Category Archives: Economy and Meltdown

How to Predict the Upturn?

In these troubled times, there are things that are much nicer to think about or look at as indicators of how business is going and who’s buying what and who’s off-loading where. It’s not all boring traders sitting behind desks and beads of sweat dripping down foreheads, and scoffing sandwiches and choking on pretzels as the dollar takes a dive or we learn that the bond sell-off is underway as the Federal Reserve pulls the plug. Have you had enough of Abenomics? Have you had enough of the Obamanometer to measure economic growth?

They might be oddball, but there are researchers out there that collect data on almost anything and everything.  In troubled times look at something else for inspiration to see where we are going next. It can’t be any worse than trying to predict the bears and the bulls before they happen. It sends your blood pressure sky high, leads to divorce and ranting partners, screaming kids, and you’ll only finish up in some bar drinker double martinis.

Look at the research and take heed!

  1. In troubled times, people increase their use of coupons and money-off vouchers from stores. There are ways to save and this is one of them. The number of coupons peaked in 2010 at 178 billion in the US. So, either one of you out there is doing a damn lot of cutting and pasting, or we are all using them. That works out at nearly 600 coupons for each one of us in the States! But, things are getting better…or we’ve had enough or the scissors have gone blunt. We reduced our use of coupons by 8% last year and that means: the recession is over? Wish it were!
  2. Research shows that when things are set to improve economically the clothes come off and we feel liberated and at ease with nudity. The number of magazine covers that show naked people coincides with the period just before a bull. Check out the mags, guys! The more the clothes come off in Sports Illustrated Swimsuit, the more skin you get to see, the better the outlook is going to be!
  3. Diapers. Yes, it’s not that weird. In economically prosperous times, we have confidence in the future. When we are confident, we make babies, don’t we? Well, the nation’s fertility rate has dropped. It’s now below replacement levels and there should be growing concern about the future. It’s now below the 2.1 necessary level just to keep the population afloat (which is the number of children we are supposed to have to maintain population at the current level).
  4. Cinema theatre and entertainment sales increase. Yes, believe it or not, if we can’t get a job, we go to the cinema. We bury our heads in make-believe fantasy fiction and we get away from the sad and bad lives that we lead. If sales are up, the recession is on. Sales are up again if we compare 2012 to 2011 (from 1, 283 million to 1, 364.7 million) at box offices across the US.
  5. Men’s underwear increases in a country where people believe that they are going to enter a bull market.Guys who are poverty-stricken and that don’t have a cent to spare are hardly going to spend money on their boxers, are they? Who are they going to strike it lucky with anyhow? The really bad times? Guys go commando, don’t they? Last year sales for underwear increased by 6% standing t $2.194 billion. When did you last buy new white briefs, boys?
  6. Toothbrushes. When we enter economic meltdown, we tend to go to the dentist less, apparently. That’s reasonable. Toothbrush sales go up as we start caring for our teeth more on our own. Impossible to see the statistics for this…so, you’ll have to judge that yourself.
  7. Hot Waitress Theory. When you go to the local diner, take a look at the woman serving you. If she is a young, sexy lady, then things have taken a downturn already. Apparently, in troubled times, the ladies can’t get by on their looks alone and they find fewer jobs as models, actresses or party hosts. Maybe the same thing should stand for the good-looking guys too. Why didn’t someone invent the good-looking bar tender index?
  8. Lipstick and Make-up. When things are taking a nosedive, women resort to using more make-up as a means to appear more attractive. It will give them better chances at job interviews.
  9. Hemlines. When hemlines recede, we are getting ready for a bull run. Confidence in themselves and confidence in the economy means the ladies show their legs. Or they get told to by the fashion industry.
  10. Join the Marines! Your country needs you! When the going gets tough, the tough get going. The downturn means that there are more people that join up and sign their lives away in the hope of a better life working for their country. The US Army exceeded the 2012 goal of 27, 550 (they recruited 27, 701).

Take a look at the list! Isn’t it surprising that most of those indicators concern women? Clothes, make-up and looks? Who said women were not part and parcel of our economy? Who said they didn’t play a major role in what we do every day? Move over guys, it’s the ladies that are the real indicators of what’s going on in our economies and they have been running the show for years now! But, you knew that, already!

Originally posted http://www.tothetick.com/how-to-predict-the-upturn

    

The Merry Month of May Ends

Historically girls dance around the Maypole winding the ribbons up. Then they reverse and unwind those ribbons. Is this an appropriate metaphor for May 31, 2013?

Global economic data Friday was weak. In the eurozone unemployment overall rose to 12.2% vs 12.1% as the EU entered its sixth straight recessionary quarter. The unemployment rate from PIIGS countries ranged from 40.5% to a mind numbing 62.5%. India reported its worst GDP data (4.8%) in a decade. The Aussie bank index has fallen 12% from its recent high. The IMF warned (no, they don’t have a standing army, navy or ICBMs) Japan to better monitor its yen currency debasement.

There were some really interesting and unusual U.S. economic data releases to end the month. The negative was Personal Income (0% vs .1% exp & prior .3%) and Spending (-.2% vs exp .0% & prior .1%) report. It’s hard to grow the economy if consumers aren’t able to save and spend. Next the unremarkable U of Mich. Consumer Sentiment report (84.5 vs 83.7 exp & prior 82.7) being so since it’s so weighted by stock prices. Last was the shocker from the Chicago PMI (58.6 vs 50 exp & prior 49) which steamrolled estimates and prior data. The latter is basically a survey of chosen participants who provide comments to various questions. It was odd given some comments that were quite negative. Zero Hedge highlights these negative comments as follow:

Lately the months start good and then end bad.

Three months of declining sales in one of our core product lines indicates a slow down, though there are a couple of others hanging in there.

Some primary commodity resins we buy are starting to moderate and even decline a bit in price.

Business activity should be picking up and be stronger by this time of the year, but a bit more delayed than usual, so some concern there.

With the second corrugated linerboard increase in 6 months, the producers are showing us what an oligopoly is all about.

Corrugated costs are going up based on supposed paper demand increases. The timing of this is a bit off based on only modest increases in market demand. I expect this increase to fail with time.

Most other items are not increasing at this time.

New orders have been light since March, but the sales people are still optimistic that a couple of big orders are soon to be released.

A deeper reading of the Chicago report per Bloomberg noted: “This report, which covers all areas of the Chicago economy not just manufacturing, may be suffering from a low sample size this month, which may or may not explain today’s great surge”.

Later the “core” April Retail Sales was just revised lower from .6% to .2% which is a significant change.

Investors were given a migraine overall whether the “bad news is good and good news is great” theme was still in play. But wait; let’s remember Friday offered a very large ($5 billion) #0000ff;”>POMO action which should have lubricated trading desks. Let’s just call it “tactical money printing”.

One thing is crystal clear; highly correlated global trends are breaking up. There is no way U.S. markets can take a lonely bullish walk from Europe, Japan, China, India, Latin America and even bond markets. The dollar (UUP) rallied while gold (GLD) reversed course along with commodities (DBC). Emerging Markets (EEM) and many formerly popular BRIC markets (EWZ, RSX, EPI & FXI) haven’t made investors money consistently over the past two years due to protracted trading ranges. Eurozone markets (IEV & EZU) are in tough shape despite the ECBs jawboning efforts. Bonds (TLT to HYG) markets have been hit hard in May. The same is true for earlier much in demand dividend sectors.

We’ve raised cash to over 75% from our previous 50% position as recently as two weeks ago. Now we have to wait for Mr Market’s next move.

Volume on this last day of May increased substantially while breadth per the WSJ was negative.

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NYMO

NYMO

The NYMO
is a market breadth indicator that is based on the difference between
the number of advancing and declining issues on the NYSE. When readings
are +60/-60 markets are extended short-term.

NYSI

NYSI

The McClellan Summation Index
is a long-term version of the McClellan Oscillator. It is a market
breadth indicator, and interpretation is similar to that of the
McClellan Oscillator, except that it is more suited to major trends. I
believe readings of +1000/-1000 reveal markets as much extended.

VIX

VIX

The VIX
is a widely used measure of market risk and is often referred to as the
“investor fear gauge”. Our own interpretation is highlighted in the
chart above. The VIX measures the level of put option activity over a
30-day period. Greater buying of put options (protection) causes the
index to rise.

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From my experience its possible there can be pockets of strength within overall weakness. Discovering these is difficult and for us the tape should and will find them. One positive for us anyway is long/short opportunities may finally present themselves again. That style has been the least effective within the QE/ZIRP environment as bullish trends were dominant globally.

We move into June with the first important reading coming from Friday’s Employment Report followed by the much watched Fed Meeting on the 19th. Then things should slow toward the holiday period but there’s no guarantee that will be the case. Monday will begin some rebalancing from stocks to bonds by those managers with that mandate so be careful.

Sell in May and go away will be on every investor’s mind after Friday’s week performance. It’s always been when you sell that’s been the measure for this maxim to be effective. If so the high for SPY would have been May 21st at $167.17. Then there’s the reappearance of the Hindenburg Omen but that’s for another day’s discussion.

The sun was warm but the wind was chill.
You know how it is with an April day
When the sun is out and the wind is still,
You’re one month on in the middle of May.
But if you so much as dare to speak,
A cloud comes over the sunlit arch,
A wind comes off a frozen peak,
And you’re two months back in the middle of March.

Robert Frost

                                                                                                                      

Let’s see what happens.

    

Ben Bernanke Capital May P&L: ($115) Billion

For all the attention paid to the 1.9% drop in PIMCO’s $293 billion Total Return Fund in the month of May following one of the worst months for bonds in a long while, perhaps a far more important question is what happens when one mixes the world’s largest actively managed, fixed income portfolio, that of the $3.4 trillion hedge fund located at 33 Liberty Street, and its DV01 of over $2.5 billion, with the 46 bps move in the 10 year in the month of May, and gets a P&L of ($115) billion, or double the said hedge fund’s total capital.

The hedge fund in question is of course the Federal Reserve Bank.

While no LPs, aka taxpayers will be concerned at the biggest ever monthly “loss” of 3.5% just yet, because it is simply on “paper”, at what point will that most precious of central bank commodities – fiath that the bald man behind the curtain knows what he is doing – start running in short supply? And, even worse, how long before the Fed has to start paying ever more and more reserve interest to the same banks (the majority of which are foreign) so reviled for being bailed out in the first place, until one day, it goes cash flow negative and has to request a bailout from the US Treasury and thus, the US people?

    

On Crushing Student Loans, Worthless College Degrees And The Millennials

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

The existing social and financial order is crumbling because it is unsustainable on multiple levels. The central state is not the Millennials’ friend, it is their oppressor.

No generation of young people is ever politicized by hunger in distant lands or issues of the elderly. It’s no rap on youth that self-interest defines what issues have the potential to radically transform their political consciousness; the transformative cause must reveal the system is broken for them and that it intends on sacrificing their generation to uphold the Status Quo.

The Millennial generation, also known as Gen-Y (Gen-Y comes after Gen-X), is generally defined as those born between 1982 and 2004.

The oldest Millennials were children during the first Iraq War in 1991 (Desert Storm) and just coming of age in 2001 (9/11 and the war in Afghanistan) and the start of the second Iraq War (2003).

The Millennials have entered adulthood in a era characterized by permanent low-intensity wars and central-bank/state managed financial bubbles–2001 to the present. In other words, the only experience they have is of centralized state mismanagement on a global scale.

The gross incompetence of the government and central bank–not to mention the endless power grabs by these centralized authorities–has not yet aroused a political consciousness that the system is irrevocably broken, not just for older generations but most especially for them.

Anecdotally, it appears the Millennial generation is still operating on the fantasy that all they need to do to get a secure, good-paying job and a happy life is go to college and enter the Status Quo machine of government/corporate America.

There are two fatal flaws in this fantasy: the $1+ trillion student loan industry and a transforming economy. The higher education industry in the U.S. operates as a central state-enabled and funded cartel, limiting supply while demand (based on the fantasy that a college degree has critical value) soars. This enables the cartel to keep raising prices even as the value of its product (a diploma) sinks to near-zero.

Since the Federal government issues and guarantees all student loans, the higher education cartel is (like sickcare, national defense and the mortgage industry) effectively socialized, i.e. funded and managed by the central state.

If you understand the student loan system is predatory, parasitic and exploitive, you have reached first base of a meaningful political awareness. If you understand the central state (Federal government) funds and enforces this system, you’ve reached second base. If you understand the vast majority of college degrees do little to prepare you to be productively employed in the real economy, you have reached third base.

If you understand the Status Quo is unsustainable and does not operate according the the fantasy model you’ve been told, congratulations, you’re close to home base.

I have covered all the salient issues repeatedly:

The Fatal Disease of the Status Quo: Diminishing Returns (May 1, 2013)

College Grads: It’s a Different Economy (May 3, 2013)

Bernanke’s Neofeudal Rentier Economy (May 7, 2013)

Degrowth and Anti-Consumerism (May 9, 2013)

Centralization and Sociopathology (May 21, 2013)

Present Shock and the Loss of History and Context (May 22, 2013)

Generation X: An Inconvenient Era (guest post) (May 23, 2013)

The Nearly-Free University (November 15, 2012)

The central state is not your friend, it is your oppressor. The loan shark that won’t let you discharge your student loan debt without appealing each ruling against you three times is the government (and its hired-gun proxies).

The oppressor who demands you work your entire life to pay interest on public debt squandered on neocolonial wars and various cartels (sickcare et al.) is your central state.

The entity who demands you pay higher taxes so the generation entering retirement gets all that it was promised, even though the world has changed and the promises are no longer sustainable? The central state.

The oppressor that will devote its enormous resources to investigate and crush you if you actively resist the bankers and financiers who pull the political lackeys’ strings? The central state.

At some point, the Millennial generation will have to awaken to the fact that the only way to change its fate is to grasp political power and redirect the policy and mindset of the nation. Centralization is the black hole that is destroying the nation’s social and economic vigor. Decentralization, transparency, accountability, adaptability, social innovation, a community-based economy–these are the key features of a sustainable social order.

The existing social and financial order is crumbling because it is unsustainable on multiple levels. The Status Quo will cling to its false promises and corrupt centers of power until the moment the whole thing implodes.

Related links of interest:

Dear Class of ‘13: You’ve been scammed How the College-Industrial Complex drove tuition so high

Overdue Student Loans Reach Record as U.S. Graduates Seek Jobs

Bureaucrats Paid $250,000 Feed Outcry Over College Costs

Welcome, Robot Overlords. Please Don’t Fire Us?

My Generation’s Disease

Podcast with Mike Swanson of WallStreetWindow.com on student loan debt and the Nearly Free University: Charles Hugh Smith On the Forces of Centralization and Soaring Education Costs. I always enjoy discussing issues with Mike, a polymath with a wide range of interests and experiences.

    

Select Highlights From Goldman's End Of Trading Recap

From vampire squid:

Some color on the extent of the selling from Laine Litman on the futures desk: Starting 6 minutes before the cash close we saw a strong sell off in ESM3. As predicted, volumes and volatility were high. We sold off 7 handles before the additional quick crash of 4.25 points in the final few seconds. Over 110k contracts traded in the last minute. This is the largest non-quarter end volumes seen since November 2011 (117k) and the largest volumes since June 2012 (111k).

Oh, so thaaaaaaat‘s where the volume was hiding.