As the ‘Continuum’ lurks below the red line (monthly EMA 100)…
I noticed that a Fed pumper is out saying ‘Only taper when sure economy on right track‘ (despite the wonderful economic signals coming out of manufacturing, corporate profits and even ‘jobs’, to a degree) but the long bond’s yield could have other ideas.
The 10 year yield (TNX) continues to look bullish. In the lower panels are Housing, Banks and Utilities. Banks should prefer a rising yield and the other two? Not so much.
A disclaimer: I am long and/or trading several regular ‘bull stocks’ (as well as short a couple). Don’t interpret the sober message below as a ‘sell your stocks right now!’ style bearish warning. Indeed, after an expected choppy start to December I think more bull market mania, errr… rally, could still be ahead. But it would be just dandy if people would keep their perspective along the way.
From the December 1 edition of Notes From the Rabbit Hole (NFTRH 267):
Closing the 2008 ‘Gap’
In 2008 market and economic participants suffered a hard downside ‘gap’ in the prices of their assets and in the levels of their expectations. The bull market that began in March of 2009 is doing a fine job of closing that gap and fully resetting the herd from the utter fear mode of Q4, 2008 to a 2007 or even 1999 style greed mode today.
So here is the playbook folks. ISM is going to be released today at 10:00 US Eastern. If it is strong, as it has been for the last several releases (Surprised? You shouldn’t have been) then there will likely be some ‘taper’ jawbones out again because long term yields already look bullishly constructive. Relentless manufacturing strength would put more upward pressure on yields.
The Fed should just give up on its chronic manipulation and let the ‘organic’ economy be; let it ride. Let the banks take over and ‘carry’ the yield differentials as they become incentivized through higher profit motive to borrow short and lend long.
I’ll probably release the opening segment publicly, but the screenshot gives you an idea of where it is going. NFTRH 267, a damn good and rational market letter… is out now.
By Doug Noland
Another week another record high.
“To understand the Great Depression is the Holy Grail of macroeconomics. Not only did the Depression give birth to macroeconomics as a distinct field of study, but also—to an extent that is not always fully appreciated—the experience of the 1930s continues to influence macroeconomists’ beliefs, policy recommendations, and research agendas. And, practicalities aside, finding an explanation for the worldwide economic collapse of the 1930s remains a fascinating intellectual challenge.” Ben. S Bernanke, Essays on the Great Depression, 2000
By Bob Hoye
The following is part of Pivotal Events that was published for our subscribers November 21, 2013.
“The Fed Should be Seeking Redemption”
Signs Of The Times
“Fitch Ratings has downgraded the credit worthiness of Chicago’s bond debt
because of its public pension problems.” – Yahoo, November 11