Posts filed under “Markets”

Inflation/Shminflation

Barron’s agrees with our assessment that, CPI not withstanding, there is actually some inflation out there. Add Oil and Fed tightening, a voila! That’s a recipe for a slowdown: 

"If we didn’t know better, we’d suspect the good governors are actually recognizing, as they’ve given broad hints they are, that inflation is very much alive and kicking, whatever the absurd government price readings show . . ."

Conditioned by the fiction that the price of energy isn’t all that important to the economy anymore and numbed to the effects of rising interest rates by the regularity, predictability and modest size of the increases, investors have grown to shrug off their impact. Yet, rationally, by itself, either would be enough to cause serious economic discomfort. Together, they are really bad news.

Merrill Lynch’s David Rosenberg points out in a Friday dispatch that "we’re witnessing an event that has happened barely more than 15% of the time in the past five decades: a year that sees the Fed tighten (liquidity pinch), oil prices rise (margin and personal-income squeeze) and the equity market head lower (wealth effect, discount mechanism) — a triple play.

Such a triple play has occurred only eight times in the past 50 years, and on seven such occasions, gross-domestic-product growth either slowed or stopped dead in the water. The odds, then, of a slowdown in 2006 are 88%, which David says without fear of contradiction, is not "a track record worth betting against." The decline in growth in the wake of triple-play years has averaged 2½%. 

"So," David comments, "if past is prescient, we could well be in store for 1%-ish-type growth next year." And, he adds, wryly, "Something tells us that equity valuation, credit spreads and the dollar are not presently priced for such an outcome." Whatever could make him think that?

The Merrill data is attached as a PDF

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Sources:

Hello, Columbus

IT’S A BIT EARLY TO CELEBRATE COLUMBUS DAY.

ALAN ABELSON
UP AND DOWN WALL STREET 
Barron’s MONDAY, SEPTEMBER 26, 2005      
http://online.barrons.com/article/SB112751830413150623.html         

Thought of the Day: U.S. Economy Out on a Triple Play
David Rosenberg
Merril Lynch Economic Commentary,  22 September 2005 
David Rosenberg Merrill.pdf

Category: Commodities, Economy, Fixed Income/Interest Rates, Markets

The Fog of Katrina

Category: Earnings, Economy, Investing, Markets, Psychology

Chart of the Week: U Michigan Sentiment Index Gives Market Warning

Category: Markets, Psychology, Retail

Sometimes, There is No Pony

Category: Economy, Investing, Markets, Psychology, Trading

Chart of the Week: DJIA Making Higher Lows

Category: Markets

Delayed Onset: Some Historical Comparisons

Category: Investing, Markets, Psychology

Presidential Cycles

This weeks Barron’s has an interesting chart from Sy Harding. If you are unfamiliar with Harding’s work, have a look at his prescient 1999 book, “Riding the Bear: How to Prosper in the Coming Bear Market.” (Spend the $1.49 on used copy — its well worth it). Harding suggests that: “UNLESS I’M LOOKING AT the…Read More

Category: Markets, Technical Analysis

Sector Analysis

Category: Investing, Markets

DJIA 1966 – 1982

The previous chart reveals the long standing secular moves of the markets; What’s an investor to do during one of the long periods of weakness? One answer is to learn to be more nimble, and trade the cyclical markets. > Dow Jones Industrial Average, 1966 – 1982 click for larger chart data for chart courtesy…Read More

Category: Investing, Markets, Psychology, Technical Analysis

Market Cycles: 100 Year DJIA

Yet another look (see prior takes here and here) at the concept of market cycles. The past century  shows alternating Bullish and Bearish phases, secular periods each lasting for an extended time (between 10 to 20 years). > Dow Jones Industrials, 1903 – 2004 Note that markets are up slightly for 2005 since this chart…Read More

Category: Economy, Investing, Markets