Posts filed under “Think Tank”

Jobless Claims

Initial Claims totaled 608k, 4k more than consensus and up from 605k last week which was revised up by 4k. The 4 week average fell to 616k from 623k, the lowest since Feb. The real surprise though in today’s data was Continuing Claims that were 153k less than expected and down 148k from last week’s record high. It’s the first weekly drop since Jan and at 6.687mm it’s at a 4 week low. The insured unemployment rate fell .1% to 5% from last week’s highest level since 1982. Expectations for June payrolls are for a drop of 400k. As the economy has stabilized at still weak levels, it has of course lent support to optimism that the stabilization is a precursor to growth. With this belief, employers grow more reluctant to fire people on the hopes that when business picks up they will be needed and a corollary is that some employers take advantage of the available pool of workers and start to hire in anticipation of a pickup in demand. Fingers crossed.

Category: MacroNotes

Stock markets: retreat in store?

Stock markets: retreat in store?

It seems as if the spring rally has probably exhausted itself. And it is about time given the extent and rapidity of the move. The MSCI World Index increased by 45.2% from its March lows until the early June high and the MSCI Emerging Markets Index by a staggering 68.9%. Both these indices have only had one down-week since the advance commenced in early March.

Leading markets such as Russia (+137.0%), India (+89.5%), China (+54.7%) and Brazil (+50.4%) significantly outperformed laggards such as the Dow Jones Industrial Index (+27.5%) and the S&P 500 Index (+39.9%), although all markets recorded very respectable returns. The major US indices have gained for 12 out of the past 14 weeks.

Click here or on the table for a larger image.

global-stock-markets-index-movements-18-june-2009

Source: Plexus Asset Management (based on data from I-Net Bridge)

Focusing on the US, the S&P 500 Index (911) has backed off resistance at its January high (935) and is less than five points away from breaking down through the key 200-day moving average (906) – broken to the upside only two weeks ago.

Importantly, short-term oscillators such as the rate-of-change (momentum) indicator is on a knife’s edge of giving a selling signal, i.e. crossing through the zero line in the bottom section of the chart below. Also note the negative divergence between the Index and the ROC line – typically be a warning sign that a near-term trend change will take place.

spx-18june-pic11

Source: StockCharts.com

The venerable Richard Russell of Dow Theory Letters fame said: “In order for a counter-trend rally in a bear market to be sustained, it requires steady or rising buying power plus short covering. Lowry’s Buying Power Index has been declining steadily since May 8. At yesterday’s market close, this Index (demand) was only 24 points higher than it was at the March 9 lows. Furthermore, volume is drying up.

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Category: Think Tank

Technical noise/Fighting the last war

With triple witch expiration Friday, where the open interest in the 900 strike in the SPX is huge and within just a few points of the 200 day moving average, the Russell rebalancing next Friday and only a few weeks before quarter end, there will be a lot of crosscurrents that will impact market activity…Read More

Category: MacroNotes

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…Read More

Category: Bailouts, Think Tank

Obama’s Regulatory Proposals — Smarter or Just More?

Good Evening: U.S. stocks finished mixed Wednesday after a morning dip and afternoon rally both failed. Some less than cheery news from FedEx and some bank downgrades set the tone for the early weakness, while a successful test of the 200 day moving average by the S&P 500 helped prices rebound in the afternoon. And…Read More

Category: Markets, Think Tank

That’s a lot of money

Vincent Farrell, Jr. is Chief Investment Officer of Soleil Securities, a New York based investment management company. Over his long career on Wall Street, he has worked for numerous distinguished firms. Mr. Farrell graduated from Princeton University in 1969 and received his M.B.A. from the Iona College Graduate School of Business in 1972.

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Household debt is “down” to 130% of disposable income. “Down” is a relative term. It was 134% recently. But it was half the current level as recently as the mid-1980′s. Total debt in the U.S. (all debt including the government) stands at about 360% of Gross Domestic Product. It was 155% in 1980. Another way to slice the debt overview is to look at non-financial debt (take the banks’ debt, etc. out) and that is 240% of GDP. The Euro zone is also at about that level and Japan is at something like 450% of GDP. But that economy has been down for a long time, so I take no comfort we are better off than that.

Let’s look at household debt for a moment. Disposable personal income is close enough to $11 trillion that we can use that as a number. If household debt were to retreat to, say, 100% of income, it would be a retrenchment of a good bit over $3 trillion. That would be one big bite out of consumer expenditures. I have no idea where this debt to income will or should go. Things tend to revert to the norm over time, and if we were in the 70% range in the 1980′s, I don’t think returning to 100% is a crazy view. If the savings rate were to return to its 70-year average of 9%, that would chip in almost $1 trillion a year. Savings might not go to pay off debt, but, from a total balance sheet overview, we could balance one against the other. If all else stayed equal (which of course it won’t), it would take several years to get back to 100%. Not a joyful prospect for a booming economy led by the consumer, but I don’t think any of us believe the consumer is going to be a driving force in any recovery.

What might be a driving force would be inventory restocking. I mentioned yesterday that Industrial Production was down again, which means there is no inventory build at all, and inventory liquidation instead. If final demand started to pick up, there would be a need to increase production quickly.

New York City has balanced its budget with the aid of Federal stimulus dollars. But the smoke and mirrors employed also revealed a rise in the sales tax and a reduction in the work force. How does the use of stimulus dollars in this sense stimulate? Taxes are up and employment down. I don’t get it. Only about $50 billion or so of the total stimulus package of $787 billion has been spent, and there is a lot of enthusiasm that, when the rest gets spent, the economy will prosper. But if it non-stimulates like this, we are in for a reassessment.

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Category: Credit, Currency, Think Tank

Draft of Financial Regulation Proposal

A recent draft of the plan to reshape financial regulation sent to members of Congress (via NYT) > click for PDF via NYT

Category: Bailouts, Politics, Regulation, Think Tank

Bank CDS/What’s going on?

The giveback of the June gains over the past few days in the S&P’s has been matched by the corporate credit markets where the CDS on the HY and IG index are back to the levels of late May. The action in the bank sector specifically is most interesting. On May 7th the results of…Read More

Category: MacroNotes

Gasoline Prices

The higher than expected build in gasoline prices in today’s weekly DOE data is sending front month gasoline futures down 2.5%. This may result, in the next few days, in the very first decline in retail gasoline prices at the pump since April 28th, as measured by the daily AAA national unleaded gasoline price survey….Read More

Category: MacroNotes

Morning stuff

The May CPI rose .1% headline, .2% less than expected but the core gain of .1% was right in line with forecasts. Headline CPI y/o/y fell 1.3%, the most since April 1950 and was .4% greater than expected. The core rate rose 1.8% y/o/y. In the CPI, food prices make up a larger portion than…Read More

Category: MacroNotes