.
Although the American economy has reduced its rapid rate of recovery, it is still on a firm expansionary course. The fear that dominated two years ago has largely vanished, replaced by a recovery that has turned the gold speculators' dreams into a nightmare.”
Courtesy of Acting Man The source is the August 29, 1976 edition of The New York Times.
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.
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.
There is no such thing as a conspiracy.Sincerely yours,
LIBOR trader, 2011,
Bernie Madoff (Ponzi scheme, 1992-2008),
Bernie Ebbers, Worldcom, 2005,
Samsung & Hynix & Infineon, DRAM price fixing, 2005,
President Bush, "WMDs are definitely in Iraq", 2002,
Enron and Arthur Andersen, 2001,
Jack Abramoff, casino lobbying, 1995-2004,
Savings & Loan executives, various, 1990,
Ollie North, Iran-Contra 1981-85,
President Richard Nixon (missing tape recording sections during Watergate, 1974),
Daniel Ellsberg, Pentagon Papers, 1972,
Secret bombing of Cambodia, 1969,
Reichstag fire, Berlin 1933,
Big perspectives and thoughts
Major reasons for gold price changes, in no particular order:
This is not intended as a complete list but at least provides a framework within which to judge price action.
- Limits in supply, "peak cheap gold"
- Changes in demand (investment, jewelry, manufacturing, central bank etc.)
- Inflation direction & speed of change
- Real interest rate direction
- Fear - social, political, "financial system", peer pressure, safe haven
- Pain & Misery index (unemployment plus inflation rate)
- Changes in confidence of money or a given currency or the "financial system" (..."gold is simply the reciprocal of the world's faith in the institution of managed currencies. It is one divided by T, where T stands for trust." - James Grant, Barrons, Sept 2011)
- Manipulation/control/intervention by central banks and others
- Technical analysis factors
- High general volatility
Another take: Fundamental Drivers of the Gold Market
Some of the major ways the whole world wide economic and political issues could play out, in no particular order:
- Inflationary or hyperinflationary depression, aka very significant stagflation
- Deflationary depression
- Debt restructuring
- "Rescue" by the IMF, BIS & World Bank (or similar institutions) involving a new world currency etc.
- "Debt jubilee", partial or not, and including an all consumer government bailout in order to pay down debt.
- Wars of varying sizes, and not necessarily involving guns and shooting
- Large population decreases, due to disease, weather events, energy and/or food shortages, wars, or other Malthusian issues.
- "New World Order" - oligarchy, fascism, corporatism, kleptocracy, etc.
On the brighter side:
- Energy breakthroughs
- True leaders and statesmen emerge
- "Age of Aquarius" factors, in other words very unexpected positive changes - aka, "white swans"
And obviously, various combinations of the above.
"The Banks must be restrained, and the financial system reformed, with balance restored to the economy, before there can be any sustained recovery."
"A credibility trap is a condition wherein the financial, political and informational functions of a society have been compromised by corruption and fraud, so that the leadership cannot effectively reform, or even honestly address, the problems of that system without impairing and implicating, at least incidentally, a broad swath of the power structure, including themselves.
The status quo tolerates the corruption and the fraud because they have profited at least indirectly from it, and would like to continue to do so. Even the impulse to reform within the power structure is susceptible to various forms of soft blackmail and coercion by the system that maintains and rewards.
And so a failed policy and its support system become self-sustaining, long after it is seen by objective observers to have failed. In its failure it is counterproductive, and an impediment to recovery in the real economy. Admitting failure is not an option for the thought leaders who receive their power from that system.
The continuity of the structural hierarchy must therefore be maintained at all costs, even to the point of becoming a painfully obvious, organized hypocrisy."
Prior years blogs