Posts filed under “Cycles”

Short Memories (Fade the Inflation Hysteria, II)

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.”

Current day:

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.

Category: Contrary Indicators, Cycles, Data Analysis, Economy, Federal Reserve, Inflation

Housing Starts, Composites vs 2007-11 Cycle

Terrific pair of charts from Ron Griess The excesses in the prior cycle (2001-2006) have made the current run utterly abysmal: > Current Cycle versus 1o Prior Cycles Click for larger graphs > Current Cycle versus Composite All charts courtesy of The Chart Store

Category: Cycles, Real Estate

About 8 months ago, I was intrigued by the prospects of 500% market gains being a regular cyclical phenomena.

The first post was titled “Hirsch’s WTF Forecast: Dow 38,820” and filed under the category “Really, really bad calls.” (I’ll mea culpa if we come anywhere near 30,000 by 2025). I thought my old pal Jeff had lost his mind.

But then I spoke with Jeff. He explained his reasoning. He sent me his fathers infamous 1977 500% call. I ended up doing a new post “War & Peace + Inflation + Secular Bull = Dow 38K ?”  The more I looked into it, the more it seemed like an ingenious piece of history repeating.

I became impressed enough the methodology that I agreed to write the forward! I have no idea if we will see Dow 38820 in 2025, but the thesis is both intriguing and  defendable . . .

Some notable reviews follow:

“As someone who views the investment glass half empty, I would normally treat a forecasted price target for the Dow Jones Industrial of 38,820 as hyperbolic and outlandish.  That is, unless the forecaster is Jeff Hirsch!  Jeff is ‘bred in the purple’ and has royalty in his investment blood as his legendary dad, Yale Hirsch, was the dean of all technical analysts (and was the first of his kind to accurately predict the roaring Bull Market of 1974-1990). More importantly, Jeff’s rationale for another super boom is well articulated in his own unique set of facts, figures and dissection of history.  To every serious investor I say, Read Super Boom or Perish!”

-Douglas A. Kass, President, Seabreeze Partners Management Inc.

“Jeff Hirsch delivers a 500% effort in Super Boom. Unless you’re closed minded or comatose there is a lot, lot more here than any investment reader can normally hope for. The visuals and data alone are worth many times the price.”
-Ken Fisher, Founder and CEO, Fisher Investments, Forbes “Portfolio Strategy” Columnist, 5-time New York Times bestselling author

Super Boom reminds the reader of the power of compounding. DJIA 38,820 by 2025 might sound like an outrageous level, but the implied sub-9% compound annual growth rate (following a decade of decline) makes the target appear more attainable. Within these pages, Jeff demonstrates that he has learned a lot from his father and has inherited the reputation as a renowned and respected market historian.”
-Sam Stovall, Chief Investment Strategist, Standard & Poor’s Equity Research

“As a kid I taught Jeff how to catch big rainbow trout in Montana. In Super Boom, he’s returned the favor by showing us how to catch a monster stock market move. A must-read book.”
—Larry Williams, trader

Chapter 5 excerpt after the jump

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Category: Books, Cycles, Technical Analysis

Fade the Inflation Hysteria

Tons of talk and pixels being spilled over the imminent inflation threat.  It bears an eerie resemblance to what we heard from the likes of Jerry Bowyer and Art Laffer two years ago.  I’d fade it now, exactly as I suggested back then (here and here, the latter piece co-authored with Bonddad): Exhibit A —…Read More

Category: Commodities, Current Affairs, Cycles, Data Analysis, Economy, Inflation, Markets, Research, Wages & Income

Attention WSJ OpEd: Correction Needed

Invictus here, requesting a correction from the WSJ. In an editorial on Saturday, the WSJ made the following demonstrably false claim, using a slightly modified Calculated Risk (Bill McBride) employment graph (emphasis mine): The nearby chart compares the recovery rate in jobs after each of the last four recessions, and so far this one has been…Read More

Category: Cycles, Data Analysis, Economy, Employment, Financial Press

What is the Half Life of Your Favorite Technology?

I mentioned this on Bloomberg early this morning, but its worth exploring further: What is the average half life of your favorite technology? We operate under the false assumption of substance and solidity, when in reality, things are deeply in flux. Everything changes, nothing lasts. The various technologies we use are physical manifestations of ideas,…Read More

Category: Cycles, Philosophy, Technology

Secular Bear Markets (inflation adjusted)

Fabulous set of charts looking at inflation adjusted S&P composite during major secular bear markets, via The Chart Store:


Secular Bear Markets


Here is the current crash and snapback:

2007-09 Bear Market


Prior bear markets (WWI, great Depression, 1970s) after the jump

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Category: Cycles, Markets, Technical Analysis

Rebound vs Valuations

Two seemingly contradictory articles are in the WSJ today: • Dow’s Big Rebound Can’t Erase Doubts • A Serving of Doubt on Bank Valuations Perhaps we can help reconcile them. The Dow has recovered from a deeply oversold condition; some of this was the natural elapsing of time, as the panic passed and things moved…Read More

Category: Bailouts, Cycles, Federal Reserve, Investing, Valuation

“Trade the First Day, then Stay Away”

This morning, the WSJ reports on a new trading pattern: First day of the month rally: “Some traders have been adopting a new ritual in recent months—buying early on the first day of the month and selling by the day’s close—taking advantage of a peculiar phenomenon that has seen the Dow Jones Industrial Average rise…Read More

Category: Cycles, Markets, Psychology

Presidential Chart Porn

With the recent passing of what would have been Ronald Reagan’s 100th birthday — and with President Obama having  invoked his name — we have been treated to a steady stream of articles about our 40th president, most of them remembering him in the most glowing terms, particularly as it relates to his economic record. …Read More

Category: Cycles, Data Analysis, Economy, Markets, Politics