Tag Archives: economy

When a Bubble Isn’t… ?

Guest Post by Capitalist Exploits

Many are arguing that startups, and more specifically hi-tech startups are in a bubble. I’ve argued it myself herein and with colleagues over the past several months. Accelerators and Angel groups are popping up everywhere, from Akron to Auckland and everywhere in between. Money is flowing like champagne on an oligarchs yacht!

To the casual observer, and even to some of the VC world’s most prominent insiders the exuberance is creating some concern. On September 25th Marc Andreessen tweeted this (amongst 17 additional posts on the same subject):

When market turns, M&A mostly stops. Nobody will want to buy your cash-incinerating startup. There will be no Plan B. VAPORIZE.

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Around the Web; Economic Data Fest

Well, we have been thinking that the strength in USD could start to take the top off the party here in the US.  Today’s data, combined with the Semi Equip. book-to-bill data is backing that up.  The caveat is that no one day, week or month should be taken in a vacuum.  But still…

Around the Web

  • Saving Credit (PDF) by one of my personal heroes, Raghuram Rajan, head of the Reserve Bank of India.
  • Updated Thanksgiving week breakdown from QuantEdges.  Just as one little human in the machine, I have noticed over my years in the market that Black Friday almost always seems to be bullish.

 

Around the Web

 

Around the Web

  • Crude Oil?  Jeff Saut’s latest note (Nov. 17)

 

Around the Web

 

More Good News for Employment

Guest Post by Tom McClellan

UMich Sentiment versus unemployment rate
November 14, 2014

The data on the U.S. unemployment rate have been getting progressively better over recent months, either because of or in spite of the government’s efforts, depending on one’s viewpoint.  And if this week’s chart is to be believed, then the data should continue to get better over the next several months.

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Gold, Inflation Expectations and Economic Confidence

Guest Post by Steve Saville

As a result of what happened during just one of the past twenty decades (the 1970s), most people now believe that a large rise in “price inflation” or inflation expectations is needed to bring about a major rally in the gold price. This impression of gold is so ingrained that it has persisted even though the US$ gold price managed to rise by 560% during 2001-2011 in parallel with only small increases in “price inflation” (based on the CPI) and inflation expectations. The reality is that gold tends to perform very well during periods of declining confidence in the financial system, the economy and/or the official money, regardless of whether the decline in confidence is based on expectations of higher “inflation” or something else entirely.

Inflation expectations are certainly part of the gold story, but only to the extent that they affect the real interest rate. For example, a 2% rise in inflation expectations would only result in a more bullish backdrop for gold if it were accompanied by a rise of less than 2% in the nominal interest rate. For another example, a 1% decline in inflation expectations would not result in a more bearish backdrop for gold if it were accompanied by a decline of more than 1% in the nominal interest rate.

Other parts of the gold story include indicators of economic confidence and financial-market liquidity, such as credit spreads and the yield curve.

That large rises in the gold price are NOT primarily driven by increasing fear of “inflation” is evidenced by the fact that the large multi-year gold rallies of 2001-2006 and 2008-2011 began amidst FALLING inflation expectations. These rallies were set in motion by substantial stock market declines and plummeting confidence in central banks, commercial banks and the economy’s prospects. Even during the 1970s, the period when the gold price famously rocketed upward in parallel with increasing fear of “inflation”, the gold rally was mostly about declining real interest rates and declining confidence in both monetary and fiscal governance. After all, if the official plan to address a “price inflation” problem involves fixing prices and distributing “Whip Inflation Now” buttons, and at the same time the central bank and the government are experimenting with Keynesian demand-boosting strategies, then there’s only one way for economic confidence to go, and that’s down.

Since mid-2013 there have been a few multi-month periods when it appeared as if economic confidence was turning down, but on each occasion the downturn wasn’t sustained. This is due in no small part to the seemingly unstoppable advance in the stock market. In the minds of many people the stock market and the economy are linked, with a rising stock market supposedly being a sign of future economic strength. This line of thinking is misguided, but regardless of whether it is right or wrong the perception is having a substantial effect on the gold market.

For now, the economic confidence engendered to a large extent by the rising stock market is putting irresistible downward pressure on the gold price.

Around the Web

  • Across the Curve channels Buffalo Springfield and sees the commodity Armageddon as bond friendly, to the point where Yellen can take the rate hike for 2015 off the table.  Who’d be surprised about that?
  • Reformed Broker on 9 surprising things the subject of my favorite book on trading/investing/markets said.

 

Economic Snapshot

Excerpted from this week’s Notes From the Rabbit Hole, NFTRH 314:

Note; the post also appears at nftrh.com, which is 90+% ready for prime time!

Our view has been that a stronger US dollar would eventually start to eat away at corporate results, especially in the manufacturing sector and at US based companies with a global customer base. The decline in revenues thus far is something to be watched because where revenues go, earnings eventually follow.

[edit: the segment previous to this one reviewed a contrast between strong earnings and sagging revenues with companies that have reported earnings thus far]

An article by Doug Short published at Business Insider on Friday illustrates how the Economic Cycle Research Institute (ECRI) called for a recession in 2011 and was promptly made to eat that call first by Operation Twist and then by balls out QE3. All the while as ZIRP has quietly whirred along in the background for 6 years.

ECRI’s weekly Leading Index is flashing warnings again…

ecri

…while the St. Louis Fed’s Leading Index (incl. ISM data, Treasury spreads and State level housing permits and unemployment data) continues to slog around its 30 year average after the big recovery out of 2009.

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