Posts filed under “Think Tank”

Gold, has been around for 5000 years

That barbaric 5000 year old metal, gold, is just $30+ from $1000 and just a few dollars more from its all time record high. I’m not familiar with any other asset that is this close to its record high and not coincidentally coincides with the dollar index being near its record low. Gold is now up 31% since Oct ’07 when the SPX peaked at 1565. Because gold doesn’t have much industrial use (mostly electronics and dental, 8% of total demand), jewelry (33% of demand) and investment (59% of demand) are the two main sources of demand. India in fact is the biggest buyer of gold jewelry. With high prices discouraging jewelry purchases, the main source of buying this year has come from investments. Why would someone buy a piece of metal that yields nothing and doesn’t have much economic relevance other than looking nice in a necklace? Because it is perceived as another currency that is not a fiat one, because it historically has risen in line with inflation and because it’s perceived as some place of safety. If markets telegraph investor thoughts on the future, gold’s action is an interesting dynamic with the S&P 500 back to 1000 after a rally of 50%, the 10 yr bond yield at 3.70% versus its 47 year average of 6.90%, inflation expectations over the next 10 years below 2% according to the TIPS, an expected July CPI reading of -2.1%, the biggest drop since 1949 and a Federal Reserve that is made up mostly of those who think inflation is subdued and will be for the next few years.

Category: MacroNotes

Pending Home Sales

June Pending Home Sales showed no negative impact to the rise in mortgage rates and responded instead to lower prices and tax incentives as it rose 3.6% m/o/m, well above estimates of a gain of .7%. It is a measure of contract signings and a precursor to Existing Home Sales (closings). The two areas with…Read More

Category: MacroNotes

Personal Income and Spending

June Personal Income fell 1.3%, .3% more than expected but comes after the sharp 1.3% gain in May that was driven by one time transfer payments. Excluding the impact from the ARRA stimulus act, Income fell .1% vs almost flat in May. Personal Spending rose .4%, .1% more than the consensus but the prior month…Read More

Category: MacroNotes

Party like its 1998

A breather in European stocks, as better than expected earnings from UBS and BMW was met by selling, is weighing on the futures as they digest the 1000 level, back to where it was in Feb 1998 when it got there for the first time. In 1998, Saving Private Ryan was the #1 grossing movie,…Read More

Category: MacroNotes

Reflation = S&P 1000; What’s Next?

Good Evening: U.S. stocks once again surged ahead on Monday, leaving the widely watched S&P 500 above 1000 for the first time since last autumn’s precipitous fall. Leading the way were the economically sensitive materials, energy, and industrial names, which themselves were the beneficiaries of a strong tailwind in the commodity pits. As soon as…Read More

Category: Markets, Think Tank


David R. Kotok co-founded Cumberland Advisors in 1973 and has been its Chief Investment Officer since inception. He holds a B.S. in Economics from The Wharton School of the University of Pennsylvania, an M.S. in Organizational Dynamics from The School of Arts and Sciences at the University of Pennsylvania, and a Masters in Philosophy from the University of Pennsylvania. Mr. Kotok’s articles and financial market commentary have appeared in The New York Times, The Wall Street Journal, Barron’s, and other publications. He is a frequent contributor to CNBC programs. Mr. Kotok is also a member of the National Business Economics Issues Council (NBEIC), the National Association for Business Economics (NABE), the Philadelphia Council for Business Economics (PCBE), and the Philadelphia Financial Economists Group (PFEG).


August 2, 2009

Genesis 1:31 says “And God saw every thing that he had made, and, behold, it was very good. And the evening and the morning were the sixth day.“ A few millennia later, we find that the world’s most popular book can be applied metaphorically to the US House of Representatives, as it labors in the creation of clunker-nomics.

The first billion voted by the Congress for the $4500 clunker rebate program was exhausted in 6 days. Practicing for deity status, the House beheld and determined “it was very good.” They immediately passed a $2 billion addition. That bill now goes to the Senate, which will pass something similar, and then to a conference committee to resolve some differences about rules. We expect additional funding will be forthcoming quickly. Congress loves to spend and Americans love to receive.

In the spirit of Genesis, Adam and Eve American, otherwise affectionately known as John and Jane Doe, recognize a good deal when they see one. They had an old clunker worth a few hundred. Suddenly they can exchange it for $4500 if they buy the new one now. The rest they can finance at very low interest rates, thanks to the Federal Reserve and the Treasury for extending TARP and other funds so that lenders can offer them liberal terms. They seized the moment – who can blame them?

This will boost short-term activity in the US. Neil Soss of Credit Suisse estimates, “Our math suggests that vehicle sales could spike in July, perhaps to a run rate near 12.5 million units (at a seasonally adjusted annual rate) from the 9.6mn average of Q2.” He adds that “in response to cash-for-clunkers … the personal savings rate will drop sharply in the next months, even as the longer run trend is still headed higher.” That will ramp up auto production in the 3rd quarter. Neil concludes, “As a consequence, we are revising up our Q3 real GDP forecast to 2.0% (from 1.3%) and our Q4 forecast to 2.5% (from 2.0%).
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Category: Bailouts, Economy, Think Tank

it’s official, a 50% rally off the lows

1000 in the SPX is not just a round number that we’ve reached; it makes it an official 50% rally off the 666 March 6th low. The 5 month time frame of the rally is very similar to the 5 month rally of 48% from Nov 1929 to April 1930 after the dramatic 50% fall…Read More

Category: MacroNotes


The ISM manufacturing was a much better 48.9 up from 44.8 in June and vs estimates of 46.5. It’s the highest since Aug ’08 when it was at 49.3. It was last above 50 in Jan ’08. New Orders shot above 50 to 55.3 from 49.2 (most since July ’07) while Backlogs got to 50,…Read More

Category: MacroNotes

King Report: GDP Follies

> The GDP report last Friday evinces the folly of US government economic statistics and Wall Street consensus analysis. Most of the Street heralded the 1% decline in Q2 GDP because it was 0.5 better than consensus – even though the US government admitted in the release that its GDP estimates over the past several…Read More

Category: Data Analysis, Economy, Mathematics, Think Tank

As China goes, so goes…

Another rise in the July manufacturing indexes for both state owned and privately held businesses in China sent Chinese stocks to a fresh 13 month high and has erased the 5% selloff last Wednesday. The July PMI in India was unchanged but remains firmly above 50 at 55.3. In response, copper is at a fresh…Read More

Category: MacroNotes