Leaving aside for a moment the compulsion for market participants to remain ‘risk ON’ that is an underlying effect of Fed policy of the last 2 years, what other effects may have been promoted by the latest inflationary operations?
Well, personal consumption is trending up. Yey, it’s 1999 (or 2007) again!
Unfortunately, personal savings is trending the other way as ZIRP has put a bull’s eye on the dreaded domestic enemy known as the saver. Why, saving seems to have been deemed un-American and in the face of ZIRP, it’s a losing bet too… as long as the asset bubble is maintained that is.
Hey, despite a re-shoring of manufacturing that is in progress (and a good thing), we remain a heavily consumer based economy. They are consuming and they will continue to consume until they puke, which in less crude terms means until the next asset market liquidation.
Officials have spent the last couple of years looking like heroes (boom). We are likely in the process of pivoting toward the other end of the spectrum. That would be the inevitable bust stage. We will not consume our way to prosperity especially by manipulating debt.
This has been our theme for 2014, a macro pivot toward the chronic economic deceleration that has been in play really, since 2001 when the age of ‘Inflation onDemand’ began. The rest has been rolling booms and busts. We may be finishing up a boom oh, right about now.
So Industrial Production (-.3% vs. economist projections of +.2%) joins 2 Payrolls reports and one ISM manufacturing report in the dumper. Of course it has all been the fault of the cold weather according to this blurb:
“Industrial production dropped 0.3% in January, the Federal Reserve reported Friday, with the cold weather knocking manufacturing output by 0.8% and mining output by 0.9%, which more than offset the 4.1% surge in utilities output on heating demand.”
It wouldn’t have anything to do with a Fed compelled to exit QE bond buying by elevated interest rates and Goldilocks’ life blood dripping away slowly but surely. No, in bull land there is always a more cartoonish excuse.
Guest Post by Tom McClellan
February 14, 2014
The conventional stock market analysis world revolves around earnings. “Earnings drive the stock market,” they say. This myopic view is akin to the belief that carbon dioxide is the driving force behind the greenhouse effect (water vapor actually accounts for 90-95% of it, but you don’t hear that). People believe that earnings are everything because they have been told that it is so, and everyone thinks so, therefore it must be so. Circularity of logic and contradictory evidence do not seem to be significant impediments to the acceptance of this belief system.
The Palladium Gold Ratio is one indicator we used over a year ago to indicate 2013′s economic growth spurt. Ref. the most recent up arrow. While the ratio is looking wobbly, a new down signal would only begin with a drop below the lower of the two moving averages and be confirmed by an eventual cross of the moving averages.
Palladium Gold Ratio, weekly chart (NFTRH 277)
The Payrolls data are a jumble of interpretations and misinterpretations. The ISM was however, an unmitigated negative. We’ll see if the likes of Pall-Gold and other indicators confirm in the coming months.
Guest Post by Steve Saville
1) The monetary backdrop continues to be very different in the US today than it was in earlier post-bubble periods. This is slowing the corrective process and introducing new price distortions that will have to be ‘resolved’ via another devastating economic bust. When will they ever learn?
Guest Post by Michael Ashton
In normal times, by which I mean before actions of the Federal Reserve became the only data point that mattered, the monthly ISM report was important because it was the first broad-based look at the most-recent month’s data.
Guest Analysis by Bob Hoye
Click for full PDF report
A 35 page monster (lots of pertinent charts and graphics, so it’s not as difficult a read as it may sound) was just sent out to NFTRH Premium subscribers. It’s a good one too. Filled with probabilities in alignment with our bigger picture plans for the financial markets, and yet some short-term moderation of views as applicable.
Friday was a scary day for the US stock market. Said market is not broken, but the indicators beneath it are rapidly coming apart and the bull market’s technical parameters are coming into play. Then there is gold and other ‘risk off’ things. So much to discuss and 35 pages really was not enough. Good thing we have nothing but time to lay it all out going forward in 2014.
NFTRH 275, a solid piece of work… out now.
Just doin’ the work required to firm up the plan. 31 pages of it. I look forward to a phase when we can lock, load and simply manage new trends.