Ho Ho Ho

santaOr Ha ha ha… whatever, he has arrived on cue.

Oh my I am glad I didn’t get greedy on the shorts and held and added the longs.

You see, it is called having a plan and the rough plan – per the average seasonal – was for a hard dump in early December off of hideously over bullish sentiment and then the potential for Santa.  Yesterday and today, as the tax loss sellers evaporated, he got here.

Other festivities could revolve around the ‘January Effect’ depending upon what’s in holiday revelers’ eggnog.

We’ll take it week to week, but for now… the fat man is in the house.

 

Around the Web

  • For you junior mining enthusiasts, Otto at IKN relates his frustrations with trying to do the right thing and be a good egg among mostly rotten ones, then rubs it in the face of certain hate mailers[biiwii comment: there is a reason he and I have gotten along well over the years, and that reason is that I perceive him to be a rarity in the gods-forsaken junior mining sphere… honest and in touch with regular people]

EWI on Crude Oil

[biiwii comment:  I distinctly remember Prechter calling the ‘Peak Oil’ craze what it was, hype and trend following, while everyone was getting crazy about it.  Herds never change.]

From EWI:

Today, there is no shortage of opinions about oil.

So why should you bother reading this one?

Because 99% of oil forecasts out there are based on so-called fundamentals. The same “fundamentals” that back in June, when oil cost $107 a barrel, promised even higher prices due to:

  • The rising threat of Islamic State in Iraq
  • Weak U.S. dollar and
  • Strong U.S. job growth

Now that oil has fallen to $54, the same sources are giving you “reasons” why it should fall even more.

You can see what’s happening: Too many analysts simply extrapolate yesterday’s trend into tomorrow.

That’s like saying that because it’s sunny today, expect sun tomorrow, too. That’s not forecasting.

Elliott Wave International prides itself on being bold with its forecasts. They have just released a new report from their in-house Energy expert giving you a unique look at the trend in Crude.

Special Report: “Oil: What’s Next?”

EWI’s Chief Energy Analyst, Steve Craig, has lived the oil market for close to 30 years. In this free report, Steve shares his take on where oil has been — and where it’s going.

Access your free oil report today and get a fresh perspective on crude oil.

Bonus: On Thursday, December 18, we will expand the report to include a clip from Steve’s brand new video forecast for crude oil.

FOMC

In other words, we may raise interest rates or we may not.  Ha ha ha…

[edit] subtext:  screw the savers, let’s pretend that the hype is true and the great November ‘Jobs’ report is going to fan out and start enriching Main Street now that the top 1% are not only bailed out, but enriched beyond their wildest dreams.  Let’s pretend it has nothing to do with the fact that we already know we cannot raise interest rates without some… how shall we put it… significant side effects.

Release Date: December 17, 2014

For immediate release

Information received since the Federal Open Market Committee met in October suggests that economic activity is expanding at a moderate pace. Labor market conditions improved further, with solid job gains and a lower unemployment rate. On balance, a range of labor market indicators suggests that underutilization of labor resources continues to diminish. Household spending is rising moderately and business fixed investment is advancing, while the recovery in the housing sector remains slow. Inflation has continued to run below the Committee’s longer-run objective, partly reflecting declines in energy prices. Market-based measures of inflation compensation have declined somewhat further; survey-based measures of longer-term inflation expectations have remained stable.

Continue reading FOMC

Post-CPI Tweets

Guest Post by Michael Ashton

Below is a summary of my post-CPI tweets. You can follow me @inflation_guy :

  • 1y inflation swaps and gasoline futures imply a 1-year core inflation rate of 0.83%. Wonder how much of that we will get today.
  • Very weak CPI on first blush: headline -0.3%, near expectations, but core 0.07%, pushing y/y core down to 1.71% from 1.81%.
  • Ignore the “BIGGEST DROP SINCE DECEMBER 2008″ headlines. That’s only headline CPI, which doesn’t matter. Core still +1.7% and median ~2.3%
  • Amazing how core simply refuses to converge with median. Whopping fall in used cars and trucks and apparel – which is dollar related.
  • Core services +2.5%, unch; core goods -0.5%, lowest since 2008. But this time, we’re in a recovery.
  • Medical Care Commodities, which had been what was dragging down core, back up to 3.1% y/y. So we’re taking turns keeping core below median.
  • Core ex-housing declines to +0.800%, a new low.
  • That’s a new post-2004 low on core ex-shelter.
  • Accel major groups: Food, Med Care (22.5%) Decel: Housing, Apparel, Transp, Recreation, Educ/Comm, Other (77.5%). BUT…
  • But in housing, Primary Rents 3.482% from 3.343%, big jump. Owners’ Equiv to 2.707% from 2.723%, but will follow primaries.
  • Less-persistent stuff in housing responsible for decline: Lodging away from home, Household insurance, household energy, furnishings.
  • Real story today is probably Apparel, which is clearly a dollar story. Y/y goes to -0.4% from +0.6%. Small weight, but outlier.
  • Similarly used cars and trucks, -3.1% from -1.7% y/y (new vehicles was unch at 0.6% y/y).
  • On the other hand, every part of Medical Care increased. That drag on core is over.
  • Curious is that airfares dropped: -3.9% from -2.8%. SHOULD happen due to energy price declines, but in my own shopping I haven’t seen it.
  • I don’t see persistence in the drags on core CPI. There’s a rotation in tail-event drags, which is why median is still well above 2%.
  • We continue to focus on median as a better and more stable measure of inflation.
  • Back of the envelope calc for median CPI is +0.23% m/m, increasing y/y to 2.34%. Let’s see how close I get. Number around noon. [Ed. note: figure actually came in around 0.15%, 2.25% y/y. Not sure where I am going wrong methodologically but the general point remains: Median continues to run hotter than core, and around 2.3%.]

Continue reading Post-CPI Tweets

The Fracturing Energy Bubble is the New Housing Crash

Guest Post by Stealthflation (David Stockman)

Let’s see. Between July 2007 and January 2009, the median US residential housing price plunged from $230k to $165k or by 30%. That must have been some kind of super “tax cut”.

In fact, that brutal housing price plunge amounted to a $400 billion per year “savings” at the $1.5 trillion per year run-rate of residential housing turnover. So with all that extra money in their pockets consumers were positioned to spend-up a storm on shoes, shirts and dinners at the Red Lobster.

Except they didn’t.  And, no, it wasn’t because housing is a purported  “capital good” or that transactions are largely “financed” at upwards of 85% leverage ratios. None of those truisms changed consumer incomes or spending power per se.

Continue reading The Fracturing Energy Bubble is the New Housing Crash

It’s the ‘Screw Everybody’ Market

Bulls and bears trading left jabs, and the black boxes just doing what they do, churning the market based on inputs of geopolitical and geo-financial (it’s not a word, I know) angst and inflammatory headlines.  All while a group of interest rate manipulators huddle to try to find the ‘just right’ (ref: Goldilocks) statement to put together tomorrow.

I have one tech company up 5% and the other down 5%. But cash is by far my best holding right now.

As a decidedly non-committed bear I took my own advice and covered all short positions as SPY hit target.   I managed some nice bear trades and still managed to lose money on balance so far this week.  That argues to me that I am not smarter than the market this week and thus, should act accordingly.

As for gold and gold miners, I really don’t know right now.  My already small exposure was eliminated on the pop after yesterday’s breakdowns.  But I tell you folks, if I see the combination of weakening forward-looking data (I could not care less about November’s ‘Jobs’ or Industrial Production) and commodities continuing to implode relative to gold, I for one will be on high alert.  Also, it’s a prime tax loss selling week.  So how real or materially important is that selling in the miners, other than to provide a potential trading opportunity?

Bigger picture, the final piece of the puzzle for gold bugs is the US economy and its headline stock indexes.  This is a very interesting, no compelling market environment for geeks who live for this stuff.   Certain markets and ratios are blowing off (up and down) and it is really fascinating.  Something seems about to change after these terminal moves blow out (cue Silver 2011 reference).

[edit] btw, volatility aside, the stock market has not at all broken its short-term downtrend.

Is the End of QE Bearish for Gold?

Guest Post by Steve Saville

[edit] highly recommended; please read.  Steve Saville illustrates our core philosophy on gold very well here.

The conventional view is that Fed money creation is necessarily bullish for gold and that a tightening of monetary conditions beginning with the cessation of Fed money creation is necessarily bearish for gold. It’s strange that this view is popular given that gold was clearly hurt more than helped by the QE program that extended from October of 2012 through to October of this year. If gold is now going to be hurt by a ‘tighter’ Fed, the implication is that regardless of what the Fed does it’s bearish for gold. If the Fed aggressively pumps money into the economy, it’s bearish for gold. If the Fed stops pumping money, it’s bearish for gold. If the Fed not only stops pumping money but starts hiking interest rates, it’s astronomically bearish for gold! Rather than relying on conventional wisdom, which is usually wrong when applied to the gold market, we’ll now turn to some historical data in an effort to understand how gold will likely react to a less ‘accommodative’ Federal Reserve.

First, some data from the distant past.

Continue reading Is the End of QE Bearish for Gold?

Around the Web

 

The Collapsing Periphery

Guest Post by Doug Noland

The collapsing Periphery took aim at the Core.

This week saw things take a turn for the worse for the faltering Periphery Bubble. On the back of crude’s $8.03 collapse (to five-year lows), Venezuela CDS surged another 1,402 bps to 4,151 bps. Ukrainian bond yields surged 517 bps this week to 28.63%. Russian ruble yields jumped another 95 bps to 12.82%. On the currency front, the Russian ruble was slammed for another 9.25% (down 43.6% y-t-d). The Colombian peso fell 3.7%, the South African rand 2.1%, Indonesia rupiah 1.4%, Chilean peso 1.1% and Indian rupee declined 0.8%. The Chinese renminbi declined a not insignificant 0.6% against the dollar this week.

Importantly, the Periphery’s core has fallen under major duress. The Mexican peso was hit for another 2.7% (down 11.7%) this week, while the Brazilian real was down 2.5% (down 11%) and the Turkish lira 1.7% (down 6.5%). Brazilian CDS (Credit default swap) surged 48 bps to a one-year high 212 bps. Mexican CDS jumped 22 bps to a one-year high 112 bps. Brazilian stocks sank 7.7%. Turkey CDS rose 36 bps to 185 (high since October). Indonesian rupiah bond yields jumped 34 bps to 8.11%.

Continue reading The Collapsing Periphery

NFTRH 321 Out Now

A good report that departs from some of the nuts and bolts (so much so that I forgot to include the usual currency segment, which we have frankly had nailed since the commodity currencies broke down a year ago and the great USD rally was just a twinkle in Uncle Buck’s eye :-) ), managing what was an expected early December drop in markets with an eye out toward Tax Loss, Santa and January Effect seasonals.

But to me the most important aspects of #321 are its clear views about why nothing about this macro environment is healthy, how the market is vulnerable and how 6 years later we are simply closing out a massively significant market event, with the majority at the opposite end of the emotional spectrum to Q4, 2008.

On that note, at the prodding of a subscriber, I’ve excerpted a segment from NFTRH 7 (Nov. 8, 2008) on Deflation and Inflation.  To me it shows how little things have changed in the ensuing 6 years.  Amazing, really.  I’ll probably post it here later, to go with Friday’s post about a potential ‘inflation trade’ bounce, possibly in early 2015.

nftrh321