The Big Picture - Macro Perspective on the Capital Markets, Economy, Technology, and Digital Media

Pretty cool idea:

“Color is a major part of any brand’s identity. Here we’re taking a look at some of the most recognizable color identities in the world, as well as some groups and forums on COLOURlovers that could be valuable for anyone who is working to give their brand a little more color.

Can you “Name That Brand” by color alone?

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Source:
A Modern-Day Depression”: Rosenberg Sees “Tough Slogging” for the Economy
Aaron Task
Yahoo Tech Ticker Jul 29, 2010 08:00am
http://finance.yahoo.com/tech-ticker/%22a-modern-day-depression%22-rosenberg-sees-%22tough-slogging%22-for-the-economy-535274.html

The Inflation/Deflation debate seems to be constantly coming up — from clients, institutional accounts, and the media. Let’s look at a few points on this:

Deflation is a fact. It is happening now, it is real, and we see it in the actual data.

Inflation does not exist presently. It is, at best, an opinion. It might happen in the future, or it might not — but it does not exist, at least on a measurable form, presently.

What about deficits? Debt? Overspending? QE/ZIRP/Low rates?

Well, Japan cut rates, wildly overspent, borrowed like loons — and they had a decade plus of deflation, not inflation. We may not be Japan, but they are the 2nd largest economy in the world, and represent an actual economy that behaved, well, the way the US is.

Until the slack in the labor market is reduced — near record low weekly hours, 16% U6 unemployment, etc. — inflation simply is not a threat.

The 10 year Treasury Bond is at record low yields, so bond buyers are looking for more economic softness, not inflation.

The first heads up  about inflation you will see will be when the Bid to Cover ratio of the Treasury Bonds — how many buyers are there relative to bonds for sale at US auction — right now, its oversubscribed 3X. Once buyers start insisting on greater yield, the Treasury department will have to start raising the bond rates they offer — we will know that Bonds are a short, due to impending inflation.

That will be your early inflation warning.

But now? Its nowhere in sight . . . .

Initial Jobless Claims totaled 457k, a touch below expectations of 460k but last week was revised up by 4k to 468k. GM not shutting auto plants as is typical this time of the year is still a distortion but it is surprising that claims aren’t lower because of it and thus current levels still remain a concern at this stage of an economic recovery. The 4 week average, which helps to smooth out the data, fell to 453k from 457k. Continuing Claims rose by 81k and were 65k above the forecast. Extended Benefits, delayed by 2 weeks, fell a net 269k and are still being influenced by the lack of benefit extension legislation at the time which should reverse in the next week or two as it’s since passed.

via Windowless Van:

hat tip Mike

On a closing basis, the Euro is trading at the highest since early May vs the US$ as is the STOXX Europe 600 stock index after July Euro zone Economic Confidence rose to the highest since Mar ’08, coming in 2 pts above expectations led by both business and consumer confidence. Also, German unemployment fell for a 13th straight month, by 20k, in line with expectations and the unemployment rate at 7.6% is matching the lowest level since 1992. Italian business confidence rose to the highest since May ’08. In the financing category, Hungary successfully sold 4 yr, 6 yr and 13 yr paper all at yields above 7% and Italy sold a 10 yr below 4% for the 1st time since Mar. The Shanghai index rose for the 8th day in 9, closing at a 2 month high ahead of key manufacturing data in the next few days and copper is rising to near a 3 month high. New Zealand raised interest rates by 25 bps to 3% as expected.

(Invictus here, boys and girls)

As I have written previously here and elsewhere, I tend to look at everything through the lens of job creation.  What is the correlation of a particular release to the job market, if indeed there is one.  Does it lead?  Lag?  Is it coincident?  If I can find a meaningful correlation (say, over 0.70), I figure it’s worth examining more closely.  If not, I move on.

With that in mind, it was off to the drawing board to see what the Durable Goods release might tell me.  This is what I found:

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(Data Source: St. Louis Fed)

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Durable Goods and Nonfarm Payrolls — both on a year-over-year percentage change basis — have a correlation of 0.85 when payrolls are lagged by four months.  Now, the year-over-year change in Durables probably peaked a couple of months ago at 19% (a very rarified level, to be sure).  So, to reiterate another point I’ve made both here and elsewhere, comps are going to start getting harder and many metrics are looking decidedly more late-cycle-ish than early-cycle-ish.  I fear the hour is growing late and we’re rapidly running out of time as the labor market continues to struggle.

And I see nothing stimulative on the horizon as far as employment goes.  I’ll note that next month’s YoY Durables comp is up against a relatively strong number, so look for a sharp decline — a 5% month-over-month gain next month will still bring the year-over-year down to 13.3%, and I don’t think anyone’s looking for 5%.

That’s all sans revisions, of course.  I wouldn’t be surprised to see the YoY gain drop to roughly 10%, and it’ll get harder from there . . .

Okay, I threw a lot of heavy stuff at you today. And you kept the comments on all of these, for the most part, on topic.

This good deed must not go unpunished, so as a small recognition, its time to cut loose. Now is the time you can veer wildly off topic. Discuss GW, Fox News, lousy airports, insane forecasts.  Perhaps you can chat up my new favorite blog, Things I Would Do to Bang Scarlett Johansson.

No topic is off limit

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What Say Ye?

RAB Capital Global Portfolio Strategist Marshall Auerback on the outlook for the federal government’s mounting debt.

July 28, 2010