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.
Econintersect: Katherine Eban, along with reporter associates Doris Burke and Frederik Joelving, have published an excellent investigative journalism story in Fortune. The subtitle for the article tells only part of the story:
"The epic inside story of long-term criminal fraud at Ranbaxy, the Indian drug company that makes generic Lipitor for millions of Americans."
This is not just a story about Lipitor, and not just about Ranbaxy, but also about an entire system of drug approval, oversight and regulation which is seriously flawed, even criminogenic.
Econintersect: The U.S. Senate permanent subcommittee on investigations released a report Monday evening 20 May 2013 charging Apple of creating what are essentially shell entities in Ireland to shelter (by special arragement with the Irish government) as much as $74 billion in income from taxation by the U.S. or any other government. Perhaps even $138 billion of income is involved; Econintersect is having trouble adding up all the numbers at this point. One of the techniques that was exercized involved both the use of U.S. tax law loopholes and by claiming they "are not tax residents of any jurisdiction", according to the report. The committee is headed by Carl Levin (D. MI) and John McCain (R, AZ). The committee will commence hearings on the report today, Tuesday 21 March 2013.
The IRS division responsible for flagging Tea Party groups has long been an agency afterthought, beset by mismanagement, financial constraints and an unwillingness to spell out just what it expects from social welfare nonprofits, former officials and experts say.
The controversy that erupted in the past week, leading to the ousting of the acting Internal Revenue Service commissioner, an investigation by the FBI, and congressional hearings that kicked off Friday, comes against a backdrop of dysfunction brewing for years.
Moves launched in the 1990s were designed to streamline the tax agency and make it more efficient. But they had unintended consequences for the IRS’s Exempt Organizations division.
Econontersect: What Intel Corp. calls the "world's largest high school science research competition" was won by a 19-year old Romanian, Ionut Budisteanu, at the award ceremnoy in Phoenix, AZ last Friday (17 May 2013). The contest was sponsored by the Intel International Science and Engineering Fair, a program of Society for Science & the Public. Budisteanu was selected for the top prize from 17 category winners who were determined after judging of 1,600 entires from more than 70 countries. His entry involved the use of artificial intelligence to create a viable model for a low-cost, self-driving car.
Click on photo for larger image of all three top winners at gizmag.
Gasoline prices rose an average of 7.0 cents cents nationwide this past week from last weeks rise to 6.5 cents from the week before (+15.0 cents since 29 April) - with the largest rise in the Gulf Coast (2.8) followed by West Coast California (+2.5).
Average prices by region and a breakdown by grade follow after the "Read More".
Econintersect: Lyme disease is a prevalent infectious disorder in the north central and northeastern United States and parts of Europe. It is also reported infrequently in a number of southern and western U.S. states. There is a Lyme disease hot spot along the northern California coast. It derives its name from the town of Lyme, CT, where it was diagnosed in 1975. There is generally accepted evidence that the disease has existed without the formal name for at least 100 years.
Click on image for wider view of Borrelia burgdorferi.
Econintersect: Click Read more >> below graphic to see today's list.
The top of today's reading list has Yahoo!'s vow to not srew up Tumblr ........ and the last article is about a huge pile of Canadian tars sands refuse collecting in Detroit.
by Jaison R. Abel and Richard Deitz - Liberty Street Economics, Federal Reserve Bank of New York
Although the unemployment rate of workers with a college degree has remained well below average since the Great Recession, there is growing concern that college graduates are increasingly underemployed—that is, working in a job that does not require a college degree or the skills acquired through their chosen field of study.
by Jun Nie and Lisa Taylor, Federal Reserve Bank of Kansas City
Export growth is an important source of aggregate growth in the U.S. economy. Indeed the importance of exports in contributing to U.S. economic growth has risen steadily over the past three decades, with exports nearly doubling as a share of GDP. Export growth has been championed in recent years as a key driver for the country’s ongoing economic recovery.
But exports of goods and services produced in the United States depend crucially on foreign demand. When foreign economic growth is low, foreign demand tends to be weak as people have less income to purchase U.S. goods and services. In this way, lower foreign growth may lead to less growth in U.S. exports.
So many variables play into determining where to set up shop for a small business, and how favorable local government is to business surely warrants consideration.
In this infographic, we break down the best and worst states to do business in based on the Tax Foundation’s 2011 Business Tax Climate Index. Of course, many, many other factors serve important roles in influencing the location for a small business (e.g. population density, local culture, climate, etc.), so while tax law draws attention, it’s certainly not the deciding factor.
This week eight central banks took policy decisions with three banks cutting rates (Israel, Serbia and Turkey) and five leaving rates on hold (Indonesia, Iceland, Russia, Latvia and Chile) as the Bank of Japan’s (BOJ) monetary easing continues to impact monetary policy decisions worldwide.
This week’s rate reduction by Israel and Turkey brings it to a total of five rate cuts in reaction to the BOJ’s new phase of monetary easing, which has lead to a drop in the value of the yen and raised fears of an accelerated influx of capital into higher-yielding currencies, threatening to create asset bubbles.
Prior to this week’s cuts, Australia and Korea had cut rates, specifically mentioning foreign exchange as part of their reasoning, while Turkey has now cut rates twice since the BOJ's announcement on April 4, in both cases pointing to strong capital inflows.
Econintersect: Click Read more >> below graphic to see today's list.
The top of today's reading list has two articles that might indicate a market top from two authors who are postulating just the opposite ........ and the last article says the House of Representatives may have just passed an act that will effectively eliminate the debt ceiling. But then the author posted another article the next day which says what Congress has done is ambiguous.
This week we have a Ted Talk about the mathematics of scaling for cities and corporations. Trained as a theoretical physicist, Geoffrey West has turned his analytical mind toward the inner workings of more concrete things, like ... animals. In a paper for Science in 1997, he and his team uncovered what he sees as a surprisingly universal law of biology — the way in which heart rate, size and energy consumption are related, consistently, across most living animals. (Though not all animals: “There are always going to be people who say, ‘What about the crayfish?’ " he says. “Well, what about it? Every fundamental law has exceptions. But you still need the law or else all you have is observations that don’t make sense.")
Econintersect: The CDC (Centers for Disease Control and Prevention) has released a report that finds the number of children in the U.S. with mental disorders has been growing between 1994 and 2011. In any given year between 13% and 20% of U.S. children experience a mental disorder. The treament costs are estimated at $247 billion annually. The new report just released by the CDC covers data fromm 2005-2011.
Econintersect: Secretary of the Treasury Jacob (Jack) Lew has sent a letter to John Boehner, Speaker of the House of Representatives, detailing actions that will be taken in the interim until action is taken to increase the debt limit of the United States. The letter and the actions are pro forma, repeating what has transpired in the past when action was not prompt with regard to raising the limit. In the following, the press release by the Treasury Department is presented in full, as well as an Appendix which describes the "Extraordinary Measures". A substantial portion of the measures amount to simply postponing actions that would add to the national debt. Almost all of the approximately $260 billion in "headroom" will simply be booked as federal debt after the new limit is established.
Econintersect: Chairman Ben S. Bernanke at the Bard College at Simon's Rock (Great Barrington, Massachusetts) told graduates of the importance of innovation, creativity and critical thinking on their futures. This is a speech readers should absorb, and forward to your children and grandchildren
The history of technological innovation and economic development teaches us that change is the only constant. During your working lives, you will have to reinvent yourselves many times. Success and satisfaction will not come from mastering a fixed body of knowledge but from constant adaptation and creativity in a rapidly changing world. Engaging with and applying new technologies will be a crucial part of that adaptation.
This modern, flat infographic presents a combination of data from the Ponemon Institute, offering a candid insight in to the true cost to employers of misplaced or stolen hardware.
Econintersect: Click Read more >> below graphic to see today's list.
The top of today's reading list has Felix Salmon asking if we have solved our fiscal problems........ and the last article is Bill Gross' admonition that, although the bond market has peaked, interest rates will not rise immediately.
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.
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.
The April 2013 Consumer Price Index (CPI-U) year-over-year inflation rate fell from 1.5% to 1.1% . Core inflation (CPI less food and energy) fell slightly also from 1.9% to 1.7%.
The dynamics were large decreases from the gasoline index (which is not part of core inflation), and some inflationary pressures from electricity and natural gas.
The Producer Price Index (released yesterday) showed finished goods fell to a 0.6% year-over-year inflation rate.
Read more »
We thought it would be amusing to start this discussion with the latest “Smoke and Mirrors” from RealtyTrac. They clearly have an interesting perspective and “scale” in relation to measuring the housing recovery. If a picture can be worth a thousand words, hyperbole has just reached a new level. No prizes for guessing what the consensus view on the housing market is. Read more »
This article was originally published by Voxeu.org(May 3, 2013)
Europe’s austerity-first approach has triggered research-based efforts to evaluate the effectiveness of debt-reduction strategies. This column, based on a US empirical study, suggests that an ‘austerity shock’ in a weak economy may be self-defeating. Public-debt reduction historically occurs gradually amid improved growth. If policymakers, firms and households respond as in the past, we should expect lower deficits amid higher growth and, eventually, decreasing debt ratios.
In many advanced countries, in the wake of the 2008 global financial crisis, deficits skyrocketed and public debt ballooned (see Figure 1). In fact, fiscal stimulus accounted for only a small fraction of the increase in debt, whereas collapsing revenues and higher unemployment and social benefits contributed the largest share (IMF 2011). Read more »
The headlines say Industrial Production (IP) declined 0.5% in April 2013 and up 1.9% year-over-year. Econintersect's analysis using the unadjusted data is that IP was also showed a decline of 0.5% month-over-month but the year-over-year was up 2.5% year-over-year.
The year-over-year rate of growth is trending up using a three month rolling average, but is down using any rolling average between 6 to 12 months.
Industrial production is being affected by large movements in utilities, but the data was soft in most categories.
The market was expecting a month-over-month decrease of 0.2% to 0.5% (vs the headline growth decline of 0.5%).
The manufacturing sub-index (which is more representative of economic activity) was down 0.4% month-over-month - and up 1.3% year-over-year - seasonally adjusted.
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.
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.
This article was originally published by Money Morning, (May 17, 2013)
In New York City last week investors from around the country gathered for the Ira Sohn Conference to pitch their lists of the best stocks to buy in 2013.
One of the more interesting presentations this year featured Steve Eisman of Emrys Partners, who gave a presentation that was very bullish on the prospects for the U.S. housing market.
While many investors have proffered opinions of the strength and validity of housing market performance, investors should pay especially close attention to Eisman when he speaks on the subject.
With just one look, it is now possible to see exactly which option strategies are currently profitable and which are not. Those who use option performance as a technical indicator can now see where the stock market is today (as measured by the S&P 500 index) and where it is likely to go next, with a simple “You Are Here” marker.
Industrial Production fell by 0.5 percent in April on a seasonally adjusted basis after having increased 0.3 percent in March and 0.9 percent in February, according to the Fed. The consensus estimate was for a decrease of 0.2%. Economists had been missing to the optimistic side on most forecasts for the past several months. This month they course corrected and now their estimates are too low.
The media only pays attention to this silliness because it has nothing better to do. I’m more interested in how the the trend of actual, not seasonally manipulated, economic data lines up with the performance of the stock market, since there is some historical correlation.
Ready or not, we should expect a week dominated by an even greater focus on Fed policy. There are four reasons:
The economic data calendar is very light;
Earnings season has ended;
Many will be heading for the exits early, anticipating a holiday weekend; and finally
Bernanke testifies on the economy before the Congressional Joint Economic Committee. There will also be other Fed speeches and the minutes of the last FOMC meeting.
Why does silver move so much further, and faster, than gold...?
The silver market often gets a bum rap. The reason is that often its gyrations are much greater than those of the gold market.
What causes this? There are theories that bankers and investment companies are conspiring to try to manipulate the market. However, buying or selling alone is not a conspiracy. It is called a speculation. Where conspiracy begins is poorly defined in law, especially where it's one through market trading. But one factor is true: market perception can be changed by those with big wallets.
Premarkets were up a 'tad' leading speculation of a bull run when the markets opened.
Markets did open up, but not in a spectacular fashion as the bulls and bears battled it out. It first appeared as if the markets were floundering until the higher than normal volume was noticed.
By 10 am the markets had melted up rapidly where the averages were setting new highs where the DOW was up 0.60% and the $RUT was up +0.70% and still going. Now is the time to be very cautious.
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 [...]
Our computer models analyze a large basket of fundamental, technical, internal and sentiment data in order to calculate our Secular Trend Score (STS) and our Cyclical Trend Score (CTS). The historical data used by our models extend back to the market crash in 1929 and have enabled our STS to correctly identify every secular inflection [...]
This Keiser Report, examines whether the markets are soaring or crashing but find it impossible to determine as long standing data patterns have broken down.
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.
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:
Walter Young is the owner and CEO of Emery Winslow Scale (EWS) Company, headquartered in Seymour, Connecticut.
Walter is 91 years young. As far as I know, he is the senior-most active CEO in the scale industry, as well as in America. His life story is both legendary and ordinary, but uniquely American ...
Like his former MIT colleague Stanley Fischer, Mario Draghi hinted that their former MIT colleague's "Helicopter" will soon be taking off, in his most recent ECB press conference; but was quick to opine that it won't be flying in Europe[i]. In doing so, he provided more support to the thesis in Terminal Velocity (4)[ii], that "the Eurozone, faced with the prospect of break-up, as the Germans refuse to pick up the tab for fiscal union without a global bank run, provides the lowest fruit on the tree to be picked this summer". Draghi has gone even further than Fischer, by creating the necessary conditions for a fully blown European bank run. He has created these conditions by going one better than Bernanke and moving beyond the "Zero Bound"; to the "Negative Bound", where lenders and depositors pay financial institutions to take their money[iii]. The thought of paying a shaky European bank to take one's deposits, after what happened to depositors in Cyprus, apparently seems like a reasonable quid pro quo to "Super Mario".
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: "
evening 20 May 2013 charging Apple of creating what are essentially shell entities in Ireland to shelter (by special arragement with the Irish government) as much as $74 billion in income from taxation by the U.S. or any other government. Perhaps even $138 billion of income is involved; Econintersect is having trouble adding up all the numbers at this point. One of the techniques that was exercized involved both the use of U.S. tax law loopholes and by claiming they "are not tax residents of any jurisdiction", according to the report. The committee is headed by Carl Levin (D. MI) and John McCain (R, AZ). The committee will commence hearings on the report today, Tuesday 21 March 2013.
The IRS division responsible for flagging Tea Party groups has long been an agency afterthought, beset by mismanagement, financial constraints and an unwillingness to spell out just what it expects from social welfare nonprofits, former officials and experts say.
This week eight central banks took policy decisions with three banks cutting rates (
Econintersect: Secretary of the Treasury Jacob (Jack) Lew has sent a letter to John Boehner, Speaker of the House of Representatives, detailing actions that will be taken in the interim until action is taken to increase the debt limit of the United States. The letter and the actions are pro forma, repeating what has transpired in the past when action was not prompt with regard to raising the limit. In the following, the press release by the Treasury Department is presented in full, as well as an Appendix which describes the "Extraordinary Measures". A substantial portion of the measures amount to simply postponing actions that would add to the national debt. Almost all of the approximately $260 billion in "headroom" will simply be booked as federal debt after the new limit is established. 
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.
The April 2013 Consumer Price Index (CPI-U) year-over-year inflation rate fell from 1.5% to 1.1% . Core inflation (CPI less food and energy) fell slightly also from 1.9% to 1.7%.
The dynamics were large decreases from the gasoline index (which is not part of core inflation), and some inflationary pressures from electricity and natural gas.
The Producer Price Index (
For the second month in a row, both import and export container counts are contracting year-over-year - comparing same months in 2012 and 2013.
The headlines say Industrial Production (IP) declined 0.5% in April 2013 and up 1.9% year-over-year. Econintersect's analysis using the unadjusted data is that IP was also showed a decline of 0.5% month-over-month but the year-over-year was up 2.5% year-over-year.
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:
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 New York City last week investors from around the country gathered for the Ira Sohn Conference to pitch their lists of the best 
With just one look, it is now possible to see exactly which option strategies are currently profitable and which are not. Those who use option performance as a technical indicator can now see where the stock market is today (as measured by the S&P 500 index) and where it is likely to go next, with a simple “You Are Here” marker.
Industrial Production fell by 0.5 percent in April on a seasonally adjusted basis after having increased 0.3 percent in March and 0.9 percent in February, according to the Fed. The consensus estimate was for a decrease of 0.2%. Economists had been missing to the optimistic side on most forecasts for the past several months. This month they course corrected and now their estimates are too low.
The silver market often gets a bum rap. The reason is that often its gyrations are much greater than those of the gold market.
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: 
Like his former MIT colleague Stanley Fischer, Mario Draghi hinted that their former MIT colleague's "Helicopter" will soon be taking off, in his most recent ECB press conference; but was quick to opine that it won't be flying in Europe[i]. In doing so, he provided more support to the thesis in Terminal Velocity (4)[ii], that "the Eurozone, faced with the prospect of break-up, as the Germans refuse to pick up the tab for fiscal union without a global bank run, provides the lowest fruit on the tree to be picked this summer". Draghi has gone even further than Fischer, by creating the necessary conditions for a fully blown European bank run. He has created these conditions by going one better than Bernanke and moving beyond the "Zero Bound"; to the "Negative Bound", where lenders and depositors pay financial institutions to take their money[iii]. The thought of paying a shaky European bank to take one's deposits, after what happened to depositors in Cyprus, apparently seems like a reasonable quid pro quo to "Super Mario".
