Please read The U.S. Business Cycle in the Context of the Yo-Yo Years which is an update on ECRI's recession call. The readings declined slightly for the second week in a row - but the current levels of the WLI are still within an improvement channel - and showing positive growth to come within the next six months. ECRI's coincident and lagging indicators for April were also revised in this post (see below)
Econintersect: A study of the impact of extended unemployment benefits has found no measurable affect on the rate at which the unemployed return to work. The implication is that availability of further unemployment benefits does not reduce percentage of the unemployed returning to work. But there other correlations that do imply possible behavioral impacts for the extended benefits.
The study is discussed in a working paper byHenry S. Farber of Princeton University and Robert G. Valletta, Federal Reserve Bank of California.
Fifty percent of American small businesses close up shop within their first year. But in 2011, more establishments opened than closed. All of these factors and more create a competitive environment where longevity is the name of the game and a key to success. So what can you do to ensure your doors stay open? You’ll find the answers in the infographic below.
Fed's Balance Sheet is a record $3.356 trillion (up from the last week's record $3.311trillion). The complete balance sheet data and graphical breakdown of the cumulative and weekly changes follows the "read more".
Despite the difficulties Apple (NASDAQ:AAPL) has faced as a company in the past six months, the Apple brand remains as strong as ever. That’s according to Millward Brown’s Brandz Top 100 ranking published earlier this week. Millward Brown estimates the implicit value of Apple as a brand at $185 billion, up from $183 billion in 2012. This brand value is 62% greater than the number two brand, making Apple clearly the brand name top dog.
Econintersect: Click Read more >> below graphic to see today's list.
The top of today's reading list has Trang Ho's explanation why gold could drop another 80% ........ and the last article is Felix Salmon's admonition: "Don't Fear the Bubble".
Econintersect: Week 20 of 2013 ending 18 May shows same week total rail traffic improved according to data released by the Association of American Railroads (AAR). Rail for the last month has been showing very positive growth dynamics.
Four week rolling average is improving, and better than the rolling average one year ago;
13 week rolling average is improving,and better than the rolling average one year ago;
52 week rolling average is improving, and better than the rolling average one year ago;
Econintersect: New York Federal Reserve staff has forecast real GDP growth, the unemployment rate, and inflation in 2013 and 2014 - and the 2013 forecast is roughly similar to the Blue Chip consensus (a poll of top business economists) and the Survey of Professional Forecasters (SPF) median forecast
The staff forecast for 2014 is somewhat above the Blue Chip and SPF, which probably reflects our expectation of more receding of the headwinds and greater improvement in fundamentals than in the consensus forecast of the surveys.
This is the first manufacturing survey in May which shows expansion - and it was the first expansion after seven months of contraction. Please see below.
The market was expecting 348,000 to 350,000 vs the 340,000 reported. The more important 4 week moving average is statistically unchanged, moving from 339,250 (reported last week - but backward revision now revised last weeks number to 340,000) to 339,500. Read more »
Econintersect: Associated Press Science writer Seth Borentstein has reported that the strength of the Moore, Oklahoma tornado on 21 May 2013 dwarfed the "awesome energy of the atomic bomb that leveled Hiroshima". Just how powerful was this storm? How does it compare historically? Econintersect heard again and again from TV reporters that Tuesday evening that this was the most powerful tornado in history. Is that true?
Yesterday, Microsoft introduced the next generation of its Xbox video game console. The Xbox One will compete with Nintendo's Wii U and Sony's PlayStation 3 in a market that has been radically transformed in the past few years. Now that smartphones and tablets deliver high quality gaming content to everyone that has a few dollars to spare, home consoles need to provide customers with additional features in order to lure them into paying hundreds of dollars for a dedicated gaming device.
Econintersect: William C. Dudley, President and Chief Executive Officer of the Federal Reserve Bank of New York offered some of insights into the Federal Reserve's Policies - and show some contrasts to the May Federal Reserve Meeting Minutes.
Those exit principles stated that we would first stop reinvesting, then raise short-term interest rates, and finally sell agency mortgage backed securities over a three-to-five year period. This seems stale in several respects. .... More broadly, it may be desirable to update our thinking around the path and composition of the balance sheet over time, in light of our capacity to shape this path in a way that mitigates potential costs and risks. .... Expectations about future MBS sales or actual sales have the potential to generate or amplify such an upward spike in long-term rates. If the Committee believes that it could be costly in terms of credibility to incur a period of no remittances to Treasury—a notion I am personally somewhat skeptical about—avoiding MBS sales would also reduce this risk. Indeed, the Committee might conclude that it was better on all three counts to allow the agency MBS securities to run off passively over time.
Econintersect: The American Trucking Associations’ (ATA) trucking index fell 0.2% in April after rising 0.9% in March. Compared with April 2012, seasonally adjusted tonnage was up 4.3%. Truck tonnage year-to-date is up 4.0% over 2012.
It should be noted that trucking jobs grew in April 2013 according to the Bureau of Labor Statistics. From ATA Chief Economist Bob Costello:
“The slight drop in tonnage during April fit with trends from other industries that drive a significant amount of truck freight, such as manufacturing and housing, noting that in April, compared with the previous month, factory output slipped 0.4% while housing starts plunged 16.5%.”
Econintersect: The 01 May 2013 meeting statement presented the actions taken. This post covers the economic discussion during this FOMC meeting between the members. The Fed's Balance Sheet (which we report on weekly) is now at record levels.
It appears that the FOMC members believed the economy is little changed, and there was a possibility of slower QE purchases by mid-year:
.....Participants generally saw the economic outlook as little changed since they met in March. However, economic data releases over the intermeeting period were mixed, raising some concern that the recovery might be slowing after a solid start earlier this year, thereby repeating the pattern observed in recent years. Various views on this prospect were offered, from those participants who put more emphasis on the underlying momentum of the economy, noting the strengthening in private domestic final demand, to those who stressed the growing fiscal restraint or the other headwinds still facing the economy.
.....A number of participants expressed willingness to adjust the flow of purchases downward as early as the June meeting if the economic information received by that time showed evidence of sufficiently strong and sustained growth; however, views differed about what evidence would be necessary and the likelihood of that outcome..
Econintersect: Click Read more >> below graphic to see today's list.
The top of today's reading list has GEI contributor Washington's Blog asking if "everything is rigged" ........ and the last article is about the banning of a former president from the upcoming Iranian election.
Econintersect: Fed Chairman Ben S. Bernanke told the Joint Economic Committee of the U.S. Congress today:
A premature tightening of monetary policy could lead interest rates to rise temporarily but would also carry a substantial risk of slowing or ending the economic recovery and causing inflation to fall further. Such outcomes tend to be associated with extended periods of lower, not higher, interest rates, as well as poor returns on other assets. Moreover, renewed economic weakness would pose its own risks to financial stability.
The Nonfinancial leverage subindex of the National Financial Conditions Index increased slightly (less good) this week but still remains well in economic expansion territory. Econintersect focuses on non-financial tools to monitor the economy.
This index remains on a "less good" trend line, and is believed to be a good forward indicator a recession is coming. A value above zero is a recession warning.
by Matthew Higgins and Thomas Klitgaard - Liberty Street Economics, Federal Reserve Bank of New York
Current account deficits in euro area periphery countries have now largely disappeared. This represents a substantial adjustment. Only two years ago, deficits stood at nearly 10 percent of GDP in Greece and Portugal and 5 percent in Spain and Italy (see chart below). This sharp narrowing means that spending has been brought in line with income, largely righting an imbalance that had left these countries dependent on heavy foreign borrowing.
The Bank of Japan (BOJ) maintained its aim of expanding the monetary base by an annual 60-70 trillion yen, along with purchases of Japanese government bonds and other securities, and voiced confidence that the economy was now picking up speed and consumer prices would start to rise.
The BOJ, which launched its "new phase of monetary easing" in early April, said it would continue with its plan to buy government bonds so their outstanding amount rises by 50 trillion yen a year and the average remaining maturity of these purchases will be about seven years.
Econintersect: Blogger, investment analyst and Washington Post columnist Barry Ritholtz has posted a piece at his blog The Big Picture. The title: "NY/NJ/CT Congressional Delegation Should Demand Apology from Oklahoma Senators Inhofe and Coburn". Both Inhofe and Colburn were among 31 senators who voted against the relief effort for Hurricane Sandy. Now both are backing emergency aid for their own state. Inhoffe told MSNBC that the tornado recovery funding will be a "totally different" situation from Sandy. (See The Washington Post.)
Econintersect: Click Read more >> below graphic to see today's list.
The top of today's reading list discusses the production (mining) cost of silver ........ and the last article is about Sheila Barr's claim that Dodd-Frank ends taxpayer bailouts.
A comparison of US Coincident Index, Aruoba-Diebold-Scotti business conditions index, Conference Board's Coincident Index, ECRI's USCI (U.S. Coincident Index), and Chicago Fed National Activity Index (CFNAI) coincident indicators follows.
Get the facts from BMC's 6th Annual Mainframe Survey For the 6th year running, BMC has surveyed 1,300 mainframe users worldwide. Why? So we can better understand the world of mainframe through the eyes of the people who use it every day.
has opened a portal to Amazon's great products. All purchases at Amazon using this link help support Econintersect at the same prices one normally receives.
The headlines say the durable goods sector improved significantly in April 2013 - rebounding from a very poor March. This analysis is stronger than the headlines - but is in conflict with industrial production data from the Federal Reserve.
Econintersect Analysis:
new orders up 6.4% month-over-month, and up 4.4% year-over-year
Inflation adjusted new orders are up 1.8% year-over-year
production (inflation adjusted using the Federal Reserve's Industrial Production Index - durable goods) down 1.6% month-over-month, up 2.3% year-over-year [note that this is a series with moderate backward revision - and it uses production as a pulse point (not new orders or shipments)] - three month trend is "less good"
backlog (unfilled orders) down 0.1% month-over-month
civilian airplanes were the tailwind for durables this month - but most everything was showing moderate to good growth.
I have often spoken of the disconnect between Wall Street and Main Street. While asset prices are inflated by continued interventions of monetary policy from the Federal Reserve, boosting Wall Street profits and widening the wealth gap between the top 20% of Americans and the rest, "Main Street" continues to suffer from a rising cost of living and falling wage growth. Just recently Gallup released the following survey:
"The federal poverty threshold for a family of four is just under $24,000; however, Americans believe such a family unit living in their community needs more than double that - $58,000, on average - just to 'get by.' That estimate reflects 29% of Americans saying these families need up to $50,000 in annual income, 47% saying they need between $50,000 and $99,999, and 10% saying they need $100,000 or more."
New home sales data for April 2013 was better than last month's data - but the data remains very noisy and needs to be averaged to make any sense of it.
If one uses a 3 month rolling average, the data has been statistically constant (rate of growth constant) in 2013.
April 2013 was the best April since 2008;
The year-over-year change for April was above average for the values seen in the last year.
The headline seasonally adjusted numbers say new home sales are up 2.3% month-over-month, and Econintersect's analysis is better.
Martin Wolf had an article in the FT yesterday about the German growth model being applied to the whole euro zone. He notes that because of the flawed analysis that ‘government debt did it’ there is only one way left for demand to grow:
That leaves external adjustment. According to the IMF, France will be the only large eurozone member country to run a current account deficit this year. It forecasts that, by 2018, every current eurozone member, except Finland, will be a net capital exporter. The eurozone as a whole is forecast to run a current account surplus of 2.5 per cent of GDP. Such reliance on balancing via external demand is what one would expect of a Germanic eurozone.
The headlines for existing home sales say that sales improved in April . Our analysis shows sales (based on comparing year-over-year growth) is a little above average for the growth evidenced over the last 12 months. This month looks good analytically.
Econintersect Analysis:
Sales up 6.0% month-over-month, Up 13.5% year-over-year - growth rate trend is accelerating
Prices down 0.5% month-over-month, Up 9.4% year-over-year
The homes for sale inventory grew again this month, and is historically normal for Aprils.
In Housing Smoke and Mirrors (4)[i] and (5),[ii] to confront the threat of the deteriorating bad mortgage vintages -
“the Federal Reserve and the Federal Government were observed to be running swiftly into the housing market.”
The latest data, on the HOPE NOW programme, has confirmed that the ratio of modifications to foreclosures was two-to-one in the first quarter of this year.[iii]
Housing Smoke and Mirrors (6)[iv] suggested that the governance rules of the GSEs were about to be changed, so that they could modify mortgage principle values. This would then allow them to securitize their “Zombie Home” mortgages into MBS, that could then be bought by the Fed.
Here We Go Again
On March 27, 2013, the Federal Housing Finance Administration (FHFA) announced the introduction of still another mortgage modification program. Entitled the Streamlined Modification Program, it was intended to enable distressed borrowers to more easily qualify for a modification.
Unlike the HAMP modification program, borrowers will not have to show any financial hardship whatsoever in order to qualify. If their first lien is owned or guaranteed by either Fannie Mae or Freddie Mac, the only requirement is that they be delinquent for 90 days or more and complete a 3-month trial period. Also - they cannot be delinquent for more than two years and cannot have had two or more previous modifications.
Nice deal, huh? The obvious criticism is that it will only encourage borrowers to default in order to qualify. FHFA's answer is that it will minimize losses to Fannie and Freddie by reducing foreclosures. Really?Read more »
The battle for the Syrian city of Al-Qusayr, which came under regime artillery fire May 19, is actually part of a larger battle for the highly coveted Homs governorate. As we noted in 2012, the battle has wide-reaching ramifications for the Syrian rebels since Al-Qusayr sits along a major transit point for rebel supplies and reinforcements coming in from Lebanon. But it is equally important to loyalist forces. If the Syrian regime loses control of the Orontes River Valley and its major road junctions, Damascus will be largely cut off from Aleppo and the Alawite-dominated coast, which would limit the regime's access to supply lines from port cities.
This article was originally published by Voxeu.org on May 12, 2013
The UK escaped a liquidity trap in the 1930s and enjoyed a strong economic recovery. This column argues that what drove this recovery was ‘unconventional’ monetary policy implemented not by the Bank of England but by the Treasury. Thus, Neville Chamberlain was an early proponent of ‘Abenomics’. This raises the question: is inflation targeting by an independent central bank appropriate at a time of very low nominal-interest rates?
In mid-1932, the UK had experienced a recession of a similar magnitude to that of 2008-09, was engaged in fiscal consolidation that reduced the structural budget deficit by about 4% of GDP, had short-term interest rates that were close to zero, and was in a double-dip recession (Crafts and Fearon 2013). The years from 1933 through 1936 saw a very strong recovery with growth of over 4% in every year. The Chancellor of the Exchequer, Neville Chamberlain (in office from November 1931 to May 1937) was the architect of this recovery. Given the similarities with the situation now facing George Osborne, is there anything he could learn from the policies adopted by his predecessor? Read more »
The economy was almost statistically unchanged in April 2013 - and this index is suggesting the economy is expanding just below the historical trend rate of growth - with the Chicago Fed National Activity Index (CFNAI) 3 month moving (3MA) average increasing from -0.5 to -0.4. The 3MA has now been in negative territory for two months, but still well above the levels associated with recessions.
Read more »
From Terminal Velocity (3) – “The Pyramid Scheme”[i]:
Reading between the lines, it is clear that the Fed intends to maintain a large balance sheet of assets for some time; even after interest rates have begun to normalize. The Fed will then use a rolling form of Operation Twist, across the Yield Curve and across asset classes, in order to target particular areas that it believes need influencing. The overall size of the balance sheet and its composition will then be managed, to achieve a background of benchmark interest rates for specific capital market sectors and the economy in general. This balance sheet management will involve increases and decreases in overall size, in addition to substitution of different assets and maturities. In this way, the Fed intends to anticipate and prevent bubbles or excessive tightness in liquidity from occurring.
It therefore looks as though the Fed will allow QE to roll off via expiry; and that it is quite prepared to provide specific monetary support to specific credit instruments, even as interest rates are rising in general. The intention and capability are to make the economic recovery sustainable during the rising rate environment.
The evils of this deluge of paper money are not to be removed until our citizens are generally and radically instructed in their cause and consequences, and silence by their authority the interested clamors and sophistry of speculating, shaving, and banking institutions. Till then we must be content to return, quo ad hoc, to the savage state, to recur to barter in the exchange of our property, for want of a stable, common measure of value, that now in use being less fixed than the beads and wampum of the Indian, and to deliver up our citizens, their property and their labor, passive victims to the swindling tricks of bankers and mountebankers. ≈ Thomas Jefferson, in a letter to John Adams, 21 March 1819 Read more »
The Ideology to End Ideologies – A Response to Corey Robin on Nietzsche, Hayek, Mises, and Marginalism
by Philip Pilkington
This article was first published by Naked Capitalism (May 13, 2013)
Editor's Note:Econintersect considers this a fundamentally important discussion of the philosophical underpinnings of 20th and 21st century economic thinking. It is contentious, to the point of being "in your face", and is a far more complex subject than many would try to address in an essay of this length. However, the author has succeeded illustriously in his effort. The reader is encouraged to take the time to read this carefully and critically. We think it is well worth the effort.
The political philosopher Corey Robin recently published an interesting essay on what he thinks to be the connection between the late German philosopher Friedrich Nietzsche and the economic theory of marginalism which Robin associates with the Austrian school (but which, of course, is also a mainstay of mainstream neoclassical economics). I should start by saying that I respect Robin’s work a great deal; I respect it to the extent that I did an interview with him for this very site when his last book appeared. However, his latest piece is grossly misguided and reflective of the fact that, when it comes to theoretical economics, academic critics on the left simply do not know their enemy at all. Read more »
There have been several posts over the past few weeks discussing college / university education. Goldman Sachs economist Jan Hatzius stated:
[T]he faster job growth among college graduates is entirely due to faster growth in the size of the college-educated population; the employment/population ratio among college graduates has in fact fallen sharply,
The media exhibited much consternation today as economists’ consensus guess on first time unemployment claims turned out to be way too optimistic this week. That raised two questions in my mind. Was the number really that bad, and even if it was, does it matter?
The Labor Department reported that the seasonally adjusted (SA) representation of first time claims for unemployment rose by 32,000 to 360,000 from a revised 328,000 (was 323,000) in the advance report for the week ended May 11, 2013. The consensus estimate of economists of 330,000 for the SA headline number was too optimistic after 3 weeks of guesses that were too pessimistic. Call it “evening things up.” They were wrong one way 3 times in a row, so they overcompensated the other way this week. It’s a ridiculous game, but everybody plays anyway. Forecasters are virtually always wrong, not just because economic forecasting is quackery, but also because the seasonally adjusted number, being made-up, is impossible to consistently guess (see endnote). Read more »
The University of Michigan Consumer Sentiment preliminary number for May came in at 83.7, a major advance over the April final reading of 76.4. This is the highest level since July of 2007, prior to the Great Recession. The Briefing.com consensus was for 78.5.
See the chart below for a long-term perspective on this widely watched index. I've highlighted recessions and included real GDP to help evaluate the correlation between the Michigan Consumer Sentiment Index and the broader economy.
Read more »
The Conference Board Leading Economic Index (LEI) for the U.S. improved 0.6% in April to 95.0 (2004 = 100). Overall, the index value has been slowly trending up, and one month is not a trend.
This index is designed to forecast the economy six months in advance. The market expected a 0.3% improvement in the LEI (versus the +0.6% reported).
Both the LEI and ECRI's WLI are forecasting improving growth for the next six months.
Read more »
One of the most interesting phenomena marking the recent financial crisis was the disruptions in the interbank market, where banks borrow and lend reserves to each other. This post draws upon my paper with Douglas Gale, “Liquidity Hoarding,” to discuss this practice by banks during times of increased uncertainty about future liquidity needs and its consequences for the efficient transfer of liquidity in the interbank market.
The Philly Fed Business Outlook Survey fell into negative (contraction) - after two months in positive territory. This survey has been negative for 9 of the last 13 months. Key element new orders slipped further into contraction territory.
This is a very noisy index which readers should be reminded is sentiment based. The Philly Fed historically is one of the most negative of all the Fed manufacturing surveys.
The market was expecting the index value of 2.0 to 2.5 (actual was -5.2). Positive numbers indicate market expansion, negative numbers indicate contraction.
Read more »
Residential building permits and construction completions in April 2013 continues to show the industry growth.
Our analysis paints a slightly different picture than the headline data.
Apartment building permits comparing April 2012 to April 2013 are stronger this month.
The rate of annual growth for building permits in the last 12 months for this sector has been mostly in a channel between 25% and 40%. This month is above this channel.
Please note that the media concentrates on housing starts as a single metric for this data series - while Econintersect focuses on the general growth trends of the sector (permits versus completions) which are the best indicator of trends which show the health of this sector. Housing starts would give an indication of construction contribution to GDP.
Editor's note: Two days ago Elliott Morss published an Op Ed on flaws in U.S. governance represented by the failure to even debate proposed background check legislation for gun buyers. A discussion ensued between Dr. Morss and a reader and contributor, Richard P. Rust, which has led to this posted debate. Read more »
Princeling Jiang Mianheng, son of former leader Jiang Zemin, is spearheading a project for China's National Academy of Sciences with a start-up budget of $350m.
The aim is to break free of the archaic pressurized-water reactors fueled by uranium -- originally designed for US submarines in the 1950s -- opting instead for new generation of thorium reactors that produce far less toxic waste and cannot blow their top like Fukushima.
He has already recruited 140 PhD scientists, working full-time on thorium power at the Shanghai Institute of Nuclear and Applied Physics. He will have 750 staff by 2015.
London is one of the Forex trading hot spots on the planet. I live in Chicago but also spend time in London. When I am with London traders, I notice they are trying to make so many different strategies work in the Forex market, yet I don’t meet anyone who is achieving the success they are in search of. They don’t realize the key factor in trading is proper market timing. Market Timing is the ability to identify market turning points and market moves in advance, before they happen, with a very high degree of accuracy. It is also the ability to identify where market prices are going to go, before they go there. The main reason you would want to know how to time the markets turning points in advance is to attain the lowest risk, highest reward, and highest probability entry into a position in the market. Think about it, by entering as close to the turn in price as possible, you enjoy three key factors:
Below, technical overviews and analysis for key stock indices, commodities and currency pairs, based on market activity at the end of the 23 May 2013 U.S. session. This information is a comprehensive summary derived from simple and exponential moving averages along with key technical indicators shown for specific time intervals.
After nearly two decades of economic stagnation, Prime Minister Shinzo Abe’s massive stimulus program seems to be finally driving Japan’s economy into a period of growth.
Japan’s gross domestic product (GDP) only grew 1 percent in the fourth quarter, another dismal showing in a decades-long period of stagnation. However, earlier this week the government reported that the country’s economy grew by an annualized 3.5 percent in the first three months of this year.
Not only did that pace beat the consensus expectation of less than 3 percent, it also made Japan one of the fastest growing developed economies in the world. For example, US GDP grew by just 2.5 percent and the euro zone experienced a -0.9 percent contraction.
I’m not entirely sure what the Dollar is trying to do here, but it’s getting hard to ignore the strength. As far as the Cycles stand it’s telling me that at least a Daily Cycle Top should be just about in. The wildcard now is whether this 7 day surge has greater Investor Cycle implications. If a new Investor Cycle is in play, it will have a significant impact on where the dollar is headed and will alter the outlook for the precious metals.
I try to always respect price, but something about this move just doesn't feel right to me. This is a Day 12 high with a strong close above the Bollinger Band, so regardless of the Week count we should see a 3-7 day decline into a DCL.
The euro/dollar pair experienced an extension of the prevailing downside trend on Friday, moving to a low of 1.2795, before retracing to the two day low area from Wed/Thur around 1.2840 – a longer term price pivot zone.
Price is now threatening to take out prior support around the 1.2745 area.
The 61.8% Fibonacci retrace of the longer term swing higher follows as a technical area of interest around 1.2680.
Large speculators had increased the net short EUR position by over 40% on the weekly basis according to the latest COT report data, to hit $7.6 billion for the specified reporting period and -46,291 versus -33,533 net short contracts.
Below, technical overviews and analysis for key stock indices, commodities and currency pairs, based on market activity at the end of the 21 May 2013 U.S. session. This information is a comprehensive summary derived from simple and exponential moving averages along with key technical indicators shown for specific time intervals.
The dollar has been one of the strongest currencies during 2013 and has bucked a trend that has existed over the past three years. As the debt crisis unfolded in the spring of 2010, investors flocked to the dollar as a safe haven currency. The risk on/risk off environment generated a choppy market for currency traders, but that phenomenon seems to have ended.
First, stocks hit new highs last Friday. Gold lost $22 per ounce. But believe it or not, our new Trade of the Decade is going well. As you may recall, we began a "Trade of the Decade" back at the start of the 21st century. "Buy gold. Sell stocks." That was it. No fancy straddles, hedges or derivatives. Not even any stock selection. Just a simple macro trade that you could stick with for the next 10 years.
How did it turn out? Beautifully. Gold was the top performing asset class of that period from 2000-2010.
Rising corporate profit margins have been a key driver of rising stock prices according to a report in Business Insider that summarizes a research piece from BAML. The report claims that margins have grown mostly due to low interest rates and low taxes and that this margin growth will end. However, the report contends that currently fat margins will not revert back to historical norms as the bears claim. If margins are stable, profit growth should be as well. Therefore they expect stock prices to rise 5-7% annually.
News Flash! Corporate profits don’t drive stock prices and stock prices don’t discount the future.
Stock prices have already risen 17% this year, and they might rise another 17%. That might be followed by a decline of 40% next year. The idea that prices will rise along a nice soft 5-7% curve because profit growth will be around that rate is just silly.
Insider buying decreased slightly with insiders purchasing $65.81 million of their stock last week compared to $66.13 million in the week prior. Selling increased with insiders selling $3.65 billion of stock last week compared to $2.06 billion in the week prior.
Sell/Buy Ratio: The insider Sell/Buy ratio is calculated by dividing the total insider sales in a given week by total insider purchases that week. The adjusted ratio for last week increased to 55.43. In other words, insiders sold more than 55 times as much stock as they purchased. The Sell/Buy ratio this week compares unfavorably with the prior week, when the ratio stood at 31.13.
In this free podcast (recorded Monday afternoon) Russ Winter tells Lee Adler that a shortage of physical gold at the Comex and no real price discovery means that gold and silver prices should soar. Lee says the technical picture on gold has been conducive to a bottom, and says stocks still look to be headed higher.
It is my firm belief that the market will still be here when I get back, so fear not somehow we will survive. Don't do anything rash over the weekend and remember Monday the 27th. is a Market Holiday.
During the past several years, the Federal Reserve has engaged in a historic market intervention through its quantitative easing (QE) programs. Early on in the process, Federal Reserve Chairman Ben Bernanke indicated that the intent of the intervention was to inflate the stock market and thereby spur a “virtuous cycle” through which the economy would [...]
In September 2011, our cycle analysis predicted the formation of a long-term top in the gold market. Following the development of a consolidation formation from late 2011 until early 2013, prices moved below congestion support in the 1,550 area. As expected, the breakdown was followed by a severe decline of 12 percent during the last [...]
What organizers say is the world's largest Lego model, a life-sized Star Wars X-wing Starfighter, touches down in New York's Times Square. It's 43 feet or 13 meters long, a life-sized replica of a "Star Wars" fighter craft.
London is one of the Forex trading hot spots on the planet. I live in Chicago but also spend time in London. When I am with London traders, I notice they are trying to make so many different strategies work in the Forex market, yet I don’t meet anyone who is achieving the success they are in search of. They don’t realize the key factor in trading is proper market timing. Market Timing is the ability to identify market turning points and market moves in advance, before they happen, with a very high degree of accuracy. It is also the ability to identify where market prices are going to go, before they go there. The main reason you would want to know how to time the markets turning points in advance is to attain the lowest risk, highest reward, and highest probability entry into a position in the market. Think about it, by entering as close to the turn in price as possible, you enjoy three key factors:
One of the reasons that it is been so hard for a lot of analysts, even trained economists, to understand the imbalances that were at the root of the current crisis is that we too easily confuse national savings with household savings. By coincidence there was recently a very interesting debate on the subject involving several economists, and it is pretty clear from the debate that even accounting identities can lead to confusion.
The difference between household and national savings matters because of the impact of national savings on a country’s current account, as I discuss in a recent piece in Foreign Policy. In it I argue that we often and mistakenly think of nations as if they were simply very large households. Because we know that the more a household saves out of current income, the better prepared it is for the future and the more likely to get rich, we assume the same must be true for a country. Or as Mr. Micawber famously insisted:
Annual income twenty pounds, annual expenditure nineteen six, result happiness. Annual income twenty pounds, annual expenditure twenty pound ought and six, result misery.
America is a very young country (as compared with China, for example) and Americans often take many old things as new, innocently and ignorantly. Two examples:
Fiat money: It was invented by the Chinese more than 1,000 years ago!
Money printing: It has been used, misused, and abused, by many governments around the world ever since fiat money was invented.
The Pew Global Attitudes Project has its annual report out. It confirms what all European already know: disillusionment with the way the European institutions function. Democracy is a nice word, but in Europe, it is not one man one vote. The European parliament is too weak to go after the commission. The troika sits in many countries, potentially blocking legislation that would help those most affected and the ECB has stressed its mandate as far as it goes but can not do any more. Here is a vital passage:
A Review of the Documentary "Thin Ice" produced by Oxford University, United Kingdom, Victoria University of Wellington, New Zealand (VUW), and London-based DOX Productions.
Written by Charles McKenna
Editor's note: The trailer for the documentary can be viewed at the end of this article.
Scientists have just released the results of new work that broadens their database and provides more accurate estimates of expected temperature rise due to climate change. Their recent conclusion: Past estimates of global warming have severely underestimated the actual temperature rise we are likely to experience.
Several of these rules have since been revoked, but their wacky and arbitrary nature demonstrates the arrogance of power in China. One can imagine all too easily their creators — sitting in comfortable armchairs, drinking high-grade tea and smoking fine cigarettes — discussing the issues at hand as if they were purely intellectual abstractions, never considering how ordinary people might react. That people will be unhappy is no cause for concern because, for so long, the power of the state has trampled on individual rights. Only when rules are so onerous that they stir actual protest do higher-ups take notice: “You guys are just making a mess of things,” they’ll tell their bureaucrat underlings.
Niall Ferguson is the champion of anti-Keynesian economists. Last week, he explained why America’s pursuit of Keynesian policies is leading to disastrous consequences.
Ferguson gave four symptoms of U.S. degeneration as evidence that Keynesian policies have created underlying weaknesses.
Ferguson, a professor at Harvard, gave the opening talk at last week’s Strategic Investment Conference in San Diego, hosted by Altegris Investments and John Mauldin. His remarks were based on his newly released book, The Great Degeneration: How Institutions Decay and Economies Die.
Elizabeth Warren may be the best senator in Congress — or at least the most honest. Expect to see her attacked from both sides of the aisle.
She continues to castigate the Obama adminsitration (and she’s a Democrat!) for not punishing the crooked banks (all the big banks are crooked) for criminally defrauding millions of Americans out of trillions of dollars, while continuing to stuff their own pockets.
Naturally, Obama avoids this subject (as do the Republicans) like it were poop in the punch bowl. For politicians, the banks are too big (i.e. too big as contributors) to jail.
France has been given by the European Commission an extra two years to get its budget deficit down to 3 % of GDP, but on condition that it implements reforms that will improve its longer term budget outlook.
Top of the list is to get the national pension system under control, currently running a deficit of about 0.7 % of GDP and set to rise to almost 1 % of GDP by 2020 or even earlier, and getting steadily larger thereafter.
This will be a tough nut to crack for the present socialist government under President Francois Hollande. No socialist government in the past 30 years has dared to reform the system, leaving it to conservative governments to patch it up.
Like bombs, guns are dangerous: in 2011, 87 people were shot every day - 54 suicides, 30 homicides. In addition, 851 people were shot unintentionally, like what happened a week back - a 5-year old boy who was given a gun as a present by his parents and unintentionally shot his 2-year old sister.
In earlier pieces, I have reflected on how we have handled other known killers: cigarettes, alcohol, motor vehicles, and overeating. I have also documented how many deaths have resulted because certain drugs are illegal. This article explains how lessons learned from our efforts to control these other killers apply to guns.
Since the world seems to be interested in Alternative für Deutschland I have translated some of their demands into English. It’s all from the programme which they posted on their website. I selected only a few which I thought interesting:
Econintersect: Week 20 of 2013 ending 18 May shows same week total rail traffic improved according to data released by the Association of American Railroads (AAR). Rail for the last month has been showing very positive growth dynamics.
Econintersect: The American Trucking Associations’ (ATA) trucking index fell 0.2% in April after rising 0.9% in March. Compared with April 2012, seasonally adjusted tonnage was up 4.3%. Truck tonnage year-to-date is up 4.0% over 2012.
other securities, and voiced confidence that the economy was now picking up speed and consumer prices would start to rise.
Econintersect: Blogger, investment analyst and Washington Post columnist Barry Ritholtz has posted a piece at his blog The Big Picture. The title: "
The headlines say the durable goods sector improved significantly in April 2013 - rebounding from a very poor March. This analysis is stronger than the headlines - but is in conflict with industrial production data from the Federal Reserve.
Econintersect Analysis:
New home sales data for April 2013 was better than last month's data - but the data remains very noisy and needs to be averaged to make any sense of it.
Martin Wolf had an article in the FT yesterday about the German growth model being applied to the whole euro zone. He notes that because of the flawed analysis that ‘government debt did it’ there is only one way left for demand to grow:
The headlines for existing home sales say that sales improved in April . Our analysis shows sales (based on comparing year-over-year growth) is a little above average for the growth evidenced over the last 12 months. This month looks good analytically.
Econintersect Analysis:
The UK escaped a liquidity trap in the 1930s and enjoyed a strong economic recovery. This column argues that what drove this recovery was ‘unconventional’ monetary policy implemented not by the Bank of England but by the Treasury. Thus, Neville Chamberlain was an early proponent of ‘Abenomics’. This raises the question: is inflation targeting by an independent central bank appropriate at a time of very low nominal-interest rates?
In mid-1932, the UK had experienced a recession of a similar magnitude to that of 2008-09, was engaged in fiscal consolidation that reduced the structural budget deficit by about 4% of GDP, had short-term interest rates that were close to zero, and was in a double-dip recession (Crafts and Fearon 2013). The years from 1933 through 1936 saw a very strong recovery with growth of over 4% in every year. The Chancellor of the Exchequer, Neville Chamberlain (in office from November 1931 to May 1937) was the architect of this recovery. Given the similarities with the situation now facing George Osborne, is there anything he could learn from the policies adopted by his predecessor? 
The economy was almost statistically unchanged in April 2013 - and this index is suggesting the economy is expanding just below the historical trend rate of growth - with the 
Reading between the lines, it is clear that the Fed intends to maintain a large balance sheet of assets for some time; even after interest rates have begun to normalize. The Fed will then use a rolling form of Operation Twist, across the Yield Curve and across asset classes, in order to target particular areas that it believes need influencing. The overall size of the balance sheet and its composition will then be managed, to achieve a background of benchmark interest rates for specific capital market sectors and the economy in general. This balance sheet management will involve increases and decreases in overall size, in addition to substitution of different assets and maturities. In this way, the Fed intends to anticipate and prevent bubbles or excessive tightness in liquidity from occurring.
It therefore looks as though the Fed will allow QE to roll off via expiry; and that it is quite prepared to provide specific monetary support to specific credit instruments, even as interest rates are rising in general. The intention and capability are to make the economic recovery sustainable during the rising rate environment.
The evils of this deluge of paper money are not to be removed until our citizens are generally and radically instructed in their cause and consequences, and silence by their authority the interested clamors and sophistry of speculating, shaving, and banking institutions. Till then we must be content to return, quo ad hoc, to the savage state, to recur to barter in the exchange of our property, for want of a stable, common measure of value, that now in use being less fixed than the beads and wampum of the Indian, and to deliver up our citizens, their property and their labor, passive victims to the swindling tricks of bankers and mountebankers. ≈ Thomas Jefferson, in a letter to John Adams, 21 March 1819 
The political philosopher Corey Robin recently published 
The media exhibited much consternation today as economists’ consensus guess on first time unemployment claims turned out to be way too optimistic this week. That raised two questions in my mind. Was the number really that bad, and even if it was, does it matter?
The 
The University of Michigan Consumer Sentiment preliminary number for May came in at 83.7, a major advance over the April final reading of 76.4. This is the highest level since July of 2007, prior to the Great Recession. The Briefing.com consensus was for 78.5.
See the chart below for a long-term perspective on this widely watched index. I've highlighted recessions and included real GDP to help evaluate the correlation between the Michigan Consumer Sentiment Index and the broader economy.
The Conference Board Leading Economic Index (LEI) for the U.S. improved 0.6% in April to 95.0 (2004 = 100). Overall, the index value has been slowly trending up, and one month is not a trend.
This index is designed to forecast the economy six months in advance. The market expected a 0.3% improvement in the LEI (versus the +0.6% reported).
Both the LEI and ECRI's WLI are forecasting improving growth for the next six months.
The Philly Fed Business Outlook Survey fell into negative (contraction) - after two months in positive territory. This survey has been negative for 9 of the last 13 months. Key element new orders slipped further into contraction territory.
This is a very noisy index which readers should be reminded is sentiment based. The Philly Fed historically is one of the most negative of all the Fed manufacturing surveys.
The market was expecting the index value of 2.0 to 2.5 (actual was -5.2). Positive numbers indicate market expansion, negative numbers indicate contraction.
Residential building permits and construction completions in April 2013 continues to show the industry growth.
Editor's note: Two days ago Elliott Morss published an Op Ed on flaws in U.S. governance represented by the failure to even debate proposed background check legislation for gun buyers. A discussion ensued between Dr. Morss and a reader and contributor, Richard P. Rust, which has led to this posted debate. 
Thorium is touted by many as the future energy source for the world. Thorium would be used in place of uranium and plutonium in nuclear reactors:
London is one of the Forex trading hot spots on the planet. I live in Chicago but also spend time in London. When I am with London traders, I notice they are trying to make so many different strategies work in the Forex market, yet I don’t meet anyone who is achieving the success they are in search of. They don’t realize the key factor in trading is proper market timing. Market Timing is the ability to identify market turning points and market moves in advance, before they happen, with a very high degree of accuracy. It is also the ability to identify where market prices are going to go, before they go there. The main reason you would want to know how to time the markets turning points in advance is to attain the lowest risk, highest reward, and highest probability entry into a position in the market. Think about it, by entering as close to the turn in price as possible, you enjoy three key factors:
After nearly two decades of economic stagnation, Prime Minister Shinzo Abe’s massive stimulus program seems to be finally driving Japan’s economy into a period of growth.
I’m not entirely sure what the Dollar is trying to do here, but it’s getting hard to ignore the strength. As far as the Cycles stand it’s telling me that at least a Daily Cycle Top should be just about in. The wildcard now is whether this 7 day surge has greater Investor Cycle implications. If a new Investor Cycle is in play, it will have a significant impact on where the dollar is headed and will alter the outlook for the precious metals. 
The euro/dollar pair experienced an extension of the prevailing downside trend on Friday, moving to a low of 1.2795, before retracing to the two day low area from Wed/Thur around 1.2840 – a longer term price pivot zone.
Rising corporate profit margins have been a key driver of rising stock prices according to a 
In this free podcast (recorded Monday afternoon) 
One of the reasons that it is been so hard for a lot of analysts, even trained economists, to understand the imbalances that were at the root of the current crisis is that we too easily confuse national savings with household savings. By coincidence there was recently a very interesting 
Several of these rules have since been revoked, but their wacky and arbitrary nature demonstrates the arrogance of power in China. One can imagine all too easily their creators — sitting in comfortable armchairs, drinking high-grade tea and smoking fine cigarettes — discussing the issues at hand as if they were purely intellectual abstractions, never considering how ordinary people might react. That people will be unhappy is no cause for concern because, for so long, the power of the state has trampled on individual rights. Only when rules are so onerous that they stir actual protest do higher-ups take notice: “You guys are just making a mess of things,” they’ll tell their bureaucrat underlings.
Niall Ferguson is the champion of anti-Keynesian economists. Last week, he explained why America’s pursuit of Keynesian policies is leading to disastrous consequences. 
Elizabeth Warren may be the best senator in Congress — or at least the most honest. Expect to see her attacked from both sides of the aisle.
France has been given by the European Commission an extra two years to get its budget deficit down to 3 % of GDP, but on condition that it implements reforms that will improve its longer term budget outlook.
Like bombs, guns are dangerous: 
