Tag Archive: On Economy

Trade War Game On!

2018-04-09

“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

2018-03-10

by Pater Tenebrarum

2018-03-10

S&P 500 New High Lows Percent, Feb 2015 - Apr 2018

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?

2018-03-03

by Jayant Bhandari

2018-03-03

“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

2018-03-02

by Keith Weiner

2018-03-02

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

2018-02-26

by Pater Tenebrarum

2018-02-26

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!

2018-02-25

by Dimitri Speck

2018-02-25

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

2018-02-24

by Pater Tenebrarum

2018-02-24

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?

2018-02-17

by MN Gordon

2018-02-17

US Treasury Yield Index and Total Assets of Federal Banks, Mar 2015 - Feb 2018

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

2018-02-12

by MN Gordon

2018-02-12

US Treasury Yield Index, Jan 2017 - 2018

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

2018-02-01

by MN Gordon

2018-02-01

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

2018-01-31

by Dimitri Speck

2018-01-31

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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Tax Reform and Trump’s Chinese Trade Deficit Conundrum

2018-01-26

by MN Gordon

2018-01-26

Most things come easier said than done. Take President Trump’s posture on trade with China. Trump doesn’t want a bigger trade deficit with China. He wants a smaller trade deficit with China. In fact, reducing the trade deficit with China is one of Trump’s promises to Make America Great Again.

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As the Controlled Inflation Scheme Rolls On

2018-01-21

by MN Gordon

2018-01-21

American consumers are not only feeling good. They are feeling great. They are borrowing money – and spending it – like tomorrow will never come. On Monday the Federal Reserve released its latest report of consumer credit outstanding. According to the Fed’s bean counters, U.S. consumers racked up $28 billion in new credit card debt and in new student, auto, and other non-mortgage loans in November.

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2018: The Weakest Year in the Presidential Election Cycle Has Begun

2018-01-13

by Dimitri Speck

2018-01-13

Our readers are probably aware of the influence the US election cycle has on the stock market. After Donald Trump was elected president, a particularly strong rally in stock prices ensued. Contrary to what many market participants seem to believe, trends in the stock market depend only to a negligible extent on whether a Republican or a Democrat wins the presidency.

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Several Simple Suppositions and Suspicions for 2018

2018-01-04

by MN Gordon

2018-01-04

The New Year is nearly here. The slate’s been wiped clean. New hopes, new dreams, and new fantasies, are all within reach. Today is the day to make a double-fisted grab for them. Without question, 2018 will be the year in which everything happens exactly as it should. Some things you will be able to control, others will be well beyond your control.

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Why Monetary Policy Will Cancel Out Fiscal Policy

2018-01-02

by MN Gordon

2018-01-02

Good cheer has arrived at precisely the perfect moment. You can really see it. Record stock prices, stout economic growth, and a GOP tax reform bill to boot. Has there ever been a more flawless week leading up to Christmas?

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How the Asset Bubble Could End – Part 1

2017-12-22

by Pater Tenebrarum

2017-12-22

We recently pondered the markets while trying out our brand-new electric soup-cooling spoon (see below). We are pondering the markets quite often lately, because we believe tail risk has grown by leaps and bounds and we may be quite close to an important juncture, i.e., the kind of pivot that can generate both a lot of excitement and a lot of regret all around.

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The Rug Yank Phase of Fed Policy

2017-12-17

by MN Gordon

2017-12-17

The political differences of today’s two leading parties are not over ultimate questions of principle. Rather, they are over opposing answers to the question of how a goal can be achieved with the least sacrifice. For lawmakers, the goal is to promise the populace something for nothing, while pretending to make good on it.

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The Party of Spend More vs. the Party of Tax Less

2017-12-09

by Keith Weiner

2017-12-09

The Senate just passed a 500-page tax reform bill. Assuming it lives up to its promise, it will cut taxes on corporations and individuals. Predictably, the Left hates it and the Right loves it. I am writing to argue why the Right should hate it (no, not for the reason the Left does, a desire to get the rich).

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Japan: It isn’t What the Media Tell You

2017-12-01

by Jayant Bhandari

2017-12-01

For the past few decades, Japan has been known for its stagnant economy, falling stock market, and most importantly its terrible demographics. For almost three decades, Japan’s GDP growth has mostly been less than 2%, has been negative for several of these years, and has often hovered close to zero. The net result is that its GDP is almost at the same level as 25 years ago.

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