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S&P 500 Technical Analysis

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The S&P 500 is at a key technical level. The bounce-back rally from the March low has failed to surpass the February 18th high. The index is forming a double top, and looks poised to break below its 50-day moving average. A close decidedly below the 50-day average could result in a more extended correction. How big of a correction? On a technical basis, there is minor support for stocks at 1,250 and again around 1,200, but I don’t see meaningful support for stocks until the S&P approaches the 1,100 level—that’s a long ways down from today’s level of 1,312.  … [Read more...]

Import Price Inflation Leaps

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Today, the Bureau of Labor Statistics released its latest import price index. Import prices spiked 2.7% in March, and they are up 9.7% over the last twelve months. Economists were anticipating a 2.1% monthly increase and an 8.6% year-over-year inflation rate. Much of the year-to-year gain in import prices is attributable to fuel. Excluding fuel, import price inflation was 4.2% for the twelve month period ending in March.  Though it isn’t 9.7%, an inflation rate of 4.2% is by no means benign. If broader measures of inflation rose to 4.2% on a sustained basis, interest rates would spike. You … [Read more...]

5 Tax Tips to Save You Time and Money

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Tax season is here again. The tax filing deadline for 2011 is April 18. The IRS is giving taxpayers an extra three days to file their taxes because Washington, D.C., is celebrating a public holiday on the usual filing deadline of April 15. Don’t you feel lucky? In the spirit of tax season, here are five investment tax tips that will save you time and money.    1. Make Investing Your Priority: Taxes should always be a secondary consideration in your investment decisions. Making an investment decision solely for tax purposes is a mistake. If you don’t like the future prospects of a stock or … [Read more...]

Inflation Expectations Surge

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This is a scary looking chart. The chart shows the 10 year breakeven inflation rate. This is the inflation rate that investors are anticipating over the coming ten years. Expected inflation has surged over a full percentage point since the Fed started their second money-printing crusade.   This is unsettling. The central bank is losing credibility by the day. Over the last ten years, inflation expectations have only reached these heights on three other occasions. All three times, the Fed was either tightening monetary policy or on the verge of doing so. Today, the Fed is still easing … [Read more...]

An Ominous Sign for Profits

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Corporate profits hit another record last quarter. In its final revision of fourth quarter GDP, the Bureau of Economic Analysis reported the after-tax corporate profits increased to a record $1.25 trillion. Year-over-year profit growth was 13.7% in the fourth quarter and 3.3% on an annualized quarter-to-quarter basis. The corporate sector is one of the few bright spots in what has been one of the most lackluster economic recoveries on record. Corporate profits carved out an unmistakable V-shaped recovery—bottoming in the fourth quarter of 2008 and reaching a new high by the first quarter of … [Read more...]

Serious Inflation Ahead

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Here is yet another sign that inflation pressures are building. Wal-Mart, America’s largest and lowest cost retailer says U.S. consumers will face serious inflation for clothing, food, and other products in the months ahead. If the nation’s low cost leader is planning price hikes, there isn’t a business in America that isn’t going to raise prices. I know this kind of data point doesn’t fit into the Fed’s abstruse economic models, but if Ben B. wants any chance of salvaging the Fed’s waning inflation-fighting credibility, he’d better start paying attention to this type of anecdotal … [Read more...]

In the Money

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Are you impressed by the strength of the U.S. stock market? After a mini correction that took the S&P 500 down 7% from its recent high, stocks have almost recovered all of their losses. This, despite the ongoing turmoil in the Middle East, a still uncertain outcome to Japan’s nuclear tragedy, a flare-up in the European debt crisis, an unmistakable double-dip in U.S. housing, and surging food and energy prices. Yes, the strength of this market is impressive, but not at all surprising. As I’ve written previously, the market is focused almost exclusively on one variable, and that variable is … [Read more...]

Equity Bull or Currency Bear?

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Is it an equity bull market or a currency bear market? In U.S. dollars, the S&P 500 is up an impressive 25% since August 31, 2010, but in terms of Swiss francs and gold, the S&P 500 is up only 12% and 9% respectively. Over half of the stock market rally since August can be attributed to dollar debasement. … [Read more...]

The Era of cheap China goods is over

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The era of cheap China goods is over according to Li & Fung, a Hong Kong-based logistics company. This has broad implications on many fronts. In terms of monetary policy, China has moved from an exporter of deflation to an exporter of inflation. The tailwind of disinflation in Chinese import prices is likely gone for good. I hope Ben B. is paying attention here. Higher import prices from China could push up U.S inflation. And yes even for the folk at the Fed who apparently don’t eat or drive. Higher inflation in China also has implications for competing economies in Asia. Higher Chinese … [Read more...]