Econintersect: In China the interbank short-term interest rate jumped more than 200 basis points to a new record of 8% annual rate for loans of one month and less. The central bank (People's Bank of China - PBOC) has failed to follow through on a long-term policy of continuing to pump liquidity into the money market. This has surprised banks who have been operating on the assumption that their credit expansion would be backed by money supply growth. It is not yet clear if this is a short-term adjustment or a longer term effort by the central bank to move to a less accomodative stance.
Econintersect: Over the last 33 years Americans' confidence in Newspapers has fallen from a high point above 50% in 1979 to as low as 22% in 2007 and 23% in the latest poll. Television news fared no better with the confidence of only 23% as well. Liberals had twice the confidence in newspapers (31%) compared to conservatives (15%). The poll was taken the first four days in June.
According to a May 2013 survey by Frank N. Magid Associates, 44 percent of the U.S. online population owns a tablet.
Despite growing competition from Android tablets and from its smaller brother, the full-sized iPad remains the most popular tablet in American households. 53 percent of American tablet owners own Apple’s flagship tablet.
The second most popular tablet in the U.S. is Amazon's Kindle Fire, which is used by 31 percent of the 1,068 tablet owners in the survey. Apple's iPad mini ranked fourth behind Samsung's Galaxy tablets but in front of Google’s highly acclaimed line of affordable Nexus tablets. Microsoft's Surface tablets have yet to make an impression on U.S. consumers, as only 5 percent of tablet owners call one of Microsoft's Windows 8 tablets their own.
Econintersect: Click Read more >> below graphic to see today's list.
The top of today's reading list asks what has Edward Snowden revealed that was not already known ........ and the last article is about the record number of second quarter profit warnings from Wall Street.
Econintersect: The Federal Open Market Committee (FOMC) - the board of directors of the Federal Reserve - meeting concluded today and issued their meeting statement and subsequent Fed Chairman Ben Bernanke's press conference was little changed from the previous except for lowering the growth forecast for 2013 marginally, lowering its inflation outlook, and acknowledging reduced economic risk:
The Committee sees the downside risks to the outlook for the economy and the labor market as having diminished since the fall.
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.
Congressional budget analysts, providing a positive economic assessment of proposed immigration law changes, said Tuesday that legislation to overhaul the nation’s immigration system would cut close to $1 trillion from the federal deficit over the next two decades and lead to more than 10 million new legal residents in the country.
Then tossed in a quote from one of the bill's backers:
The report was immediately seized on by backers of the bill as a significant boost to its prospects. Senator Charles E. Schumer, Democrat of New York, one of the bill’s authors, said the report “debunks the idea that immigration reform is anything other than a boon to our economy.”
Econintersect: Japan reported that exports increased to ¥5.77 trillion ($60.5 billion) in May 2013, up 10.1% compared to May 2012. This was the biggest gain in more than three years. The increase was virtually all due to a weaker yen - export volumes actually decreased by 4.8%. This was the 12th consecutive month with declining export volume. Imports also increased in May resulting in a trade deficit for the 11th straight month.
Econintersect: There is another black eye for independent accountancy. The Department of Financial Services (DFS) for New York State has extracted an agreement for a one year suspension from business with New York banks and a $10 million fine for Deloite's advisory practices at Standard Chartered. The suspension applies only to Deloite's consulting business and not to it's auditing operations, which are in a separate branch of the company.
Econintersect had an Infographic of the Day Sunday to honor Father's Day. But we had a second great infographic about Dads available and we are posting that now as a bonus.
[Note: This is testimony by Jeffrey Kling, Associate Director for Economic Analysis (Congressional Budget Office), before the Subcommittee on Human Resources, Committee on Ways and Means, U.S. House of Representatives.]
The federal government devotes roughly one-sixth of its spending to 10 major means-tested programs and tax credits, which provide cash payments or assistance in obtaining health care, food, housing, or education to people with relatively low income or few assets. Those programs and credits consist of the following:
Medicaid,
The low-income subsidy for Part D of Medicare (the part of Medicare that provides prescription drug benefits),
The refundable portion of the earned income tax credit (EITC),
Econintersect: The European Commission has officially approved the admission of Latvia to join the Eurozone group which shares the common euro currency. The ECB (European Central Bank) had approved the move on 05 June 2013. The remaining steps are considered to be pro forma: approval by EU finance ministers and the European Parliament. These could come as early as July and membership will become official 01 January 2014. There will be essentially no change to business for Latvia because the local currency (the lat) has been pegged to the euro for ten years.
After the G8 summit draws to a close, U.S. President Barack Obama will touch down in Berlin later today. To mark the occasion, we asked 500 Germans to choose their favorite U.S. president. The majority, 37.3 percent, chose Obama. John F. Kennedy came second (36.9 percent) while Bill Clinton came in third (13.7 percent).
Obama made a highly memorable visit to Berlin five years ago as a presidential candidate. Speaking at the city’s Victory Column, he was hailed as a messiah by wildly enthusiastic crowds. In 2013, Obamania is long gone, replaced with the harsh reality of the highest unemployment rates in the history of the eurozone with no signs of recovery in sight.
Econintersect: Click Read more >> below graphic to see today's list.
The top of today's reading list has Nobel laureate Joseph Stiglitz assessment of Japan's economic stimulus moves ........ and the last article maintains that Wall Street is winning the post-crisis regulation battle.
Gasoline prices fell an average of 2.9 cents cents nationwide this past week from last weeks rise of 0.9 cents from the week before (+8.5 cents since 29 April) - with the largest rise in the Gulf Coast (~+2.9).
Average prices by region and a breakdown by grade follow after the "Read More".
How does the disconnect between words and actions develop? We looked at recent survey data from a multitude of sources that shed light on bad behavior in business.
The intense rivalry between Airbus and Boeing has escalated significantly following the recent first flight of the former’s state of the art A350 XWB. This aircraft is the first in a series of highly-efficient and long range passenger planes intended to compete with Boeing’s 787 Dreamliner.
Econintersect: What happens when a Federal Reserve Governor goes to a jobs fair? Sarah Bloom Raskin did just that and told her story as part of a presentation at The Roosevelt Institute Institute conference last week: A Bold Approach to the Jobs Emergency. Based on her experience at the jobs fair she was motivated to look at some specific data on jobs and has some very specific data points that are not often mentioned by others.
Some details of the data and a video of the presentation available after the Read more >> jump.
Econintersect: The federal government launched a program called HAMP (Home Affordable Modification Program) in 2008 and expanded it as of 01 June 2012. According to a recent Bloomberg/Businessweek article, only 1.1 million have been successful enough to be considered permanent. That is less than 10% of the total of over 12 million mortgagors who were underwater at the height of the crisis in 2009. The government program was referred to recently by Bloomberg as "ham-handed". Bloomberg said that the "well-intentioned program" was "as clunky as its name".
It now appears that there may have been bank collusion to help prevent HAMP from being more effective.
Econintersect: Click Read more >> below graphic to see today's list.
The top of today's reading list discusses stock market Vulnerability this summer ........ and the last article takes a strong position against strength in the U.S. housing market.
The global advertising market is expected to grow by a modest 3 percent this year as the economic mood remains fragile in many major ad markets. According to Magna Global, total media ad revenue is predicted to reach $486 billion this year, with television remaining the most important advertising medium.
TV ad revenues will account for 40 percent of the global total this year as digital advertising continues its rise through the ranks. Digital advertising is the only category expected to see double-digit growth this year and is now bigger than print advertising on a global scale. Newspapers and magazines continue to see their ad revenues decline (-3.3 percent and -5.1 percent respectively) as reading habits are shifting toward digital consumption.
The U.S. education system is not as internationally competitive as it used to be; in fact, the United States has slipped ten spots in both high school and college graduation rates over the past three decades, according to a new report and scorecard from the Council on Foreign Relations' Renewing America initiative, which examines the domestic foundations of U.S. power. U.S. national security is directly linked to issues such as education because shortcomings among American workers threaten the country's ability to compete with other countries and set a compelling example internationally.
Three Chinese astronauts are on a 15-day mission and inhabiting the Tiangong 1 space station. China’s second female astronaut, Wang Yaping, is giving lectures to middle and elementary school students while in orbit. Nie Haisheng is the mission's commander. Born in 1964, he flew on Shenzhou 6 in 2005. Wang Yaping is China’s second female astronaut. She was born in 1980. Zhang Xiaoguang is the mission’s pilot, responsible for conducting the rendezvous and docking with the Tiangong station. He was born in 1966.
Econintersect: Click Read more >> below graphic to see today's list.
The top of today's reading list has a story about Brazil's monetary woes ........ and the last article is about how even subliminal hints about money can degrade ethics.
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.
For the third month in a row, export container counts are contracting year-over-year - comparing same months in 2012 and 2013, but imports did cross into expansion territory.
Economically intuitive imports are growing month-over-month, year-over-year, and year-to-date);
exports were slightly worse month-over-month, and continues to contract year-to-date.
Residential building permits and construction completions in May 2013 continues to show the industry growth - but the rate of change is more constant.
Our analysis paints a slightly different picture than the headline data - and shows the May data is much less good than the headlines even though it shows this sector expanding.
Apartment building permits comparing May 2012 to May 2013 are slightly weaker 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 in this channel after exceeding the channel last month.
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 May 2013 Consumer Price Index (CPI-U) year-over-year inflation rate rose moderately from 1.1% to 1.4% . Core inflation (CPI less food and energy) was unchanged at 1.7%.
The dynamics were mixed but most movements in prices were moderate - with little one can say drove inflation in May.
The Producer Price Index (released last week) showed finished goods rose to 1.7% year-over-year inflation rate. It is seldom that the CPI is lower than the PPI.
by Michael Nayebi-Oskoui and Kamran Bokhari, Stratfor
Iranians went to the polls Friday to elect outgoing President Mahmoud Ahmadinejad's successor. Candidates reported few serious problems with the process, and the losers sent congratulations to the eventual winner, Hassan Rouhani.
Compared to the political instability that followed Ahmadinejad's 2009 re-election, this process was relatively boring. But however the news media felt about the election, Iran needs domestic stability if it is going to change its foreign policy in a very challenging geopolitical environment.
Read more »
Summary: Today we look at inflation, past and present. It tells much about who to trust for economic analysis, the current state of the US economy, and what we can expect in the future.
Contents
Introduction
The inflation picture
Implications
Why has inflation fallen since 2011?
Others see the rise in real rates
For More Information
(1) Introduction
During 2010 and 2011 the media overflowed with confident and dire warnings from conservatives of inflation — or even hyperinflation — coming quite soon. They were totally wrong, as economists such as Paul Krugman said at the time. Instead inflation has slowed, by some measures hitting record low rates. As the posts at the end show, readers of the FM website saw the correct side of this debate (this has been added as a win on the Past Predictions page).
Today we look at what actually happened, and what this might mean for our future. Read more »
The Empire State Manufacturing Survey (manufacturing in New York State) in June 2013 shows manufacturing is expanding after slightly contracting last month.
This noisy index has moved from 17.1 (May 2012), 2.3 (June), 7.4 (July), -5.9 (August), -10.4 (September), -6.2 (October), -5.2 (November), -8.1 (December), -7.8 (January 2013). 10.0 (February) , 9.2 (March), 3.1 (April), -1.4 (May) - and now 7.8.
Expectation was for a reading of 0.8 to 1.0 versus the 7.8 reported
New orders sub-index of the Empire State Manufacturing Survy again shows this sector is contracting, and unfilled orders continues to say this sector is contracting.
As this index is very noisy, it is hard to understand what these massive moves up or down mean - however this regional manufacturing survey is normally one of the most pessimistic.
Read more »
This piece is originally from Voxeu.org (June 05, '13)
Europe has been postponing the recapitalization of its banking sector. This column argues that it has been doing so for far too long. Without such a recapitalization, the danger is that economic stagnation will continue for a long period, thereby putting Europe on a course towards Japanese-style inertia and the proliferation of zombie banks.
Unlike the US, Europe failed to recapitalize its biggest banks following the financial crisis of 2007-09. Instead, policymakers gambled that economic recovery would lift the profitability of financial institutions, enabling them to increase their capital buffers over time. It is now clear that this strategy has failed. The Eurozone is in a new recession and the depressed share prices of many banks signal that they are in dismal health. Read more »
The Fed’s QE has been great for bubbles. Since the Fed began publishing its open market operations daily starting in 2002, we’ve been able to see the correlations of the direction of the Fed’s System Open Market Account (SOMA) with 3 stock market bubbles, plus the biggest credit and housing bubbles in history, and the creation of fake bubble jobs in 2005-2007.
When the bubbles collapsed in 2007 and 2008, the fake jobs disappeared. Read more »
The University of Michigan Consumer Sentiment preliminary number for June came in at 82.7, down from the 84.5 final reading for May. Today's number was below Briefing.com consensus of 83.0 and Investing.com's more optimistic forecast of no change.
See the chart below [the read more] 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 headlines say seasonally adjusted Industrial Production (IP) improved an insignificant 0.1% in May 2013 and up 1.6% year-over-year. Econintersect's analysis using the unadjusted data is that IP was showed a decline of 0.9% month-over-month but the year-over-year was up 1.5% year-over-year.
The year-over-year rate of growth is trending down using a three month rolling average, and 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 increase of 0.1% (vs the headline growth of 0.1%).
The manufacturing sub-index (which is more representative of economic activity) was up 0.1% month-over-month - and up 1.7% year-over-year - seasonally adjusted.
The Producer Price Index had a significant jump in inflation this month.
The BLS reported that the Producer Price Index (PPI) finished goods prices year-over-year inflation rate rose from 0.6% in April to 1.7% in May 2013 - with the month-over-month growth up 0.5%. The PPI represents inflation pressure (or lack thereof) that migrates into consumer price.
The market had been expecting inflation of 0.1% to 0.2% month-over-month in finished goods prices compared to the 0.5%. It was foods and energy cost rise which is driving inflation.
Introduction
This article begins a project to critique the work by economists concerning regulation that has led to the award of Nobel prizes. The prize in economics in honor of Alfred Nobel is unique. It is not part of the formal Nobel Prize system. It was created by a large Swedish bank and it is the only "science" prize frequently given to those who proved incorrect. The theme of my series is how poorly the work has stood the test of predictive accuracy. Worse, it has led to policies in the private and public sector that are criminogenic and explain our recurrent, intensifying financial crises.
New factory orders (actual, adjusted for inflation and not seasonally adjusted), which is a broader measure than durable goods orders because it includes non-durables, managed to stabilize at a 0.6% year to year gain in April. That followed 5 straight months of year to year declines. As the Fed inflates a stock market bubble, US manufacturing has gone nowhere.
Real Factory Orders, The Stock Market, and The Fed – Click to enlarge
Econintersect's analysis of final business sales data (retail plus wholesale plus manufacturing) for April 2013 is better than the headline data.
the three month rolling average of business sales with this month's data is continuing to trend less good (positive growth, slower rate of improvement) - even though this was a good positive month in this noisy data series.
The inventory levels are not sending any warning signals but are on the high side.
In May 2013, year-over-year price deflation continues in import prices for 12 of the last 13 months. Export prices are also deflating for the second month in a row:
with imports down 0.6% month-over-month, down 1.9% year-over-year
and exports down 0.5% month-over-month, down 0.9% year-over-year.
The dominate factors in the month-over-month changes were falling oil import prices and falling non-food export prices - however both import and export prices fall was broad based with few exceptions (food export prices grew).
Read more »
Retail sales came in for the second month in a row stronger than anticipated.
both Econintersect's and the headline analysis were similar this month;
the headline numbers show backward revisions were slightly downward - however this was a data reset month going back three years (this reset did little to change the previous comparisons and levels);
motor vehicles were the biggest strength in this months data.
Econintersect Analysis:
sales up 0.5% month-over-month, up 4.3% year-over-year
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.
In Part 1 of this report we looked at non-farm payrolls, which come from the BLS the Current Employment Statistics Survey or CES, a survey of business establishments. The BLS also does a survey of households. The household survey or CPS — Current Population Survey– sometimes tells a different story from the establishment survey. It’s also important in that it breaks out full time employment from total employment so that we can analyze that important metric separately.
by Lucrezia Reichlin, Adair Turner and Michael Woodford
Voxeu.org published this article originally on May 20, 2013
Editor’s note: This article summarises a CEPR-London Business School debate between Adair Turner and Michael Woodford on this policy option chaired by Lucrezia Reichlin that was held in April 2013 at LBS.
With persistently weak economic conditions becoming the norm in Europe, economists are considering increasingly unconventional policy options. One tool that has yet to be taken out of storage is ‘helicopter money’, i.e. the overt monetary financing of government deficits. This column recounts a policy debate on helicopter money that was held at LBS in April 2013 among three of the world’s leading monetary economists.
Introduction by Reichlin
Since the crisis central banks have implemented a variety of non-standard monetary policies aiming at stabilising nominal demand in the presence of major disruptions in financial markets. These policies had different intermediate objectives: market making, controlling long term interest rates or asset prices, support of credit via subsidies. They had a role in stabilising financial markets after the collapse of Lehman Brothers and the banking crisis which followed. Their effects on the real economy, however, are uncertain.1Read more »
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 »
I have written before about the prospect of the Fed starting unwinding of the QE operations. Here's my summary forward view.
Stage 1: the Fed will reduce the rate of QE print ('taper on'). This is inevitable and it is already driving 10-year Treasury yields up - in last 40 days, by some 50bps. The same is also inevitable for the Euro area, albeit via a different mechanism (unwinding of excess liquidity supply to the banks, plus scaling down of any expectations for OMT to kick in), driving the Bund up some 35bps.
Below, technical overviews and analysis for key stock indices, commodities and currency pairs, based on market activity at the end of the 18 June 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.
In the effervescent realm of books on business, there are the biographies on industry titans, the how-to's, the books on leadership (or lack thereof), the postulations on the next cycle, or books about "the secret" (the perpetual media premise about visualizing your success).
But there are very few good books about trading capital markets. Two excellent works regarding capital markets that feature highly successful traders / investors are Market Wizards and The New Market Wizards, both written by Jack D. Schwager. These two books may be older titles, but they are still required reading for any serious trader / investor.
Schwager chose an interview format for his books, asking specific and learned questions to very successful traders that made it big from capital markets.
Investors have suffered with low yields, but profited from rising bond values during the 30-year bull market for bonds.
We believe the bond market is moving into a bearish phase, putting the value of existing bond holdings at risk.
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Investors have been conditioned to believe that traditional bonds are safe and can deliver 5% annualized yields over the long term. In the current climate, neither may be true.
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A variety of income-producing options are available for those who want to diversify bond portfolios and seek better yields.
Historical analysis shows that a diversified portfolio would have outperformed traditional bonds during the last bear bond market and in periods of rising interest rates.
When I look at potential trading opportunities, I like to scan for stocks that have high short selling positions in them. These are the traders betting against the stock.
Now, while there's always some validity to why a stock becomes a short selling target, it's not always the case; this is where I see contrarian trading opportunities.
Going against the grain does work, but there have been cases where a contrarian strategy has blown up in my face. The key here, like any other situation, is to make sure you have an exit strategy. So while some traders view heavy short selling positions as a negative, I view extreme short selling as a possible trade opportunity to make money by betting against the herd.
The Hindenburg Omen-a harbinger of stock market crashes-eerily appeared again last week ... and the Dow Jones promptly dropped 205 points. But its appearance brought mostly scorn from the mainstream financial media.
Here are just a few of the headlines from the past week:
"Hindenburg Omen is Just Hot Air"
"Why 'Hindenburg Omen' Is Just a Superstition"
And our personal favorite:
"Hindenburg Omen is idiotic, and if you believe in it, you should lose your right to own stocks-or anything"
Several Wall Street analysts reacted as if even being asked about the Hindenburg Omen offended them.
Economic conditions in the global economy are taking a quick turn in the wrong way!
Consider the Purchasing Managers' Index (PMI) of the U.S. economy tracked by the Institute of Supply Management. Last month it contracted for the first time since November of 2012 and only the second time since July of 2009!
The PMI registered 49.0 in May, compared to 50.7 in April. (Source: Institute of Supply Management, June 3, 2013.) Any reading below 50 suggests the manufacturing sector is experiencing a contraction.
Insider buying dropped sharply with insiders purchasing $22.81 million of their stock last week compared to $152.67 million in the week prior. Selling declined modestly with insiders selling $1.27 billion of stock last week compared to $1.31 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 went up to 55.6. 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 8.6.
Dollar/Yen chart update. The USDJPY currency pair is threatening a move to the 92.50 area previous support level as the corrective move lower has gained momentum. The dollar has lost almost 10% since May 22, when it hit a peak around 103.74 yen.
The latest COT data shows large specs at the Chicago Mercantile Exchange had cut their long USD wagers by around 30% on the weekly basis. Traders likewise cut the net short JPY bet by 13% on the prior week to record a $9.5 billion position as of last Tuesday.
Price had found resistance this week when testing the SenkouspanA level on the 10/6/13. This is an element of the Ichimoku Kinko Hyo indicator that is plotted alongside Senkou span B with the area between filled with shaded indicator lines (the cloud).
After weeks of speculation based upon speeches, newspaper columns, and pundit pontification we will finally have some hard information. Maybe. The two-day FOMC meeting will include not only the regular announcement of the decision, but also revised economic forecasts and a press conference by Chairman Bernanke. Everyone will be watching for any hints of a change in policy.
Will the Fed reduce the pace of the current QE purchasing?
If not, will it provide more information about the timing of a possible change?
What is precious metals leasing, and why is it done...?
LEASING is an integral part of the precious metals market, writes Miguel Perez-Santalla at BullionVault.
Why is it necessary? For a diverse number of reasons, the first is the need for industry to borrow instead of buying outright the metal. This enables them to avoid owning the metal at a fixed price if they have not yet contracted to sell their product.
Other companies want to borrow rather than buying gold or silver, to keep their cash consumption down. Leasing gives their business greater flexibility in money management. Still others choose to borrow to free up cash. Finally, there are those in a bridge lease, commonly used in the oil refining and pharmaceutical fields.
Gary is at a meeting out of the office this afternoon. The market close report is presented with the help of our syndication partner Investing.com. U.S. stocks had lackluster trading until the Fed released FOMC minutes and Chairman Ben Bernanke held a press conference. The market headed south from there.
At the close of U.S. trading, the Dow Jones Industrial Average finished down 1.35%, the S&P 500 index ended down 1.39%, while the Nasdaq Composite index fell 1.12%.
The final, speculative phase of the cyclical bull market in stocks that began in early 2009 continues to unfold in typical fashion. The uptrend has “gone parabolic,” accelerating into an unsustainable advance that will almost certainly be followed by a correction of equally violent character. The development of every bubble requires that the conventional mindset [...]
Last week, our cycle analysis identified the potential development of the latest short-term cycle low (STCL) in the stock market. On Friday, a cycle low signal was generated, confirming that a new short-term cycle is in progress. With respect to technical analysis, the uptrend from November remains extremely overextended and a break below key support [...]
In June, 29-year-old Edward Snowden leaked classified information on the large-scale surveillance of phone calls and Internet data by the US government. The controversy has caused massive public outcry concerning the government's actions.
Dollar/Yen chart update. The USDJPY currency pair is threatening a move to the 92.50 area previous support level as the corrective move lower has gained momentum. The dollar has lost almost 10% since May 22, when it hit a peak around 103.74 yen.
The latest COT data shows large specs at the Chicago Mercantile Exchange had cut their long USD wagers by around 30% on the weekly basis. Traders likewise cut the net short JPY bet by 13% on the prior week to record a $9.5 billion position as of last Tuesday.
Price had found resistance this week when testing the SenkouspanA level on the 10/6/13. This is an element of the Ichimoku Kinko Hyo indicator that is plotted alongside Senkou span B with the area between filled with shaded indicator lines (the cloud).
Despite a feeling of relative calm given by both the media and the American and Japanese financial markets going from record to record, the world economy is slowing down badly and a widespread recession is looming. The various players are fully aware of it and, in the face of the challenges of an imminent collapse, countries or regions are putting various strategies in place to try and limit the consequences. Whilst some seem dictated by desperation or last chance solutions, others on the contrary bear witness to a real adaptation to the world’s current changes. And it’s no surprise that, in the first category, we find the “powers of the world before” which no longer have any real options.
I was going through Taleb's book on anti-fragility last weekend, noting that he doesn't understand money/sovereign debt. His main idea that there are things which benefit from volatility is interesting. However, the way he writes about sovereign debt implies that he does not understand it. Since I have only been reading the German version I will have to translate the quote. Page numbers will be those of the German version as well. Let us start with the table on p. 52. Sovereign debt is listed as fragile, unsecured private debts as robust, and convertible bonds as antifragile. That is not how things played out in the crisis. Except for those countries using foreign currencies (like euro zone countries), sovereign bonds did exceptionally well:
France's President, Francois Hollande, is probably a man who thinks clearly, but as a wise politician he is careful not to let people know too clearly just what he thinks. Perhaps a man after the heart of the character in a novel by Benjamin Disraeli, who was asked which party he supported:
When I talk to many teenagers and grade schoolers, they seem to have no problem comprehending the fact that if you just create a lot of money, it’ll be like Monopoly money and it won’t have value. Governments do that for all kinds of reasons, especially to enhance political power to fight wars we shouldn’t be fighting or to pass welfare programs that aren’t deserved.
I should go further and say that the powerful attraction of the habits of thought engendered by “equilibrium economics” has become a major obstacle to the development of economics as science – meaning by the term “science” a body of theorems based on assumptions that are empirically derived (from observations) and which embody hypotheses that are capable of verification both in regard to the assumptions and the predictions.
This week Chinese President Xi Jinping will make his first official visit to Latin America since taking office. Xi will visit Trinidad and Tobego, Costa Rica, and Mexico. In a scramble the United States has sent Vice President Joseph Biden to the region on a goodwill mission at the same time.
The two leaders will spar over the airwaves, web, and blogosphere offering different visions of cooperation. The US should use this opportunity to strengthen ties with the region and take advantage of the fact that Latin America’s love affair with China appears to be cooling.
When I first went to work for the Nixon administration, I told my mom,
“Mom, you can’t believe it. I just wrote a speech for Nixon and he used every single word. Well, he did make two little changes. Everywhere I had ‘is’ he put ‘is not,’ and everywhere I had ‘is not’ he put ‘is,’ but other than that, Mom, it’s exactly my speech.”
Nixon did all sorts of things wrong: the import surcharge, the wage and price controls, the huge increase in social spending, the doubling of the capital gains tax rate. But to my way of thinking, Nixon’s biggest problem was going off gold.
A NOTE: Does anybody have a clear vision of the desirable financial system of the future? This article has one. It gives simple answers to 12 simple questions panellists at a recent IMF conference failed to answer.
I was honoured when the IMF asked me to moderate the Financial Regulation panel at this year’s Rethinking Macro II conference. And while naturally, I delivered one of the more enlightening and thought-provoking policy discussions of the conference, I did fail in my duties as moderator to make sure my panellists covered all the excellent questions our sponsors submitted to us. Of course, this was to be expected, as panellists at these types of events almost never address the topics requested of them (I certainly never do), but rather, like Presidential candidates, answer the questions they want to answer. However, being the conscientious person I am, who accepts responsibility for my mismanagement (unlike some bank CEOs we know), I will now step up and answer those questions myself.
UK prime minister David Cameron held a speech this week that according to the Guardian that was "months in preparation". Here is the main part:
He said the need for domestic reform was being driven by the pace of global competition. "Those who defend the case for an ever bigger state and ever bigger spending, or those who say we don't need to radically reform welfare or education, they're fundamentally saying we can ignore these leaner, fitter countries who are breathing down our neck."
Click on image for larger view of entire Adam Smith grave marker. Location of Adam Smith grave: Canongate Churchyard, Royal Mile, Edinburgh, Scotland.
Jon Stimpson is the owner and president of National Scale Technology, based in Huntsville, Alabama.
Experience has made Jon very philosophical about life. Here is one of his guiding principles: Life is filled with opportunity and adversity. Every one experiences both. The ones who succeed are the ones who best handle the adversities. Some even turn them into opportunities ...
Jon was born in Hartford, Connecticut in 1951. After university, he worked for an insurance company, because there were no jobs available in his chosen field: engineering. Several years later, one "real" job became available and his career finally began.
Econintersect: Japan reported that exports increased to ¥5.77 trillion ($60.5 billion) in May 2013, up 10.1% compared to May 2012. This was the biggest gain in more than three years. The increase was virtually all due to a weaker yen - export volumes actually decreased by 4.8%. This was the 12th consecutive month with declining export volume. Imports also increased in May resulting in a trade deficit for the 11th straight month.
Iranians went to the polls Friday to elect outgoing President Mahmoud Ahmadinejad's successor. Candidates reported few serious problems with the process, and the losers sent congratulations to the eventual winner, Hassan Rouhani.
Compared to the political instability that followed Ahmadinejad's 2009 re-election, this process was relatively boring. But however the news media felt about the election, Iran needs domestic stability if it is going to change its foreign policy in a 
During 2010 and 2011 the media overflowed with confident and dire warnings from conservatives of inflation — or even hyperinflation — coming quite soon. They were totally wrong, as economists such as Paul Krugman said at the time. Instead inflation has slowed, by some measures hitting record low rates. As the posts at the end show, readers of the FM website saw the correct side of this debate (this has been added as a win on the 
The Empire State Manufacturing Survey (manufacturing in New York State) in June 2013 shows manufacturing is expanding after slightly contracting last month.
Europe has been postponing the recapitalization of its banking sector. This column argues that it has been doing so for far too long. Without such a recapitalization, the danger is that economic stagnation will continue for a long period, thereby putting Europe on a course towards Japanese-style inertia and the proliferation of zombie banks.
Unlike the US, Europe failed to recapitalize its biggest banks following the financial crisis of 2007-09. Instead, policymakers gambled that economic recovery would lift the profitability of financial institutions, enabling them to increase their capital buffers over time. It is now clear that this strategy has failed. The Eurozone is in a new recession and the depressed share prices of many banks signal that they are in dismal health. 
In May 2013, year-over-year price deflation continues in import prices for 12 of the last 13 months. Export prices are also deflating for the second month in a row:
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.
Since the crisis central banks have implemented a variety of non-standard monetary policies aiming at stabilising nominal demand in the presence of major disruptions in financial markets. These policies had different intermediate objectives: market making, controlling long term interest rates or asset prices, support of credit via subsidies. They had a role in stabilising financial markets after the collapse of Lehman Brothers and the banking crisis which followed. Their effects on the real economy, however, are uncertain.
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. 
When I look at potential trading opportunities, I like to scan for stocks that have high 
Economic conditions in the 
Dollar/Yen chart update. The 
After weeks of speculation based upon speeches, newspaper columns, and pundit pontification we will finally have some hard information. Maybe. The two-day FOMC meeting will include not only the regular announcement of the decision, but also revised economic forecasts and a press conference by Chairman Bernanke. Everyone will be watching for any hints of a change in policy. 
Why is it necessary? For a diverse number of reasons, the first is the need for industry to borrow instead of buying outright the metal. This enables them to avoid owning the metal at a fixed price if they have not yet contracted to sell their product.
I was going through 
France's President, Francois Hollande, is probably a man who thinks clearly, but as a wise politician he is careful not to let people know too clearly just what he thinks. Perhaps a man after the heart of the character in a novel by Benjamin Disraeli, who was asked which party he supported:
I was honoured when the IMF asked me to moderate the Financial Regulation panel at this year’s Rethinking Macro II conference. And while naturally, I delivered one of the more enlightening and thought-provoking policy discussions of the conference, I did fail in my duties as moderator to make sure my panellists covered all the excellent questions our sponsors submitted to us. Of course, this was to be expected, as panellists at these types of events almost never address the topics requested of them (I certainly never do), but rather, like Presidential candidates, answer the questions they want to answer. However, being the conscientious person I am, who accepts responsibility for my mismanagement (unlike some bank CEOs we know), I will now step up and answer those questions myself.
Jon Stimpson is the owner and president of National Scale Technology, based in Huntsville, Alabama.
