Friday, April 3, 2015

So Which Is It Marketwatch?

It's ironic that this morning, even as Marketwatch was reporting a disastrous jobs report, they had three reporters cheer-leading higher stock prices and a stronger economy. So which is it, Marketwatch? Is the economy weak, as jobs and other economic data indicate, or are your cheer-leading reporters correct in prophesying a stronger economy ahead? All these were screen captures from the same web page on the same day, April 3, 2015.
Marketwatch headlines:

Marketwatch reporters and editors:

 For the sake of Rex and other false prophets in the financial markets, let me counsel you this way: Predicting the future is for prophets, not profits!

Marketwatch, your cred... is dead!

Happy Easter: Disastrous Jobs Report

Dow futures crashed 200 points before closing for the Easter weekend.
“There are no excuses with today’s report. This was a soft print any way you look at it. The headline was up only 126,000, the weakest print since February 2014, net revisions to the last two months subtracted 69,000 jobs, and the workweek fell to 34.5 hours from 34.6 hours.” — Omair Sharif, Newedge.

Wednesday, April 1, 2015

Grains Leap Following Confusing Data

This chart for soybeans this morning is typical for grains across the board today.

Corn rebounded in early deals on Wednesday, adding 0.6% to $3.78 ½ a bushel for May delivery, as of 10:00 UK time (04:00 Chicago time).
The recovery tallied with ideas that, even with the extra corn sowings identified in the USDA plantings report, US inventories will decline next season.
"Assuming a trend yield of 163 bushels per acre, the USDA's corn plantings forecast of 89.2m acres, even so almost 0.5m acres above trade expectations, will result in a slight reduction of the 2015-16 ending stocks," said Rabobank, restating a "neutral" forecast on corn futures.

Crude Oil Climbs Sharply As Iran Negotiations Stagnate

But everything is subject to a rapid change as events develop:
from CNBC:
Negotiators may have missed Tuesday's deadline, but they could still reach a deal to lift sanctions on Iranian oil exports today, which would send prices further south, analysts say.
"An agreement would trigger an instant price dip for Brent oil, but of no more than $5," said IHS Energy Insight vice president Victor Shum said by phone. While "a deal would be a breakthrough, it will only add to the supply glut in the oil markets and, potentially, push Brent towards $30 a barrel."
Negotiators from Iran and six world powers on Tehran's nuclear program failed to meet a deadline on Tuesday that would have paved the way to lift United Nations sanctions on Iranian oil exports. But talks will continue in Switzerland today.

Dr. Hussman: Stark Economic Realities

  • The U.S. has become a nation preoccupied with consumption over investment; outsourcing its jobs, hollowing out its middle class, and accumulating increasing debt burdens to do so.
  • U.S. wages and salaries have plunged to the lowest share of GDP in history, while the civilian labor force participation rate has dropped to levels not seen since the 1970’s. Yet consumption as a share of GDP is near a record high. This gap between income and expenses has been financed by debt accumulation, encouraged by the Federal Reserve’s policy of zero interest rates, and enabled by fiscal policies that prioritize income replacement rather than targeted spending and investment.
  • Since December 1999, total civilian employment among individuals 55 years of age and older has increased by 15.3 million jobs. Yet total civilian employment – including those over 55 – has grown by only 13.8 million jobs. This means exactly what you think: outside of workers 55 years of age and older, Americans of working age have 1.5 million fewer jobs today than 15 years ago.
  • There are now more than 46 million Americans on food stamps, with SNAP (Supplemental Nutrition Assistance Program) expenditures increasing five-fold since 2000.
  • While transfer payments and entitlements have increased, government consumption and investment as a share of GDP have declined to near the lowest levels in history. In effect, fiscal policy has been heavily biased toward income replacement, but has otherwise been a deer in the headlights in the face of repeated economic crisis. While the contribution of private investment has slowed to a crawl, fiscal policy – except for transfer payments – has actually been in retreat.
  • In the investment sector, real gross private domestic investment has grown at a rate of just 1.5% annually since 1999 (versus a 4.7% real annual rate in prior decades), with growth of just 1% annually over the past decade. Yet while real capital accumulation in the U.S. has weakened, corporate profit margins have never been higher.
  • In an economy where wages and salaries are depressed, but government transfer payments and increasing household debt allow households to bridge the gap and consume beyond their incomes, companies can sell their output without being constrained by the fact that households can’t actually afford it out of the labor income they earn. Meanwhile, our trading partners are more than happy to pursue mercantilist-like policies; exporting cheap foreign goods to U.S. consumers, and recycling the income by lending it back to the U.S. in order to finance that consumption.
  • Debt-financed consumption, while it proceeds unhindered, is a central driver of elevated corporate profits. Unusually elevated corporate profits (a surplus) are largely a mirror image of unusually large deficits in the household and government sectors.
  • The most reliable stock market valuation measures (i.e. the measures that have a nearly 90% correlation with actual subsequent stock market returns) are those that explicitly take account of the level of profit margins and mute the impact of that variability. These measures suggest that the S&P 500 Index is likely to be lower a decade from now than it is today (though dividend income should bring the total return to about 1.5% annually).
  • Even if the Federal Reserve was to immediately reduce the monetary base by one-third (from nearly 24 cents of monetary base per dollar of GDP to a smaller 16 cents of monetary base per dollar of GDP), short term interest rates would still be zero.
  • Once we account for movements in the Federal funds rate that can be captured by a fairly simple linear policy rule such as the Taylor Rule, additional activist monetary policy (deviations from that rule) have effectively no ability to explain subsequent changes in GDP or employment. There is a strong economic justification for proposals that would require the Fed to outline Taylor-type policy guidelines, and to explain deviations from those guidelines. These proposals should be advocated by Republicans and Democrats alike.
  • Yield-seeking speculation promoted by the Federal Reserve caused the housing bubble and the resulting global financial crisis. A change in accounting rules by the Financial Accounting Standards Board in March 2009, not extraordinary monetary policy, is what ended that crisis.
  • The true Phillips Curve is a relationship between unemployment and real wage inflation, it cannot be usefully exploited by monetary policy, and it is the only version of the Phillips Curve that actually exists in empirical data. Pursuing general price inflation does not somehow “buy” more jobs. It also does not raise real wages. It lowers them.
This spells a very UGLY future!

Employment Stagnates, So Stocks RISE!

Following this morning's ADP employment report, stocks began to rise. Stocks had been down throughout most of the night, and are still negative. But once again, this bad new is perceived as good news. What a twisted world!

So stock futures ROSE following that news! 

And this from John Hussman:
"The U.S. has become a nation preoccupied with eating its seed corn; placing consumption over investment, outsourcing its jobs, hollowing out its middle class, and accumulating increasing debt burdens to do so. What our nation needs most is to adopt fiscal policies that direct those seeds to productive soil, and to reject increasingly arbitrary monetary policies that encourage the nation to focus on what is paper instead of what is real."
By John P. Hussman, Ph.D.
President, Hussman Investment Trust

Tuesday, March 31, 2015

Nuclear No-Deal: Stocks Decline Nearly 200 Pts

After rallying off an early 200-pt sell-off during most of the session, stocks sold off in the end, closing down almost exactly 200 points.

Headlines for March 31, 2015

 Housing was weak:
 Purchasing Manager's Index disappoints again.

Monday, March 30, 2015

Oil Continues Weak, Direction Questioned

As shown in the encircled section (top left) of this chart below, crude oil leaped higher in the last few minutes of the trading day (long green candle at top left), but in after hours trading, it gave back virtually all those gains (see circled section in top left chart).

Broken Markets

Dow up 265 pts following THIS news? Proof of a broken market!