Weekly Indicators: Oil Price Tornado destroying growth Edition

- by New Deal democratThe big news this week was first quarter GDP limping in at 1.8%. It is interesting that this GDP advance was almost exactly that of second quarter 2010 when gas prices were similar. With gas prices even higher in the last month, second quarter GDP is not likely to be pretty either. Durable goods orders, however, rose strongly, up 2.5%. While the regional manufacturing surveys have weakened month over month, they are basically going from white hot to red hot.That manufacturing continues to look excellent is a great positive,...

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Contractionary fiscal policy is contractionary.

1.) Here is the GDP equation: Consumer Spending (C) + Investment (I) + Plus Net Exports (X) + Government Spending (G) = GDP.2.) Government spending subtracted 1.09% from the final GDP total (see table 2).3.) Contractionary fiscal policy is contractiona...

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Are We At a Market Top?

Two contrasting views:The bearish argument has the following 10 signs:S&P (SPY) profit margins are at or near historic highs. Given rising input costs, especially from energy and commodities; these will start to come down and reduce expected earnings. Witness the statements from Kimberley Clark (KMB), Wal-Mart (WMT), McDonalds (MCD), Xerox (XRX),…etc...

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Friday Dollar Analysis

Last week, I wrote the following about the dollar:Given the above charts, and the fact nothing has fundamentally changed in the big picture for the dollar, my assessment of the dollar market for the coming week is the exact same as it was for last week: more moves lower with rebounds into the EMAs providing upside resistance. Taking a look at the...

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Hayek v. Keynes -- the Rap Battle

Why this didn't go viral in the Econ community, I have no idea. But this is brilliant -- just brilliant.En...

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Durable Goods Up

On March 18, I wrote the following:Durable goods orders are a very volatile series. However, their current lack of movement is beginning to concern me regarding the big picture.In light of that, we got some good news yesterday:A key gauge of U.S. manufacturing rose in March and new orders in February were stronger than initially thought, indicating...

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A Closer Look At Monetary Velocity

Let's finish looking at money supply by looking at velocity and GDPFrom 1959 until 1984, there is a strong relationship between M1s YOY percentage change and GDPs YOY percentage change. This relationship breaks down briefly in 1974. In the above chart notice how the two lines mirror each other's movement.The M1/GDP YOY percentage change relationship...

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Why Do More?

Ben Bernanke, the Federal Reserve Chairman, has given the first ever Fed press conference.In it he said that quantitative easing will end in June.Quoted by the Telegraph he said:"Why do more?"However, as the Dollar continues to fall and debt continues to increase, the only large scale buyer of US debt on the market is the US government. As such, quantitative easing is destined to continue in some form or anoth...

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Thursday Oil Market Analysis

Last week I wrote the following about the oil market:Over the last few weeks, with the exception of today, the price action has been weak. There were two strong down bars, three weaker moves higher, another strong downward bar and then a weak up bar. Today's action is the only strong bar over the last 8 trading sessions.The overall feeling I...

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Richmond Fed Manufacturing Index Drops

From the Richmond Fed:Manufacturing activity in the central Atlantic region expanded in April for the seventh straight month but at a more temperate pace than a month ago, according to the Richmond Fed's latest survey. All broad indicators — including shipments, new orders and employment — continued to grow but at a rate below March's pace. Other indicators were mixed. Fifth District contacts reported that capacity utilization continued to grow more slowly, while backlogs turned slightly negative. Vendor delivery times edged higher and raw...

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A Quick Note on the Markets

Yesterday we saw rallies in all the major indexes. However, I wrote the following on Monday:Any move above technically important levels should be viewed with extreme caution unless accompanied by a fundamentally altering event such as a great unemployment report, a clear policy change from Washington that creates more fiscal stimulus, or a good...

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A Closer Look at MZM

Investopedia defines MZM thusly:A measure of the liquid money supply within an economy. MZM represents all money in M2 less the time deposits, plus all money market funds.MZM has become one of the preferred measures of money supply because it better represents money readily available within the economy for spending and consumption. This measurement...

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Greece In Danger of Defaulting

Figures reported by Eurostat on Tuesday show that the Greek deficit (10.5% of GDP in 2010) is worse than the 9.6% estimated by Brussels in February.As pressure mounts, the yield on Greek debt continues to rise (15.5% on 10 year bonds); thus increasing the likelihood of the Greek government restructuring its debt.Any restructuring of the debt (even if allowed by the EU) will in effect be regarded as a default on that de...

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Wednesday Commodity Round-Up

Silver has been getting a ton of attention lately, largely because traders and investors are seeing it as an alternative to gold. So, let's break the SLV ETF's chart down to see what they say.The underlying technicals are extremely bullish. The A/D line is showing a ton of money moving into the market, which is confirmed by the CMF. In addition,...

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The Depression as An Era of Innovation

From the NYTimes:Q. What were the key innovations of the 1930s? Mr. Field: What’s notable about the Depression years is the very broad range of advance. One can’t point to a single or even a few innovations that somehow defined the era. Nonetheless, notable new products included the DC-3, a plane introduced in 1936 that revolutionized commercial aviation; television, developed with venture capital funding during the 1930s and rolled out at the 1939-40 World’s Fair; and nylon stockings, introduced in May 1940, with 63 million pair sold the...

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Dallas Manufacturing Index Drops

From the Dallas Fed:Texas factory activity continued to expand in April, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, moved down from 24 to 8, suggesting slower growth in output. Other measures of current manufacturing activity remained positive but retreated from their March levels. The capacity utilization and shipments indexes declined to readings of 10 and 8, respectively. The new orders index was...

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A Closer Look at M2

Investopedia defines M2 as:A category within the money supply that includes M1 in addition to all time-related deposits, savings deposits, and non-institutional money-market funds.M2 is a broader classification of money than M1. Economists use M2 when looking to quantify the amount of money in circulation and trying to explain different economic...

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China To Overtake US

The IMF has issued a prediction that the Chinese economy will overtake the US economy by 2016. The forecast, based on "purchasing power parities", shows that China's gross domestic product (GDP) will rise from $11.2 trillion in 2011 to $19 trillion in 2016, while US GDP will rise from $15.2 trillion to $18.8 trillion. China's share of the global economy will rise from 14% to 18%, whilst the US share will fall to 17.7% over this period.To add to America's economic woes, Standard & Poor's have downgraded US sovereign de...

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Treasury Tuesdays

Last week, I wrote the following about the Treasury market:I'm treating the current action as a consolidation range and would wait to make a trading move until after prices convincingly choose a direction. For the IEFs, that would be a move above 94-94.5 or a move below 92. For the TLTs, it would be a move above 93.5 or a move below 90.Very...

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Actually, Mr. President, it's Called Supply and Demand

While the president is convening a counsel to look into price manipulation in the oil markets, consider these data points:From Bloomberg:Crude oil gained for a fourth day in New York, the longest rising streak since December, as escalating violence in the Middle East and Africa threatens to prolong supply disruptions. Futures advanced as much as 0.7 percent after Syrian security forces detained at least 200 protesters while unrest showed no sign of ending in Yemen. U.S. Senator John McCain said rebels in Libya need more assistance in the fight...

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A Closer Look At M1

Last week, I wrote a post on monetary velocity which got me thinking about monetary policy in general. So this week I'm going to look at the macro money statistics and how they relate to GDP.Let's start with M1A category of the money supply that includes all physical money such as coins and currency; it also includes demand deposits, which are checking...

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Crossing the Rubicon: Obama vs. Reagan

- by New Deal democratAt the end of 2007, I had an argument with democratic activist Dana Houle (a/k/a DHinMI), who argued that 2008 would likely be a fundamental turning point, a realignment of the economy and the electorate, just as the 1932 election had been.To the contrary, I argued that 2008 would be like 1968, in which the new electoral majority...

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