Posts filed under “Contrary Indicators”
Flashback to June 2008 (only three short years ago):
Headline CPI was running very close to 5.0 percent. The Fed funds rate was at 2.0 percent. Brent crude was $132/barrel. The Fed’s June 2008 minutes mentioned the word “inflation” 110 times (“deflation” and “disinflation” combined: zero), and also contained this caveat (emphasis mine):
With increased upside risks to inflation and inflation expectations, members believed that the next change in the stance of policy could well be an increase in the funds rate; indeed, one member thought that policy should be firmed at this meeting.
And CNBC reported (in May) that: “One-year inflation expectations surged to 5.2 percent — their highest since February 1982 — from 4.8 percent in April.”
Fast forward one year:
Headline CPI was -1.2 percent (so much for the public’s ability to foretell inflation trends, but who didn’t know that?). The Fed funds rate had been lowered to its current range of 0.00 – 0.25 percent. Brent crude was $69/barrel. The Fed minutes were, amazingly, discussing “reduced concerns about deflation.”
Bernanke’s prepared remarks and Q&A on Wednesday mentioned the word “inflation” 82 times. (The word “deflation”: twice.) It is unfortunate that “inflation” was far and away the dominant theme on Wednesday, swamping “jobs,” “employment,” and “unemployment” which, in my opinion, should have been the focus.
Of course, no two business cycles or economic environments are exactly the same, but as I pointed out recently here, it is unlikely that we will enter a period of sustained high inflation absent a more taut labor market, and that, unfortunately, still seems a ways off.
Front page WSJ story today — World Is Bitten by the Gold Bug: “Gold continued its upward march in a time of global financial tumult, closing above $1,500 an ounce Thursday for the first time as investors seek safe haven in the metal. In a remarkable performance for any sort of asset, gold has notched…Read More
Hunter is the author of the Distressed Debt Investing blog. His commentary has been seen in online versions of WSJ, FT, and BusinessWeek. Hunter currently works as an investing professional at a large money manager, focused on the credit markets. Previously, he worked at two large hedge funds, as an analyst working on distressed debt…Read More
It’s apparently that time again — the Valley has gone on tilt. Consider the following top ten signs. 10. Conferences are selling out 9. Venture capitalists are launching blogs 8. Everyone you know has a startup 7. Harvard MBAs are trekking to “hot” events, like SXSW 6. Harvard MBAs are fundable as CEOs 5. Private…Read More
I firts showed this back in November 2008. I wanted to show it again — this time using Slideshare, a nice Powerpoint/PDF presented. My only caveat is the time period. Its one that encompasses the greatest bull market in history. I would be more interested in seeing this across multiple secular markets — say, 1946…Read More
Yes, its that time of year when all the Gurus come out to discuss what the markets and the economy will be doing in the coming 12 months. These tend to fall into several categories: 1) Asset managers talking their books; 2) the Perma-bulls and bears do the usual debate; 3) A series of confirmation-biased…Read More
> The chart above, courtesy of Bianco Research, gives you a sense of how much enthusiasm there has been for Bonds, at the tail end of a 30 year bull run in fixed income, following the 2008 credit crisis and market collapse. Note that even after the equity market began to rally, it was still…Read More
I have been saying that I think this rally could end sometime next year. That was before I saw the word of the year: Austerity. I am wondering if this isn’t the most bizarre contrary and Bullish indicator we have seen: Time: The word, which seems to have been in every story about the world’s…Read More
Category: Contrary Indicators
Let’s put aside the obvious issue with this cover — why Wikileaks founder Julian Assange was the better choice, and that Time magazine editors are a spineless eunuchs — and look at the psychology and market connotations of this year’s Man of the Year choice. It is somewhat fitting that a decade after Time marked…Read More
Dick Arms notes that the short term and longer term ARMS Index (TRIN) is extremely overbought. The ARMS index has a pretty decent track record. This suggests that the Fed’s QE2 and euphoria over tax cuts and FICA holidays are up against a rather overbought condition. Traders should tread cautiously here: >> Dow Industrials with…Read More