In June the Dow Jones Transports and the Dow Jones Industrials indices began to diverge. Dow Theory says that the transports lead the industrials, and that divergences in the index are usually reconciled by the industrials catching up with the transports. This has proven the case once again. In early October the Dow Jones Industrial Index peaked out, and has begun falling rapidly. The result has been a spike in the Dow Jones Transports vs. Dow Jones Industrials index in the chart below. … [Read more...]
Archives for October 2012
A Savings Fueled Bump
In the last four months, growth in Americans’ disposable incomes has been nonexistent on an inflation adjusted (real) basis. But Americans’ real personal expenditures have increased considerably. As you can see in the chart below, after the recession (shaded area) Americans have kept their personal consumption growth steady as they replace their worn out possessions. But without growth in incomes, how can Americans afford to increase their personal consumption expenditures? They are withdrawing it from their savings. Over the last three months Americans have withdrawn 1.1 percentage … [Read more...]
David Einhorn on the Federal Reserve
The Buttonwood Gathering 2012 - David Einhorn on the actions of the Federal Reserve … [Read more...]
Government Boosts Economy Just Before Election
Less than two weeks before Americans head to the polls, the BEA has announced a 2% increase in real GDP growth. Of those two percent, government spending accounted for .71 percentage points. That’s the largest contribution to GDP since the 2009 stimulus funds were spent. If you didn’t believe in election year stimulus before, perhaps a look at the chart below will put your doubts to rest. You can see the 2009 stimulus funds fading out on the left hand side of the chart, and then federal spending pulls back, becoming a drag on GDP, until the third quarter of 2012, just before the election. … [Read more...]
Investing in a Global Recession
World trade volumes declined for the third month in a row according to the CPB World Trade Monitor Index released today. The index grew only 0.29% on a year over year basis (Chart 1). Every time the index has grown so slowly, the United States was already in recession. The report, put together by the Netherlands Bureau for Economic Policy Analysis, also indicated that world industrial production has also decreased, with the bulk of the decreases coming from the U.S., Japan, and Central and Eastern Europe. Evidence of the trade contraction is showing up on U.S. shores as declines in … [Read more...]
Banging the Beehive, Spoofing, and the Boston Zapper
This is not a market to play around in. Seasoned traders are getting burned. High-frequency traders are eating their lunch. The high-frequency guys are juicing the market with strategies like “banging the beehive,” “spoofing,” and the “Boston zapper.” The volatility is neck-snapping . “It was always going to be volatile, but at least if you had the right idea, you’d get paid for it. Now, you can put yourself on the line, but you’re flying blind,” said a seasoned trader recently about natural gas futures. Stop orders are an area susceptible to flash crashes and high-frequency trading. If … [Read more...]
VIDEO: Greenspan- Quite Concerned About Fiscal Cliff
Faber: ‘Reduce Government by 50 Percent’
Earnings Catch Wall Street by Surprise
Last week the market was surprised by an unintentionally early release from Google, which reported earnings much lower than analysts had expected. But Google wasn’t alone in missing earnings estimates. Chipotle Mexican Grill, General Electric, Ingersoll-Rand, Baker Hughes, Honeywell and others also came in below estimates, disappointing shareholders. But should analysts and investors be surprised? As you can see in the chart below, margins (estimated using corporate profits as a percent of GDP) maxed out in the fourth quarter of last year. Companies did all they could to boost margins … [Read more...]
What We’re Reading 10-19-12
Bernanke Advocates Stronger Currencies, Jon Hilsenrath, Wall Street Journal In boom times or bust, balance has made the difference, Vanguard Gas Market Stung by Rapid Traders, Dicolo and Rogow, Wall Street Journal The Fed’s mission creep, George F. Will, Washington Post … [Read more...]