Friday Dollar Analysis

Last week, I wrote the following about the dollar:The A/D line shows a big move into the market in early May, but not much since. The CMF confirms the lack of movement into the market. The MACD shows increasing momentum, but note the current peak is lower than the last, indicating overall declining momentum right now. While the 10 and 20 day...

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Special Bonddad blog midyear graph-reading contest

- by New Deal democratToday is June 30, and that means tomorrow starts a new fiscal year for most states. Which means it certainly is about time for Meredith Whitney's forecast of 50 to 100 significant municipal defaults totaling about $100 billion this calendar year, to start kicking in. Let's pull up a graph of a Municipal Bond index fund for the...

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Treasury Market Selling Off?

From the WSJ:For the third consecutive session, Treasury investors on Wednesday balked at buying new bonds at a large government-debt auction, sending prices lower and yields higher. The yield on the benchmark 10-year note reached 3.11%, its highest since May 25. Yields on the 10-year note have risen every day this week, adding about 0.24 percentage point since Friday and sparking speculation that the bull run in the bond market may have passed its peak. The Treasurys on sale on Wednesday were $29 billion of seven-year notes. That followed...

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Small Business Lending Heating Up?

From Reuters:Borrowing by small U.S. businesses rose at a record pace in May, data released by PayNet Inc on Thursday showed, a sign that economic growth is poised to pick up in coming months. The Thomson Reuters/PayNet Small Business Lending Index, which measures the overall volume of financing to U.S. small businesses, rose 26 percent in May from a year earlier, PayNet said. The index is now at its highest since July 2008, two months before the collapse of Lehman Brothers and the near derailment of the world financial system......"If small...

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A Foretaste

Those who have been focusing on the ongoing Greek tragedy may care to remember that the portents of doom, concerning a Greek financial meltdown, are but a foretaste of the catastrophe that will be unleashed if the US doesn't get its debt laden house in order soon.The IMF has issued a warning that the US needs to sort out its debt problems, and ensure that Congress passes legislation that allows its debt ceiling to rise. Failure to do so will lead to default on US debt, which will cause financial shock waves around the world.The irony of course...

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Thursday Oil Market Analysis

Last week, I wrote the following about the oil market:The oil market is caught between two different issues. In the short-term, there is concern about the pace of expansion. Lower growth = lower oil demand = lower prices. However, as I pointed out above, there has been a strong, fundamental, long-term shift in the world's oil demand as countries...

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June YoY house price declines least since May 2007

- by New Deal democratConsider two different scenarios by which house prices could still decline 25% in real, inflation-adjusted terms, from the present:(1) nominal prices decline 5% a year for 5 years, and inflation is 0% over that time.(2) nominal prices do not decline at all over the next 5 years, but inflation is 5% a year.Both of those give us...

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Quick Update on the Equity Markets

Consider this chart from Bespoke Investment Group regarding the last two days of equity price action:Notice that the rally has been led by more speculative areas of the marker -- technology and consumer discretionary.Consider this in line with the treasury market, which should absorb the outflow of money from the stock market in the event of an equity...

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The Economic Ball's In Washington's Court -- And That Ain't Good

As I see current economic events, the real story actually lies in Washington.First, recent economic news has been poor. It started with high commodity prices squeezing margins and consumers. At the same time, we saw international growth engines India, Brazil and China raise interest rates and reserve requirements to slow their economies, thereby also muting the increased demand caused by their growing economies. In the US, consumers have switched focus from mass consumption to paying down debt and a frugal approach to buying, making the slowing...

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Greece Goes For Austerity

The Greek parliament has approved the five year austerity package. Now all it has to do is implement ...

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Christine Lagarde Appointed Head of IMF

Christine Lagarde, the French Finance Minister, has been named as the new head of the International Monetary Fund.Rather bizarrely, and certainly pathetically, French President Nicolas Sarkozy's office declared it a "victory for France". Does Sarkozy not get the point that the IMF is an international organisation, it is not there to work for France or Sarkozy.I suspect that Ms Lagarde has sufficient intelligence and ethics to understand that point, it is a pity that Sarkozy has taken the shine off her appointment by making such a partisan and crass...

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Wednesday Commodity Round-Up

The long-term gold chart shows that prices have broken one uptrend, but the longer trend started last year is still in place. Prices have technical support in the 144 and 140 area.Prices are now below the 10, 20 and 50 day EMA. The 10 and 20 day EMAs are both moving lower, and the 10 day EMA has crossed below the 20. The 50 day EMA is now moving...

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A Note on Home Prices

Click on the above chart for a larger version.The above is from the latest Case Shiller home price index. Notice the area in the black square. Note particularly that is has been around this level for the last two years or so. Finally, notice that prices have been in a fairly tight range for this period. There's been an awful lot of talk/hype/pixels...

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Commodity prices and pre-WW2 recessions

- by New Deal democratIn the last week I have been looking at some economic data series that go back to at least the 1920s to determine which might serve as leading indicators of deflationary busts. Previously I have looked at BAA corporate bonds and housing starts.Now let's look at commodity prices. These have been kept since 1913. Some sort of commodity...

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PCEs Down .1%

From the WSJ:Consumer spending, a key driver of economic growth, was flat in May, the Commerce Department said Monday. Incomes rose 0.3%, providing some hope that spending could pick again later in the year. Economists surveyed by Dow Jones Newswires were expecting spending to rise by 0.1% and income to register a 0.4% gain. For April, spending...

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Monetary Velocity Indicates Slowing Economy

While it's important for the Federal Reserve to increase money supply during a recession to give the spending public more money for purchases, it's also important for the pace of purchases to increase, indicating more and more people are conducting purchases at a faster pace. This is called monetary velocity, and it's a very important statistic....

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The Greek Tragedy - Sarkozy's False Dawn

French president Nicolas Sarkozy believes that he has found the solution to the Greek crisis, by striking a deal with France's banks in which they have agreed to restructure their Greek debts.However, before he pops his champagne cork he would do well to remember that the deal involves using Brussels funds to reduce potential losses of private bondholders. This is not something that the Germans want, indeed it should also be noted the the Greeks have not yet accepted the deal.The Greek parliament votes on the austerity measures tomorrow. In the...

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Treasury Tuesdays

Last week, I wrote the following about the Treasury market:While I'm not seeing anything to indicate a mass exodus from with security, I do think the rally is over for now. I'd take profits if you haven't already.My concern for the rally was based on two things. First, the MACDs of both the IEF and TLTs were giving sell signals. In addition, the...

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Housing starts as a Pre-WW2 leading indicator

- by New Deal democratThis is another post concerning leading indicators from before the inflationary era. Previously we saw that BAA corporate bond rates were one such indicator. Now let's look at housing starts.Unfortunately the only data for housing starts before WW2 comes from the Statistical Abstract of the United States, and is annual. While that limits our ability to judge its effectiveness somewhat, the good news in that regard is that, as Professor Edward Leamer has shown, post-WW2 housing starts typically haven't had their maximum...

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The Washington Uncertainty Situation

Consider this fact pattern: you are currently a business owner thinking about either hiring someone or taking out a loan. As part of this process, you think about political events over the next few months and see the following:1.) Washington allows the debt ceiling debate to expire. As a result, US Treasuries sell-off, yields spike and the entire yield curve is thrown off. This of course increases the cost of your capital and makes the possibility of closing a loan nearly impossible. If you are looking at hiring a new person, you see this...

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Chickens Coming Home

In April 2010 I wrote that Greece would be eventually forced out of the Euro.Now, some 14 months later, it appears that the EU is finally waking up to the reality of Greece defaulting on its debt and being forced out of the Euro.The UK Treasury for its part is attempting to "do a Canute", and "persuade" banks to "take a haircut" on their £2.5BN visible Greek debt. Even if the "ever generous" banks were to be persuaded to "go to the barbers", and take a hit, that would be but the tip of the iceberg. Banks have a far greater (unseen) exposure to...

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Equity Week in Review and Preview of the Upcoming Week/Month

Last week, I wrote the following about the market:The IWMS and QQQs are both down ~ 9.5% from their peaks, while the SPYs are down ~ 7.25%, meaning the sell-offs are still in standard correction territory. This week, the most important developments will occur regarding the 200 day EMAs. The QQQs have already moved through this key technical area,...

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Weekly Indicators: economy in danger of full stall edition

- by New Deal democratIn the rear view mirror, Q1 GDP was revised up 0.1% to +1.9%. Monthly data focused on home sales. Both new and existing home sales for May declined slightly from April, but in the longer perspective simply continued to bounce along the bottom they first made two years ago. Durable goods orders fared better, up 1.9% from the previous month. New orders for non-defense capital goods, a component of the LEI, increased 5.8% from the month before. Durable goods may be the first signal that the Japan-induced slowdown in manufacturing...

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The Washingotn Lobotomy Factory Continues

From the NY Times:Congressional Republicans on Thursday abandoned budget talks aimed at clearing the way for a federal debt limit increase, leaving the outcome in doubt as they vowed not to give in to a Democratic push for new tax revenues as part of any compromise...... Mr. Cantor had previously expressed optimism that the sessions could produce a deal. But he announced he would not be attending Thursday’s scheduled meeting because Democrats continued to press for part of the more than $2 trillion savings target to come from moves like phasing...

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Putting a stake through the heart of an employment canard

- by New Deal democratSince the site's occasional Doomoron troll has posted one of his usual central falsehoods, claiming "Bonddad and NDD were dead wrong in predicting the recovery of employment," it's time to set the record straight.Bonddad is a big boy and can speak for himself, but as for me , in September 2009, as the economy was still shedding...

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Friday Dollar Analysis

Last week, I observed the dollar appeared to be forming a bottom. Quoting an article from Forex Blog, I noted the dollar was acting somewhat contrary to what we would anticipate: stronger economic data had led traders to a "risk on" strategy, which meant selling dollars while softer economic news led to a "risk off" strategy, meaning dollar purchases....

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Initial Claims Still Too High

From Bloomberg:More Americans than forecast filed first-time jobless claims last week and consumer confidence fell, highlighting Federal Reserve Chairman Ben S. Bernanke’s concern that the slowdown in the economy may persist. Applications for unemployment benefits increased 9,000 in the week ended June 18 to 429,000, Labor Department figures showed...

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The Great Rebalancing

From the WSJ:Several factors are at play in the uneven global economy. One is a big rebalancing that many economists believe has been long coming. China and other developing economies have depended on exports to the U.S. to fuel their growth. Meantime, U.S. consumers feasted on cheap imports. In the process, China amassed a large trade surplus...

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Thursday Oil Market Analysis

Last week, I noted that oil finally moved through the 96/98 price level, which had been providing major support for a few weeks. This move signaled a shorting opportunity. However, underlying the oil market is this change in the underlying fundamentals:This is something I've been talking about for some time: increased demand from the developing world...

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Some Notes on Existing Home Sales

Click for a larger image. Thanks to Calculated Risk for the chart.1.) Over the last three years, despite the whipsaws created by the approaching tax credit expiration and subsequent expiration -- the median and average pace of sales appears to be in the 5 million/year range (I'm eyeballing the chart to make a point). This is despite the worst housing...

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Corporate bonds and pre-WW2 recessions

- by New Deal democratOne of the items I always list in my "Weekly Indicators" column is BAA corporate bond yields. Since yesterday I wrote about the existence of economic indicators in the pre-inflationary era before WW2, it's worth revisiting that data, including BAA corporate bonds,because one of the reasons I added it to my list is precisely because...

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Cost of Wars Is Finally An Issue

From the NY Times:President Obama will talk about troop numbers in Afghanistan when he makes a prime-time speech from the White House on Wednesday night. But behind his words will be an acute awareness of what $1.3 trillion in spending on two wars in the past decade has meant at home: a ballooning budget deficit and a soaring national debt at a time when the economy is still struggling to get back on its feet.As Mr. Obama begins trying to untangle the country from its military and civilian promises in Afghanistan, his critics and allies alike...

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Wednesday Commodity Round-Up

Today, I'm going to look closer at the copper market because it's a good harbinger of the economy. Let's start with the one year chart.The primary point made by the one year chart is prices have broken a long-term uptrend. However, also note that from a long-term perspective prices have not dropped as sharply as anticipated given the overall weakness...

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Is the Stock Market Over Sold?

Consider the following chart from Bespoke Investment's Blog: Here's the explanation:The chart to the right summarizes where the S&P 500 and each of the ten sectors are trading relative to their normal trading ranges. For each sector, the circle represents where the sector is currently trading while the tail represents where the sector was trading...

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