Posted January 29, 2010 at 3:29 pm
While everyone awaits GDP data this morning, why don’t we look at the best economic gauge you have never heard of:
It doesn’t appear on any economic calendars that I’m aware of. It flies under just about everyone’s radar. Technically, it’s not a data point itself but a weighted amalgam of 85 other distinct economic data points, an all-in-one look at the United States economy.
And it does an excellent job of tracking the economy’s health.
It’s the Chicago Fed’s National Activity Index (CFNAI), and it just printed for December.
Say the folks in Chicago:
Posted January 28, 2010 at 7:55 pm
by Tom Dyson
The 12% Letter
I look out my window and see a large bank, built of sandstone. They’ve carefully landscaped the forecourt and there’s a big blue awning over the front door. This bank is four years old, but it looks newer.
Inside, there’s a neat row of teller stations set up behind glass windows that reach the ceiling. They have flat-screen televisions on the wall, tuned to the Bloomberg channel. Outside, there’s a four-lane covered “drive-thru.” There’s room for 20 cars in the parking lot.
This bank must have cost $10 million to build and probably costs $1 million a year to operate. It serves fewer than 50 customers a day.
The problem is, this bank was built in a period when credit was easy and house prices were rising every month. The owners made assumptions based on those conditions, but conditions changed and those assumptions turned out wrong.
All over America, I see the same problem. Billions of dollars worth of bad investments litter the country. These investments aren’t generating returns for their owners, and they need to be liquidated.
The liquidation process began in 2008, and it would have been near completion by now. Unfortunately, the government intervened and propped up these bad investments by making even more bad investments and encouraging everyone else to do the same.
So here I sit, watching the bank out of my window, wondering when the great American liquidation sale will resume.
Could the liquidation be starting now?
The market is overvalued in every metric I follow. Investor sentiment is uniformly bullish. Meanwhile, the S&P 500 has fallen 6% in the last seven trading sessions, and the major European bourses are all forming downtrends.
Check out this chart of the Chinese stock market. It’s entering a steep dive…
Meanwhile, the dollar is strengthening, and government bonds are starting to rise again as investors run for cover.
[ Editor's Note: For some ways to play, and profit from, the above market behavior, go to the WVA Notices section of your Wealth Vault members area, if you're not already logged in ]
Posted January 25, 2010 at 5:15 pm
By Ian Woodward:
Last week was a bad week for the Stock Market – it has the Heebie-Jeebies, i.e, the Jitters are very apparent and of 2008 proportions with a 500 point drop in the DOW. This week can add fuel to the demise of the 10 month rally we have enjoyed since March 2009 or give us a renewed boost to the rally.
It stands to reason that Politics more so than Earnings will be front and center as we look forward to the vote on the Fed Chairman, Ben Bernanke, and the State of the Union Address by President Obama on Wednesday. The REACTION by Wall Street to both may seal the fate of the rally and bring about the Intermediate Correction that so many have touted for so long, or find a fresh move to the upside to continue the rally and keep the Golden Cross alive.
Posted January 25, 2010 at 4:06 pm
The sharp slide in U.S. stocks this week portends more trouble for Wall Street in the days ahead as investors worry if the recent rally is sustainable.
With major indexes breaching key technical support levels on Wednesday, market technicians said Wall Street was likely to see the onset of a long-anticipated correction following a 70 percent run-up in the benchmark S&P 500 from March 2009.
“This is the beginning of a correction. It’s been brewing for months,” said John Kosar, market technician and president of Asbury Research in Chicago. “There’s more risk on the downside than opportunity on the upside here until we get a correction.”
Besides grappling with a deteriorating technical picture, Wall Street is also starting the new year with an even less reassuring fundamental picture as the Obama administration pushes to limit banks’ risk-taking.
Additionally, there are concerns that China, the world’s third-largest economy, risks derailing the nascent global economic recovery by tightening lending too soon to prevent its economy from overheating.
Posted January 20, 2010 at 11:39 pm
by Edward McAllister, Reuters
NEW YORK — Oil prices fell below US$78 a barrel on Wednesday as the dollar strengthened and Wall Street slipped on worries about bank lending curbs in China.
U.S. crude for February delivery. which expired on Wednesday, fell US$1.40 to settle at US$77.62 a barrel. March crude fell US$1.58 to settle at US$77.74. In London, Brent crude for March delivery lost US$1.31 to settle at US$76.32 a barrel.
U.S. equities suffered their worst slide of 2010 on Wednesday as investors worried that bank lending restrictions in China could hurt the global economic recovery.
Posted January 19, 2010 at 7:10 am
By William Pesek:
Government policymakers from Washington to Tokyo are tallying the bill for last year’s stimulus binge, and the results won’t be pretty for investors or elected officials. Since the collapse of Lehman Brothers in September 2008, the Group of 20 largest industrialized economies have spent more than $2.2 trillion—much of it borrowed—trying to restore growth.
This unprecedented public debt glut will complicate the global recovery. That’s because the government debt entering the bond markets will make it harder for private companies to issue debt of their own, either to expand or simply ride out the lingering effects of the credit crisis.
This so-called crowding-out dynamic, together with rising borrowing costs, will depress job growth. The more that small- and medium-sized businesses are starved for credit, for example, the fewer new employees they will add. The crowding also could lift interest rates for consumers.
That’s the downside of a stimulus binge: It pumps up growth initially, but the hangover can be painful across an economy for years to come.
Posted January 16, 2010 at 12:19 am
By Ethan Roberts:
Due to some days off around the holidays, it’s been a while since I gave you my last update on the national housing market, so today I would like to do just that.
I also want to tell you about the latest controversy du jour, that you may be hearing more about in the weeks ahead.
As I noted in last week’s article, as 2010 begins, we now have two distinct national real estate markets — one that is still in pretty bad shape for homeowners and sellers, and one that has now turned into one heck of an opportunity for investors and first-time homeowner bargain-hunters.
This is truly a two-tiered market. At no time that I can remember, has there been such a pervasive dichotomy within the real estate market!
Posted January 15, 2010 at 1:33 pm
By Vincent Ferando
Jim Rogers is sounding the alarm — buy agricultural commodities ahead of the riots. The financial crisis has cut off investment in agriculture, with many farmers unable to get loans for fertilizer according to Mr. Rogers. Of course, this means agricultural commodities will make a killing:
CNBC: “Sometimes in the next few years we’re going to have very serious shortages of food everywhere in the world and prices are going to go through the roof.”
Cotton and coffee are good buys because they are very distressed, while sugar, despite the fact that it has gone up a lot, is still down 70 percent from its all-time high, according to Rogers.
“I don’t think that the problems of the world are behind us yet,” he said.
Starting at 1:30 in the video:
Posted January 15, 2010 at 1:30 pm
From The Prgamatic Capitalist:
Rail traffic continues to show signs of a very tepid economic recovery as carloads and intermodal rail traffic got off to slow starts to the new year. Total carloads were off 12.7% compared to 2008 while intermodal traffic declined 3.6%. The breadth of the weakness continued to narrow, however, as 11 of the 19 commodity groups were up compared to 2008.
This weakness in rail data was best displayed by yesterday’s Railtime Indicators Report from the AAR which showed the weakest annual rail data in over 20 years. While the sequential trend continues to improve there is little doubt that the recovery is still very weak.
Posted January 15, 2010 at 1:20 pm
By Rick Newman
In the cast of corporate characters, Fannie Mae and Freddie Mac are A-list villains, thanks to the central role they played in the 2008 financial meltdown. The two mortgage-finance firms failed as spectacularly as AIG, the poster child for finance-gone-wrong, with the combined Fannie-Freddie rescue totaling about $111 billion so far–the biggest bailout of all. Both firms are effectively nationalized, and the government would probably wind them down except for one thing: They underwrite about three quarters of all the mortgages issued in the United States.
You’ve probably heard that the economy is recovering, that consumers are more optimistic, and that companies might soon begin hiring more workers than they’re firing. Hooray. We’ll all be thrilled when the economy stops quivering.
The only problem with an upbeat prognosis is that large chunks of the U.S. economy remain addicted to financial painkillers or dependent upon dysfunctional institutions like Fannie and Freddie, and we’ve never gone through the kind of withdrawal that’s set to take place this year.