Global Economic Intersection
Advertisement
  • Home
  • Economics
  • Finance
  • Politics
  • Investments
    • Invest in Amazon $250
  • Cryptocurrency
    • Best Bitcoin Accounts
    • Bitcoin Robot
      • Quantum AI
      • Bitcoin Era
      • Bitcoin Aussie System
      • Bitcoin Profit
      • Bitcoin Code
      • eKrona Cryptocurrency
      • Bitcoin Up
      • Bitcoin Prime
      • Yuan Pay Group
      • Immediate Profit
      • BitQH
      • Bitcoin Loophole
      • Crypto Boom
      • Bitcoin Treasure
      • Bitcoin Lucro
      • Bitcoin System
      • Oil Profit
      • The News Spy
      • Bitcoin Buyer
      • Bitcoin Inform
      • Immediate Edge
      • Bitcoin Evolution
      • Cryptohopper
      • Ethereum Trader
      • BitQL
      • Quantum Code
      • Bitcoin Revolution
      • British Trade Platform
      • British Bitcoin Profit
    • Bitcoin Reddit
    • Celebrities
      • Dr. Chris Brown Bitcoin
      • Teeka Tiwari Bitcoin
      • Russell Brand Bitcoin
      • Holly Willoughby Bitcoin
No Result
View All Result
  • Home
  • Economics
  • Finance
  • Politics
  • Investments
    • Invest in Amazon $250
  • Cryptocurrency
    • Best Bitcoin Accounts
    • Bitcoin Robot
      • Quantum AI
      • Bitcoin Era
      • Bitcoin Aussie System
      • Bitcoin Profit
      • Bitcoin Code
      • eKrona Cryptocurrency
      • Bitcoin Up
      • Bitcoin Prime
      • Yuan Pay Group
      • Immediate Profit
      • BitQH
      • Bitcoin Loophole
      • Crypto Boom
      • Bitcoin Treasure
      • Bitcoin Lucro
      • Bitcoin System
      • Oil Profit
      • The News Spy
      • Bitcoin Buyer
      • Bitcoin Inform
      • Immediate Edge
      • Bitcoin Evolution
      • Cryptohopper
      • Ethereum Trader
      • BitQL
      • Quantum Code
      • Bitcoin Revolution
      • British Trade Platform
      • British Bitcoin Profit
    • Bitcoin Reddit
    • Celebrities
      • Dr. Chris Brown Bitcoin
      • Teeka Tiwari Bitcoin
      • Russell Brand Bitcoin
      • Holly Willoughby Bitcoin
No Result
View All Result
Global Economic Intersection
No Result
View All Result

The Week Ahead: State of the Union, Bernanke, Earnings

admin by admin
January 22, 2012
in Uncategorized
0
0
SHARES
4
VIEWS
Share on FacebookShare on Twitter

by Jeff Miller

Normally the State of the Union Address would be the focal point for the week’s events.  In a general sense this is still true, but our focus in this weekly series is much narrower:  What will influence markets?

earnings-rideSMALLThis SOTU speech is unlikely to have a big market effect.  The political lines have been drawn. We can all hope for initiatives that will generate some compromise, but I am not hopeful.  I expect themes related to the major national problems – -housing and jobs.

My forecast last week was that by Thursday we would all be talking about earnings.  I expect earnings to dominate the story this week as well.

I’ll take this up further in the conclusion, but first let us do our regular review of the week’s news and data.

Background on “Weighing the Week Ahead”

There are many good sources for a comprehensive weekly review.  My mission is different. I single out what will be most important in the coming week. My theme for the week is what we will be watching on TV and reading in the mainstream media. It is a focus on what I think is important for my trading and client portfolios.

Unlike my other articles at “A Dash” I am not trying to develop a focused, logical argument with supporting data on a single theme. I am sharing conclusions. Sometimes these are topics that I have already written about, and others are on my agenda. I am trying to put the news in context.

Readers often disagree with my conclusions. Do not be bashful. Join in and comment about what we should expect in the days ahead. This weekly piece emphasizes my opinions about what is really important and how to put the news in context. I have had great success with my approach, but feel free to disagree. That is what makes a market!

Last Week’s Data

In last week’s report I observed that there was a change in tone.  We saw more of the same this week.  In the absence of specific bad news from Europe, the market “wants to move higher.”  All of a sudden there is more attention paid to specific stock news, and a general upward trend.  I’ll consider this important development further in the conclusion.

The Good

There was some very good news this week.

  • Initial jobless claim dipped back to the 350K range.  See Doug Short for the full story and multiple charts.

Weekly-unemployment-claims

 

  • Eurozone news was positive.  Auctions went well.  The IMF is building up firepower to the $1 trillion range.  The one-stop indicator, the Italian 10-year bond, saw yields decline to the 6.2% range from over 7% last week.  There is a nice Europe chart pack from Scott Grannis.  Here is one example:

2-yr Swap Spreads

2-yr swap spreads are an excellent indicator of financial market liquidity and systemic risk. Spreads are down meaningfully in the Eurozone, albeit still quite elevated. U.S. spreads are now back to a level that is consistent with “normal” conditions.

  • Most investors have a big fear of a crash.  See Bespoke Investment Group’s analysis.

Crashconf

 

  • The Fed turned a $77 billion profit last year.  Try to find that help from bipartisan deficit negotiators.

The Bad

The economic data had a few negatives.

  • The Baltic Dry Index is plummeting.  See Bespoke Investment Group for a great chart.  I have paid less attention to this in recent years since the supply factors from shipping outweighed demand.
  • Industrial production was a bit light of expectations, although capacity utilization was firm.
  • Gasoline prices continue a steady march higher.  Here is the key chart from Doug Short, also supported by AAA.  High fuel prices represent a tax on consumption, and one that is difficult to model.

Gasoline-crude-since-2000

  • Building permits were virtually unchanged, month-over-month.  The year-over-year change has come entirely from multi-family constructions.  Since I am a fan of this series, the housing news bothered me more than most other observers.  See Steven Hansen’s fine analysis for full details.

The Ugly — Things Change

I started out to do the “ugly” award for the week, which I initially felt was the fake CNN email about Newt.  This was a blatant lie, leveraged through modern methods.  Apparently it did not work.  Somehow Gingrich has taken stories that would have been devastating in past eras and turned it all to his advantage.  As I write this on Saturday night, he is reported as winning the South Carolina primary.  If you had merely read the news flow, without seeing the debates, you would never have predicted the outcome.

For starters, as a former practicing political scientist at a big-time school, I see what is happening this year as a real game-changer.  The growth of Internet communications and social media is having a dramatic effect.  Just think about the differences between 2008 and now — Facebook, Twitter, and IM versus email — and we are just getting started.  What was innovative in 2008 is now passe’.

One factor is that Gingrich was helped by a debate format that played to his strengths — plenty of cheering from the audience, and a group receptive to his anti-media pitch.  For perspective, I offer some relevant historical notes.

The Picture that Changed History

In 1988 Colorado Senator Gary Hart was the early leader to challenge VP George Bush.  His credentials and charisma were excellent.  There were rumors……and he challenged the media.

 

220px-Donna_Rice_and_Gary_Hart

The name of the boat where this was taken was “Monkey Business” as illustrated on the T-Shirt.  In 1988 this was a big deal for voters.  Hart was crushed in the New Hampshire primary.  Dukakis went on to victory for the Dems, and put up a weak fight.

I offer no moral judgment – -just an observation that things have changed to a much higher level of tolerance for many voters.

The New Standard for Dirty Tricks

There is a long tradition of dirty tricks in politics.  Any readers who have notheard about Dick Tuck might enjoy reading about his (alleged) exploits.  There is something roguish and crafty about putting on a conductor’s hat and waving a train out of the station when an opposing candidate is still speaking from the rear platform.  Hiring an elderly woman, having her put on a Nixon badge, and setting up an encounter seems clever.  The woman, the day after one of the Kennedy/Nixon debates, the first in history, embraces Nixon and comforts him in front of the cameras — “Don’t worry about last night.  You’ll get him next time.”

Watergate took the Dick Tuck moves to a new level.  Last week’s forged CNN email propagating lies about Gingrich should be disturbing to all of us.  I am not going to repeat the lie here, but Gingrich has put out the warning.

And I say this without regard to party or candidate.

Using Political Information

Abnormal Returns  had a great post this week on how to use political information to your investment advantage (including an actionable theme).  Do not get involved with your emotions or what you think should happen.  Stick to forecasting what is likely to happen, and finding the right stocks.

That is exactly what we try to do with political commentary.  Take your own opinion to the voting booth.  Argue it vigorously with friends.  When it comes to investing, think about what will happen, not what you want to happen.

The Indicator Snapshot

It is important to keep the current news in perspective. My weekly snapshot includes the most important summary indicators:

  • Economic/Recession Indicators. This week continues two new measures for our table. The C-Score is a weekly interpretation of the best recession indicator I found, Bob Dieli’s “aggregate spread.” I’ll explain the link to the C-Score next week.  The second is the Super Index. You can read more about it in this article, which is merely an introduction.   It reflects extensive research and testing, and is well worth monitoring. (The Super Index includes the ECRI approach).  I am going to do a complete review of the work very soon.  Meanwhile, I think it is important enough to watch every week.
  • The St. Louis Financial Stress Index.
  • The key measures from our “Felix” ETF model.

The SLFSI reports with a one-week lag. This means that the reported values do not include last week’s market action. The SLFSI has moved a lot lower, and is now out of the trigger range of my pre-determined risk alarm. This is an excellent tool for managing risk objectively, and it has suggested the need for more caution. Before implementing this indicator our team did extensive research, discovering a “warning range” that deserves respect. We identified a reading of 1.1 or higher as a place to consider reducing positions.

Indicator snapshot 012012

Our “Felix” model is the basis for our “official” vote in the weekly Ticker Sense Blogger Sentiment Poll. We have a long public record for these positions. We voted “Bullish” this week.

[For more on the penalty box see this article. For more on the system ratings, you can write to etf at newarc dot com for our free report package or to be added to the (free) weekly ETF email list. You can also write personally to me with questions or comments, and I’ll do my best to answer.]

The Week Ahead

There will be important earnings reports all week.  Eventually that is what matters.

Tuesday night we will watch the President.  In any other year the new initiatives would be worth considering.  In this election year, the proposals will all be suspect.

The FOMC announces a rate decision with a press conference by Chairman Bernanke.  Everyone already knows the rate decision.  The fresh news will be more insight into the forecasts of the various FOMC members.  Anyone following past minutes and transcripts knows that these vary significantly from staff estimates.  It could be interesting.  Everyone will view this through the prism of whether there will be another round of QE.  Market participants are more pessimistic than the Fed on the economy and have a simple heuristic about quantitative easing.  It could be interesting.

The week also includes the regular report on initial jobless claims and the initial report on Q411 GDP.   The Conference Board will give us their latest take on leading indicators, now including (yet another) change in their definitions, and a redefinition of the entire data series.  (yawn).

Oh — Europe — at some point we will hear about the negotiations concering Greek debt.

In the midst of all of the news, I think that earnings will be the continuing focus:

  1. Margin pressure?
  2. European effect?
  3. Outlook?

That is what I will be watching.  For the comprehensive daily calendar of everything relevant –economic reports, earnings, speeches — check outMark Gongloff’s helpful list.

Trading Time Frame

Our trading accounts have been 100% invested for several weeks. Felix caught the recent rally quite well and still has several strong sectors in the buy range. While the overall ratings are still not strong, it remains a marginally bullish forecast. This program has a three-week time horizon for initial purchases, but we run the model every day and change positions when indicated.  Felix has been more confident than I have been on the trading time frame.  This illustrates the importance of watching objective indicators.

Investor Time Frame

Long-term investors should continue to watch the SLFSI. Even for those of us who see many attractive stocks, it is important to pay attention to risk. In early October we reduced position sizes because of the elevated SLFSI. The index has now pulled back out of our “trigger range,” but it is still high, but declining. For investors desiring this risk management approach we raised cash when the trigger hit the range. We have also been cautious with new accounts.  The improvement here is pretty obvious, and we are getting close to a point where we will be more aggressive.  I would like to see a final verdict on the current Greek negotiations.  This is not some idea that it represents an “ultimate solution.”  My basic thesis on Europe — many plans, many participants, gradual progress, compromise all around — is playing out.  Greece is the immediate issue.

Our Dynamic Asset Allocation model is also very conservative, featuring bonds and other defensive holdings.  It is rather like the Nouriel Roubini of our methods.  What if things go wrong?  Investors should understand that cautious, hedge-oriented positions may be slow to rebound.

To summarize, we continue a conservative posture in most of our programs, recognizing the uncertainty and volatility. For new accounts we are establishing partial positions, using volatility to buy favored names and selling calls for those in the Enhanced Yield program. This program has been working very well, meeting the objectives of conservative, yield-oriented investors. It follows our key precept:

Take what the market is giving you.

Right now that continues to be dividend stocks at reasonable prices with the chance to sell call options at inflated prices.  If the stocks do nothing, you can still get almost 10% per year from dividends and call premiums.

This does not work for those selling long-dated calls.  It requires some active management, selling calls with a month or two before expiration to capture the most rapid time decay.

The Final Word

This is an important time of decision for many investors.

Quietly — almost without notice — things are getting better.

The biggest example is Europe.

Regular readers know that I am a big fan of Charles Kirk, whose work helps traders and investors alike.  I always look at his weekly chart show to get the technical picture.  I cannot always cite it in this report since I try to write it on Saturday and he posts on Sunday.  Charles has a small membership fee that basically goes to cover costs – -he doesn’t need it.  Investors will recover the cost on the first decision they make.

Members get a daily update including a quote of the day.  These are always great (the one about golf was the funniest this week), but today’s was especially thought-provoking:

“A market that slowly grinds higher is a good buy. A market that soars is
usually a good sell.” – Neal Weintraub

How much better could things be?  Here is an interesting contrast to the 100% recession forecasters from Ed Yardeni:

The US economy may be on the verge of a big comeback. It could experience an unusual second recovery over the next three years following the weak initial recovery of the past three years. In the past, recessions were followed by one broad-based recovery in economic activity. The Naysayers have been predicting a “double dip” recession for the US economy since it started to recover in 2009. I’m suggesting that a more likely scenario might be a double back-to-back recovery.
FIGURE16
and finally, his conclusion….
In the past, recessions were followed by one, not two recoveries. This time, key sectors of the economy haven’t participated in the initial economic rebound, but finally may be on the verge of doing so. The second recovery could take off as the pace of hiring quickens, housing activity finally picks up, auto sales head higher, and state and local governments stop retrenching. If so, then the US would finally enjoy the benefits of a broader-based recovery.
This is an interesting concept but we need an alliterative term to equal “double dip.”  For those of us who see investing as a zero sum game with a lot of misguided and misinformed players, this is something to think about.

Even noted doomster Marc Faber thinks that you should consider stocks!

 

Related Articles

Investing articles by Jeff Miller

Other Recent Investing Blog articles


About the Author


Jeff MillerJeff Miller has been a partner in New Arc Investments since 1997, managing investment partnerships and individual accounts. He has worked for market makers at the Chicago Board Options Exchange, where he found anomalies in the standard option pricing models and developed new forecasting techniques. Jeff is a Public Policy analyst and formerly taught advanced research methods at the University of Wisconsin. He analyzed many issues related to state tax policy and provided quantitative modeling which helped inform state and local officials in Wisconsin for more than a decade. Jeff writes at his blog, A Dash of Insight.


Previous Post

Lack of Prosecution of Bank Fraud: Conflict of Interest?

Next Post

Is the Cloud Dead?

Related Posts

India’s Largest Retailer Tests Digital Rupee
Economics

India’s Largest Retailer Tests Digital Rupee

by John Wanguba
February 5, 2023
Apple Forecasts Another Plunge In Revenue, Says iPhone Production Issues Over
Business

Apple Forecasts Another Plunge In Revenue, Says iPhone Production Issues Over

by John Wanguba
February 5, 2023
U.S. Weekly Jobless Claims Dropped To 9-Month Low; Productivity Gains Accelerate
Economics

U.S. Weekly Jobless Claims Dropped To 9-Month Low; Productivity Gains Accelerate

by John Wanguba
February 5, 2023
Bitcoin Flirts With $24K, How High Will It Go?
Economics

Bitcoin Flirts With $24K, How High Will It Go?

by John Wanguba
February 3, 2023
Venezuela's PDVSA Toughens Oil Prepayment Terms
Business

Venezuela’s PDVSA Toughens Oil Prepayment Terms

by John Wanguba
February 2, 2023
Next Post

Is the Cloud Dead?

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Browse by Category

  • Business
  • Econ Intersect News
  • Economics
  • Finance
  • Politics
  • Uncategorized

Browse by Tags

adoption altcoins banking banks Binance Bitcoin Bitcoin adoption Bitcoin market Bitcoin mining blockchain BTC business China crypto crypto adoption cryptocurrency crypto exchange crypto market crypto regulation decentralized finance DeFi Elon Musk ETH Ethereum Europe finance FTX inflation investment market analysis markets Metaverse mining NFT nonfungible tokens oil market price analysis recession regulation Russia technology Tesla the UK the US Twitter

Archives

  • February 2023
  • January 2023
  • December 2022
  • November 2022
  • October 2022
  • September 2022
  • August 2022
  • July 2022
  • June 2022
  • May 2022
  • April 2022
  • March 2022
  • February 2022
  • January 2022
  • December 2021
  • November 2021
  • October 2021
  • September 2021
  • August 2021
  • July 2021
  • June 2021
  • May 2021
  • April 2021
  • March 2021
  • February 2021
  • January 2021
  • December 2020
  • November 2020
  • October 2020
  • September 2020
  • August 2020
  • July 2020
  • June 2020
  • May 2020
  • April 2020
  • March 2020
  • February 2020
  • January 2020
  • December 2019
  • November 2019
  • October 2019
  • September 2019
  • August 2019
  • July 2019
  • June 2019
  • May 2019
  • April 2019
  • March 2019
  • February 2019
  • January 2019
  • December 2018
  • November 2018
  • October 2018
  • September 2018
  • August 2018
  • July 2018
  • June 2018
  • May 2018
  • April 2018
  • March 2018
  • February 2018
  • January 2018
  • December 2017
  • November 2017
  • October 2017
  • September 2017
  • August 2017
  • July 2017
  • June 2017
  • May 2017
  • April 2017
  • March 2017
  • February 2017
  • January 2017
  • December 2016
  • November 2016
  • October 2016
  • September 2016
  • August 2016
  • July 2016
  • June 2016
  • May 2016
  • April 2016
  • March 2016
  • February 2016
  • January 2016
  • December 2015
  • November 2015
  • October 2015
  • September 2015
  • August 2015
  • July 2015
  • June 2015
  • May 2015
  • April 2015
  • March 2015
  • February 2015
  • January 2015
  • December 2014
  • November 2014
  • October 2014
  • September 2014
  • August 2014
  • July 2014
  • June 2014
  • May 2014
  • April 2014
  • March 2014
  • February 2014
  • January 2014
  • December 2013
  • November 2013
  • October 2013
  • September 2013
  • August 2013
  • July 2013
  • June 2013
  • May 2013
  • April 2013
  • March 2013
  • February 2013
  • January 2013
  • December 2012
  • November 2012
  • October 2012
  • September 2012
  • August 2012
  • July 2012
  • June 2012
  • May 2012
  • April 2012
  • March 2012
  • February 2012
  • January 2012
  • December 2011
  • November 2011
  • October 2011
  • September 2011
  • August 2011
  • July 2011
  • June 2011
  • May 2011
  • April 2011
  • March 2011
  • February 2011
  • January 2011
  • December 2010
  • August 2010
  • August 2009

Categories

  • Business
  • Econ Intersect News
  • Economics
  • Finance
  • Politics
  • Uncategorized
Global Economic Intersection

After nearly 11 years of 24/7/365 operation, Global Economic Intersection co-founders Steven Hansen and John Lounsbury are retiring. The new owner, a global media company in London, is in the process of completing the set-up of Global Economic Intersection files in their system and publishing platform. The official website ownership transfer took place on 24 August.

Categories

  • Business
  • Econ Intersect News
  • Economics
  • Finance
  • Politics
  • Uncategorized

Recent Posts

  • India’s Largest Retailer Tests Digital Rupee
  • Apple Forecasts Another Plunge In Revenue, Says iPhone Production Issues Over
  • U.S. Weekly Jobless Claims Dropped To 9-Month Low; Productivity Gains Accelerate

© Copyright 2021 EconIntersect - Economic news, analysis and opinion.

No Result
View All Result
  • Home
  • Contact Us
  • Bitcoin Robot
    • Bitcoin Profit
    • Bitcoin Code
    • Quantum AI
    • eKrona Cryptocurrency
    • Bitcoin Up
    • Bitcoin Prime
    • Yuan Pay Group
    • Immediate Profit
    • BitIQ
    • Bitcoin Loophole
    • Crypto Boom
    • Bitcoin Era
    • Bitcoin Treasure
    • Bitcoin Lucro
    • Bitcoin System
    • Oil Profit
    • The News Spy
    • British Bitcoin Profit
    • Bitcoin Trader
  • Bitcoin Reddit

© Copyright 2021 EconIntersect - Economic news, analysis and opinion.

en English
ar Arabicbg Bulgarianda Danishnl Dutchen Englishfi Finnishfr Frenchde Germanel Greekit Italianja Japaneselv Latvianno Norwegianpl Polishpt Portuguesero Romanianes Spanishsv Swedish