Tag Archive: On Economy

A Scramble for Capital

A Spike in Bank Lending to Corporations – Sign of a Dying Boom? As we have mentioned on several occasions in these pages, when a boom nears its end, one often sees a sudden scramble for capital. This happens when investors and companies that have invested in large-scale long-term projects in the higher stages of the production structure suddenly realize that capital may not be as plentiful as they have previously assumed.

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Getting Their Pound of Flesh – Precious Metals Supply and Demand

Keith Weiner’s weekly look on Gold. Gold and silver prices, Gold-Silver Price Ratio, Gold basis and co-basis and the dollar price, Silver basis and co-basis and the dollar price.

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US Money Supply and Fed Credit – the Liquidity Drain Becomes Serious

Our good friend Michael Pollaro, who keeps a close eye on global “Austrian” money supply measures and their components, has recently provided us with a very interesting update concerning two particular drivers of money supply growth. But first, here is a chart of our latest update of the y/y growth rate of the US broad true money supply aggregate TMS-2 until the end of June 2018 with a 12-month moving average.

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Merger Mania and the Kings of Debt

Another Early Warning Siren Goes Off. Our friend Jonathan Tepper of research house Variant Perception (check out their blog to see some of their excellent work) recently pointed out to us that the volume of mergers and acquisitions has increased rather noticeably lately. Some color on this was provided in an article published by Reuters in late May, “Global M&A hits record $2 trillion in the year to date”, which inter alia contained the following...

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How to Get Ahead in Today’s Economy

This week brought forward more evidence that we are living in a fabricated world. The popular story-line presents a world of pure awesomeness. The common experience, however, falls grossly short. On Tuesday, for example, the Labor Department reported there were a record 6.6 million job openings in March. Based on the Labor Department’s data, there were enough jobs available – exactly – for the 6.6 million Americans who were actively looking for a...

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US Money Supply Growth Jumps in March , Bank Credit Growth Stalls

There was a sizable increase in the year-on-year growth rate of the true US money supply TMS-2 between February and March. Note that you would not notice this when looking at the official broad monetary aggregate M2, because the component of TMS-2 responsible for the jump is not included in M2. Let us begin by looking at a chart of the TMS-2 growth rate and its 12-month moving average.

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The Capital Structure as a Mirror of the Bubble Era

As long time readers know, we are looking at the economy through the lens of Austrian capital and monetary theory (see here for a backgrounder on capital theory and the production structure). In a nutshell: Monetary pumping falsifies interest rate signals by pushing gross market rates below the rate that reflects society-wide time preferences.

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From Fake Boom to Real Bust

More is revealed with each passing day. You can count on it. But what exactly the ‘more is of’ requires careful discrimination. Is the ‘more’ merely more noise? Or is it something of actual substance? Today we endeavor to pass judgment, on your behalf.

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Getting High on Bubbles

Back in the drug-soaked, if not halcyon, days known at the sexual and drug revolution—the 1960’s—many people were on a quest for the “perfect trip”, and the “perfect hit of acid” (the drug lysergic acid diethylamide, LSD). We will no doubt generate some hate mail for saying this, but we don’t believe that anyone ever attained that goal.

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Trade War Game On!

“Things sure are getting exciting again, ain’t they?” The remark was made by a colleague on Tuesday morning, as we stepped off the elevator to grab a cup of coffee.

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US Equities – Mixed Signals Battling it Out

Readers may recall that we looked at various market internals after the sudden sell-offs in August 2015 and January 2016 in order to find out if any of them had provided clear advance warning. One that did so was the SPX new highs/new lows percent index (HLP). Below is the latest update of this indicator.

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Purchasing Power Parity or Nominal Exchange Rates?

“An alternative exchange rate – the purchasing power parity (PPP) conversion factor – is preferred because it reflects differences in price levels for both tradable and non-tradable goods and services and therefore provides a more meaningful comparison of real output.” – the World Bank

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Socialism and Capital Consumption

We have been promising to get back to the topic of capital destruction, which we put on hiatus for the last several weeks to make our case that the interest rate remains in a falling trend. Today, we have a different way of looking at capital destruction.

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Update on the Modified Davis Method

Frank Roellinger has updated us with respect to the signals given by his Modified Ned Davis Method (MDM) in the course of the recent market correction. The MDM is a purely technical trading system designed for position-trading the Russell 2000 index, both long and short (for details and additional color see The Modified Davis Method and Reader Question on the Modified Ned Davis Method).

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Market Efficiency? The Euro is Looking Forward to the Weekend!

As I have shown in previous issues of Seasonal Insights, various financial instruments are demonstrating peculiar behavior in the course of the week: the S&P 500 Index is typically strong on Tuesdays, Gold on Fridays and Bitcoin on Tuesdays (similar to the S&P 500 Index). Several readers have inquired whether currencies exhibit such patterns as well. Are these extremely large markets also home to such statistical anomalies, or is market efficiency...

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Strange Economic Data

Contrary to the situation in 2014-2015, economic indicators are currently far from signaling an imminent recession. We frequently discussed growing weakness in the manufacturing sector in 2015 (which is the largest sector of the economy in terms of gross output) – but even then, we always stressed that no clear recession signal was in sight yet. US gross output (GO) growth year-on-year, and industrial production (IP) – note that GO continues to be...

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What Kind of Stock Market Purge Is This?

Down markets, like up markets, are both dazzling and delightful. The shock and awe of near back-to-back 1,000 point Dow Jones Industrial Average (DJIA) free-falls is indeed spectacular. There are many reasons to revel in it. Today we shall share a few. To begin, losing money in a multi-day stock market dump is no fun at all. We’d rather get our teeth drilled by a dentist. Still, a rapid selloff has many positive qualities.

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When Budget Deficits Will Really Go Vertical

United States Secretary of Treasury Steven Mnuchin has a sweet gig. He writes rubber checks to pay the nation’s bills. Yet, somehow, the rubber checks don’t bounce. Instead, like magic, they clear. How this all works, considering the nation’s technically insolvent, we don’t quite understand. But Mnuchin gets it. He knows exactly how full faith and credit works – and he knows plenty more.

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The Donald Saves the Dollar

The world is full of bad ideas. Just look around. One can hardly blink without a multitude of bad ideas coming into view. What’s more, the worse an idea is, the more popular it becomes. Take Mickey’s Fine Malt Liquor. It’s nearly as destructive as prescription pain killers. Yet people chug it down with reckless abandon.

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The FOMC Meeting Strategy: Why It May Be Particularly Promising Right Now

As readers know, investment and trading decisions can be optimized with the help of statistics. One way of doing so is offered by the FOMC meeting strategy. A study published by the Federal Reserve Bank of New York in 2011 examined the effect of FOMC meetings on stock prices. The study concluded that these meetings have a substantial impact on stock prices – and contrary to what most investors would probably tend to expect, before rather than after...

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