Long term interest rates are rising in line with manufacturing, jobs and other signs of a ‘healthy’ economy. Clown 1 popped out of the little clown car at center ring yesterday and regaled the audience with a show about non-Tapering… Taper Hype Continues.
Then a day later (about 30 seconds in circus time) the little car zoomed over to the second ring, and with Time for Fed to put taper on the table another one popped out and entranced the audience with the other side of the shtick.
Tomorrow is the employment report. In less than 2 weeks comes the FOMC. In between a a lot of mental whipsaw that just doesn’t need to be. In the good old days these people would just cook up whatever it was they were cooking and hit us with it. I have really come to dislike this age of transparency because they should not be arguing their viewpoints in public when the viewpoints are so… opposite. All they end up doing is moving hyper kinetic markets that don’t need the stimulus (no pun intended).
But get this, the ‘taper’ hype is just that. The hype is exacerbated by self-important people getting their jawbones in front of microphones. Meanwhile, market participants believe that they are supposed to be afraid of tapering when a withdrawal of QE is probably the best thing for delivering the inflation (and isn’t that what this is ultimately all about?) to Main Street via the banks and lenders. Yes, the interest rate spreads that would incentivize these institutions are being repressed by QE.
So the question remains, what are these guys afraid of? Just shut up and TAPER already!
Since this is among many others, an indicator to the macro funda climate for gold, it is notable that the 30-5 spread is dropping below the 50 day moving averages, putting a would-be bottoming pattern in question for the ratio. Gold tends to be correlated to Treasury yield spreads, rising and falling with them generally.
NFTRH has had to remain bearish (aware of a possible final waterfall that swamps the bottom callers and potentially ends the bear) on the near term price of gold and gold stocks at the risk of being mocked as a contrary indicator. That is not because I am afraid of buying a potential bottom. Long time readers know that I have routinely stepped up to the plate on bottom feeder buying op’s.
But this time, unlike Q4 2008 for example, the funda’s are just not there, no matter how loudly people bullhorn China buying, COMEX shenanigans or Fed/Goldman conspiracies. The yield spread above had been constructive, but now it is joining a chorus of other indicators saying to use caution in the near term and tune out the bottom callers.
The idea remains to be intact first and ready to speculate second.
The Effect of the Affordable Care Act on Medical Care Inflation
By Michael Ashton
I haven’t seen anything of note written about the probable effect of the implementation of the Affordable Care Act (ACA, or “Obamacare”) on Medical Care CPI. This is probably because the calculation of Medical Care inflation in the CPI is confusing to many and because the direct effects of the ACA are still speculative at this point. But this is a potentially dangerous oversight since Medical Care is 7.2% of the CPI, and is after all the part that has recently been dragging Core CPI and Core PCE lower because of its unusual weakness.
Given that iPad and iPhone are no longer the gizmos to have and that a pack of companies are encroaching on Apple’s territory, I don’t look at the company the same way I used to (although I still love my iMac, which has served me impeccably for 5 years now with never so much as a hiccup).
This morning there is some China Mobile news for iPhone. Excellent. I hold AAPL along with MSFT (INTC was sold for a small loss after its 2014 guidance was a stinker, although I plan to buy INTC back after it settles, broad market willing) as old guard tech giants. Here is the weekly chart of AAPL with a measurement to 650.
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.
FB has crept above the down trend line. Since I am leaning toward a bullish resumption on the stock market I have got to think about the possibility that momentum crap like this may have led today’s mini market correction and may be trying to lead a new phase of speculation. Regardless, rules are rules. Loss would be very limited if this thing does not get right back below that line soon.