Succinct summation of week’s events:

Positives:

1) For asset prices ONLY, more QE from the Fed
2) Preliminary Sept UoM confidence jumps 5 pts led by the Outlook
3) MBA said refi’s rose 11.9% and purchases up 8.1%
4) NFIB small biz optimism index up 1.7 pts off lowest since Oct
5) July Business Inventories rise twice expectations and matched by rise in sales
6) German Court blesses ESM
7) UK jobless claims unexpectedly falls
8) China’s Aug loan growth rise 100b yuan above forecast and CPI, PPI, retail sales and IP about in line with estimates
9) Japanese machinery orders in July rise more than expected.

Negatives:

1) More Fed QE: mortgage rate spread decline to treasuries offset by jump in 10 yr yield (highest since May) so mortgage rates unch, CRB index up 20% from late June low, CPI index in Aug rises to record high squeezing those whose wages are stagnant, 10 yr implied inflation expectations spike 20 bps to highest since May ’11, Fed further clogs balance sheet with longer term securities, US$ gets pounded, I guarantee a nasty recession when Fed has to unwind its balance sheet whenever that might be in our lifetime but the bond market will likely force it
2) Aug core Retail Sales unexpectedly falls for 3rd month in the past 5
3) Initial Jobless Claims total 382k, 12k more than expected but mostly due to hurricane
4) Aug IP weak across the board
5) PPI up large 1.7% and CPI up .6% m/o/m but core rates benign
6) China imports in Aug unexpectedly drops and exports rise less than est
7) India IP in July up just .1% and Aug inflation jumps
8) Spanish 2 yr yield jumps 40 bps as Spain backs away from asking for help.

Category: Markets

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

20 Responses to “Succinct Summation of Week’s Events (9/14/12)”

  1. Peter, it was good to cya on CNBC this week & put a face to this your weekly contribution!

    With less than 8 weeks ’til Americans go to the polls, the American economy has become a pawn in the campaigns. My Debt Wall model projects Congress will again be handcuffed by its ($16.4 trillion) Debt Limit on Jan 8 2012.

    The pause in consumers and business firm activity commenced on Memorial Day. TRI gauges GDP plunged to 0.4% in August, (from a robust 4.1% growth rate in December). Stay tuned for many more revenue misses and slashing of guidance thru Sept & Oct. Today’s TRI projections infer BEA will be announcing Q3 GDP of 0.2% eleven days before the Election.

    Four days prior to voting day, BLS is likely to announce an 8.2% Unemployment Rate and dwindling job creation. The falling UR is a mirage. 518k left the labour force this Summer!

    Despite the TRENDLines Recession Indicator being at its worst level since the Great Recession, the mainly left-dominated media appears to have purged “double dip” from its on-air vocabulary. It continues to avoid the reporting of collapsing numbers in order to protect “the chosen one”.

    On the other side, Republicans in Congress still defer passing “final” legislation to address the source of the uncertainty causing this GDP pause (Sequester, Bush-era tax cuts, payroll holiday, increasing Debt Limit & ObamaCare costs to business). In so doing they ensure their actions do not buoy the ugly Q3 GDP number.

    Data analysis is clear the current downturn is not a inventory-inspired downturn of the conventional business cycle. Rather, it appears many consumers and business firms are pausing in anticipation of regime change. TRI finds animal-sprits-plus for the post election period remain quite high. However, my current Race-for-the-White-House electoral college votes projection indicates an Obama victory on Nov 6th despite the Romney momentum.

    Debt Wall & TRI charts: http://trendlines.ca/free/economics

  2. AHodge says:

    as for
    ” US$ gets pounded, I guarantee a nasty recession when Fed has to unwind its balance sheet whenever that might be in our lifetime but the bond market will likely force it”

    i never guarantee anything financial
    but the chance in my lifetime is say 85-90%
    of as i put it
    one of these decades
    financing gap ->rate jumps-> unbearable interest /debt service burden-> recession
    dollar crash->

    and default rescheduling soft or hard

  3. gordo365 says:

    “US$ gets pounded” you mean US$ gets pounded – “again” or “more” or “continues to get pounded” etc.

    I’m in my 40s and I remember elementary school lunch used to cost 35 cents – including milk. I’m not that old.

  4. NoKidding says:

    “1) For asset prices ONLY, more QE from the Fed”

    Fix: 1) For NOMINAL asset prices ONLY, more QE from the Fed

  5. cfischer says:

    BR, I’d add “Gasoline prices back to (or within a few cents of) post-crash highs” to the Negatives?

    I’m sure that’s helping out the recovery.

  6. willid3 says:

    and very odd too. considering how much demand destruction has occurred since then

  7. dan10400 says:

    Didn’t the Treasury take on any losses by the Fed, so an unwind of its balance sheet would just be borne by the taxpayers?

  8. MayorQuimby says:

    @cfisher-

    Yeah – gas prices are a negative and a big one at that – not so much because of driving (people drive fewer miles after Labor Day) but because of its effect on food. Plus – heating costs are going to spike as well.

    Yeah – your beloved politicians (regardless of party) and the ‘brilliant’ minds at the Fed are printing – and they are now shifting from encouraging inflation to forcing it upon us all. This is a monster negative for us all over time and has the potential to make Lehman look like a trip to Tuscany in the autumn.

  9. b_thunder says:

    “…I guarantee a nasty recession when Fed has to unwind its balance sheet whenever that might be in our lifetime”

    Response: and I guarantee that the “Great Unwinding” will not happen. Not in our lifetime, not ever. First, the Fed will ramp up their balance sheet to $6-7 trillion, since so-called economists like Yellen actually wanted to do that from the get-go. And, by the way, $6T increase would perfectly offset the $6T “lost” by the “shadow” banking system.
    So, with Federal deficits easily over $20T by the end of 2015, and growing by $1T per year until infinity, there’s simply no way to raise rates or meaningfully reduce the balance sheet without Great Depression times 10.
    In the end there will be massive inflationary episode, which will render all cash savings, bond holdings, fixed loans, pensions and social security MEANINGLESS!!
    This is the single “fix” for every ill, including federal debt, pension obligations, etc.
    But before this happens, Fed will have to buy more bonds of all kinds (MBS, Federal, etc) from the top 1%, in time for them to turn around and buy dirt-cheap “real” assets, in order for them to maintain their 1% status.

  10. MayorQuimby says:

    Bah. The economy AND stock market will crash if they push too hard and history has shown that they ALWAYS do.

    This time will be no different. Arrogant bulls just might be surprised at how all of this will unfold.

  11. algernon32 says:

    @b_thunder,

    What you descibe sounds a lot like currency collapse.
    I will humbly predict another 99 years of grinding Fed induced inflation at a low enough rate to keep (most of) the riots away.

    ZIRP and EBT cards forever. The new new normal. http://www.youtube.com/watch?v=o64Fz-KW1Dk

  12. NoKidding says:

    MayorQ, I agree the stock market will crash, but it will happen so fast, and at such an unknown (to people like me) time that trying to play it is just futile. Loading up on puts again and again just gets expensive. Inverse ETFs decay. I haven’t found a negative leap on the S&P, that might be good, but if you have to make a 25 percent bet on an event that happens once in the next 4 years for a 3x gain, you still might get wiped.
    It is not arrogant to be long. It is arrogant to do it without reasonable stops.

  13. RW says:

    FWIW, seeing some of these posts almost makes me feel guilty about all the money I’m making.

  14. ilsm says:

    XX Trillions of dollars in collateral has been wiped out! Way too much for a resolution trust plan!

    To save the bankrupt TBTF banks and avoid having the US government run the economy (ala 1934, aside from TARP which was government hiding effect of triilions in lost collateral.) instead of wall st, the collateral “needs” to bubble up.

    A few (mostly tea baggers conned by the large holders of notes with deflated collateral) don’t like inflation, way too many more TBTF plus lots of owners of the deflated collateral would be crushed by deflation.

    If you like inflation elect Romney. Arithmetic is very different than the Republican and attack ad sound bites.

  15. zenospinoza says:

    The sky is falling.

    Not.

  16. cognos says:

    Havent you been “guarantee (ing) a nasty recession”… for the past couple of years?

    Please RE-THINK your approach. Its broken. The economy is in classic recovery. Duh!

    The world economy is huge. The Fed balance sheet is tiny. Get over it. Finally they are fixing the deflation problem (preferred inflation measures like “core PCE” and wage cost pressures are on or near all-time lows. Thats deflation.

  17. cognos says:

    These comments are stupid. The USD is actually quite strong right? Look at Eur currency since 1990… about flat to USD. Period since 2007 has been mainly USD strength… or flat.

    Im 35. My father used to say when I was a kid… “I remember when an icre cream cone cost 10c and a burger 25c in the 1950s (in the sticks, versus urban… but whatever). Then it was say $1 for each. Thats a good story.

    Today… I could say… I remember when a McD cheesburger cost…hmm.. 75c maybe? Maybe when I was 3 y.o. it was 69c. Today its what…? $1? Maybe only 89c. NO LONGER A GOOD STORY. Zero inflation.

    Look at a 1985 BMW. What did it cost? What was the car like? Airbags? Computers? How reliable? Massive DEFLATION everywhere. Economists are not properly measuring quality improvements.