No one indicator should be considered in a vacuum, especially one that is the ratio of a substance that has unique supply/demand fundamentals (Palladium) vs. one that is stable (Gold). But here it is anyway, the Pall-Gold ratio as we have used for a long while in NFTRH. Why? Because for whatever reasons, it has been in line with economic cycles.
Here’s the weekly chart we usually use, showing a volatile series of spikes and drops. The indication is still economic trend up, but as noted in NFTRH 336 “If this volatility keeps up it is going to turn the moving averages down and put a red arrow there.”
We also noted that nominal PALL is on the verge of entering a bear market, to join its big bro, Platinum.
Here is what Palladium is doing vs. Gold (roughly) today (PALL-GLD)…
Okay so remember, it is just an indicator made up of two discrete items. But it is also an indicator that tends to be in line with economic up and economic down cycles.
By Alhambra Investment Partners
Durable Goods Take February Too
So far the economic retrenchment has persisted into February, outlasting any significant January weather. The latest worrisome figures came in the form of durable goods and especially capital goods. The former is another peg in the consumption side while the latter is one of the few glimpses of wealth creation (if far from a complete one). Both sides, demand and supply, have had a rough run under the “rising dollar.” Like retail sales, it is clear that the economy is no longer just sputtering along and is now poised precariously.
Shipments of product are not moving very quickly at all but the pace of new orders has seriously slackened which does not suggest this is a “transitory” development. New orders for durable goods ex transportation have been below 1% year-over-year in both January and February; while new orders for capital goods non-defense non-aircraft were flat in both months (February was actually slightly negative).
Continue reading Durable Goods Take Feb.
By Alhambra Investment Partners
There really isn’t much to say about the housing market in the US right now except that economists clearly don’t know what to do with it. Having signed up wholeheartedly for the “booming” economy, or at least the narrative thereof, flagging sales in both new homes and resales doesn’t compute. Instead of recognizing why that may be, especially as it relates to the clear, obvious and unambiguous monetary influence in it all, the best they can come up with is something like this:
Lawrence Yun, NAR chief economist, says although February sales showed modest improvement, there’s been some stagnation in the market in recent months. “Insufficient supply appears to be hampering prospective buyers in several areas of the country and is hiking prices to near unsuitable levels,” he said. “Stronger price growth is a boon for homeowners looking to build additional equity, but it continues to be an obstacle for current buyers looking to close before rates rise.”
I’m at a total loss to understand what that statement actually means in anything like a real economic circumstance. According to basic supply and demand, “strong price growth” should not in any way be a constraint upon supply of houses for sale; quite the opposite. Mr. Yun takes this to an extreme whereby he actually supposes that lack of supply is restraining buyers!
Continue reading What Home Sellers Know That Economists Don’t
Of course, at 2:01 US Eastern time the market could get very actionable, but for right now it is a ‘close to the vest’ market. This means no big bets and no strong leans in one direction or the other.
Everyone Hates US Stocks –Bloomberg
If that’s true, that ain’t bearish.
Hedge Funder Dalio Thinks the Fed Can Repeat 1937 All Over Again –Bloomberg
I researched this gentleman and I love what he is all about, philosophically and in the way he views life as it relates to his vocation in the markets. i.e. it’s not just some MSM b/s. He is to be taken seriously IMO, in his knowledge of the markets but even more, as a respectable human (something lacking in this sphere, again IMO).
So here is the Fed’s idiotic Dot Plot that we are all supposed to be transfixed by.
The stock market took a hit, bounced and now by my eye anyway, is not at all cut and dry. Sentiment became toxic to the over bullish side a couple of weeks ago. Then the market dropped and bounced. This should not be an end to the downturn given the former sentiment profile that has not been nearly fixed yet.
But the leadership items we follow (esp. Biotech, Small Caps and Banks) are stable to good and then there are the AAII Individual Investors having been spooked, which is short-term positive (though the longer-term trend is over bullish and so, not healthy).
There’s lots more to the picture that can’t make it into a simple post. But it is best to check assumptions at the door and let’s all just be prepared for what is on the other side. It’s not so much the FOMC I am concerned about as my fellow market participants. That’s why I have remained in a comfortable position and recommended the same in NFTRH. It’s the ‘no strong leans’ market at the moment.
By Alhambra Investment Partners
Winter That Never Ends; Or One That Never Really Began
None of the following is unexpected given the “unexpected” nature of retail sales contradicting everything that was expected. Consumers are not acting like they “should” as the unemployment rate describes its version of the economy. From Bloomberg:
Purchases unexpectedly dropped 0.6 percent, a third consecutive decline, Commerce Department figures showed Thursday in Washington. The median forecast of 86 economists surveyed by Bloomberg called for a 0.3 percent gain. The decrease was broad-based, with 9 of 13 major categories retreating.
For the third consecutive year, winter will be blamed for the lack of actual recovery.
Continue reading Winter That Never Ends…
NFTRH subscriber Kyle took me to task in the past when I have talked annoyingly often about the “Dollar Collapse Cult” (and gold cults and deflation…) and never missing an opportunity to clarify my stance for others who may be (and probably are) annoyed by some of what I write, here’s another.
This time I am not seeking his permission to reprint his extensive email. Rather, I’ll just note that he does not get my references to a “strong economy” and “up cycle”. To him, I think it seems as if I am writing like a mainstream dunderhead (or worse) instead of the cranky blogger that I think of myself as (when blogging, anyway). My response (the expletive is due to my perception that he is one who can handle how I may actually sometimes talk in real life, based on his mails…
Okay, here we go again Kyle!
Semiconductor capital equipment HAS ramped.
ISM/Manufacturing HAD followed and ramped (these were real and verifiable as they were my former industry).
Corporate profits DID increase.
It certainly paid to play it straight over the last 2 years and not get in the way of this.
And all of it is ginned the fuck up as I take great pains to illustrate. You have to remember I am not the one out there humping for our team. My job is to manage markets. I don’t believe that I ever just blindly write that things are great and it’s a sustainable boom. It is a selective boom in certain assets and it is going fall apart.
The story is unchanged and I unapologetically stick to it. What I don’t do is tell purists (like you and me) what they want to hear in a feedback loop or vacuum. There are lot’s of purists out there with far less funds than they had 3 years ago.
I want us to be purists with all of our funds, ready when this [thing] falls apart.
For who ever cares…
By Alhambra Investment Partners
Maybe No Solid Relation Between GDP and the Economy, But Certainly Between GDP and Bubbles
Part of the rewriting of GDP in the middle of last year involved adding more components that are not directly observable, leaving them susceptible to more imputations and adjustment processes than GDP normally counts. Changing “fixed investment” to include less well-defined concepts like R&D, “intellectual property” and “entertainment” makes sense intuitively until you actually try to piece together how they are estimated. These categories clearly belong in the discussion about economic progress, but that isn’t to say that altering GDP is the right place for them.
In some respects, it just may be since GDP itself is a conglomeration of various and often disparate pieces that do not easily get combined. Again, the general idea of the economic account requires and demands statistical intrusion to gain a figure that is “meaningful”, though often without serious thought about any such meaning. In terms of Q4’s GDP report, this new category, “Intellectual Property Products”, contributed a rather significant proportion of GDP – accounting for 0.41% of the paltry 2.2%. That would tend to suggest a good chunk of the quarterly gain is of low certainty not only because of where it comes from but also because a new account such as this will be subject to heavier revisions (than even what we have already seen) as the BEA gains practice with new data sources.
In the environment of post-2008, that leaves even greater questions about whether GDP tells us what we really want to know. A more concise, though still alterable, estimate may be real final sales which exclude any number of tangential accounts that are subject more to non-economic factors. Final sales to domestic purchasers, for example, only describes what US “demand” actually was (using the BEA definitions). We can also simplify to just PCE, though bearing in mind that PCE services is heavily influenced by several imputations including the largest for “owner’s imputed rent” (which doesn’t exist at all; it is entirely made up).
Continue reading GDP & Bubbles
Just moving along in ‘swing’ mode, doing what the markets tell us to do and not trying to force anything. Simple, but it works.