Tag Archives: economy

Around the Web

By Biiwii

Market Analysis, News & Opinion From Around the Web…


Semi’s Updated

By Biiwii

As we await the Semiconductor Equipment sector’s Book-to-Bill data for June, we observe that Semiconductor sector leadership (SOX-SPX) is still intact in the US stock market.


This sector is noteworthy because it was a real indicator in early 2013 of the general strength to come in manufacturing (Semi Equipment cycles often do that) and later, employment and the ‘services’ economy.

Today SOX-SPX rests at a decision point and the bulls have the ball as long as that point is not violated.  The answer here will be especially important given that its 2013 indicator running mate, Palladium-Gold, is very bearish now.


Dollar’s Grand Masterpiece…

By Alhambra Investment Partners

The ‘Dollar’s’ Grand Masterpiece Almost In Full View

When US retail sales jumped in May on seasonal adjustments alone, economists and mainstream commentary lost all composure as they were certain that meant the “slump” was over and the dominant narrative would continue. The same occurred in Europe over a slight pickup in overall lending, not even in the household or business sectors, which was proclaimed as nothing but the beneficence of QE already working. Neither of those “certainties” lasted more than a month, as US retail sales in June were “shocking” and lending in Europe quickly fell back to its normal flatline (which the ECB has really not been able to affect through its entire five years of deep experimentation).

This is nothing new, of course, as every uptrend is extrapolated into the recovery while at the same time every bit of weakness is qualified “temporary” or “anomalous.” The result over time is the regular saw-toothed monthly variation steadily sinking on that “unexpected” but somehow persisting downtrend. If you don’t observe the overall context beyond those shortest variations you might actually expect a domestic or global recovery intact.

Continue reading Dollar’s Grand Masterpiece…

IMF Cuts, Refuses to See

By Alhambra Investment Partners

When the IMF released its semi-annual World Economic Outlook in April, it was still caught up in the GDP/Establishment Survey frenzy of late 2014. Despite the fact that Q1 GDP was certain to be negative by the time of publication, the IMF was wholly undeterred preferring instead to view the US as still the global engine and hope. They even went so far as to upgrade their projections for 2015 slightly. Their narrative about the US economy, again in April 2015, was clear:

While preliminary statistics indicate that global growth in the second half of 2014 was broadly in line with the October 2014 projections (Figure 1.1), these broad numbers masked marked growth surprises pointing to more divergence among major economies, with the U.S. recovery stronger than expected, but economic performance in many other parts of the world falling short of expectations.

Growth in the United States was stronger than expected, averaging about 4 percent annualized in the last three quarters of 2014. Consumption—the main engine of growth—has benefited from steady job creation and income growth, lower oil prices, and improved consumer confidence. The unemployment rate declined to 5.5 percent in February, more than 1 percentage point below its level of a year ago.

That was largely the same message as was repeated over and over by Janet Yellen and her FOMC (though even they had primarily stopped giving it with such unbridled gusto by the March 2015 FOMC meeting). GDP and the unemployment rate were the only way to view the economy despite so many other indications otherwise. It was still, at that time, where the “strong dollar” and lower oil prices were going to be huge boosts to an already robust expansion. In other words, it were these statistics alone that “proved” the US economy was on its way to erasing those more widely encompassing doubts – including that the unemployment rate was being driven quickly lower by the apparent and steadfast refusal of US labor to participate.

Continue reading IMF Cuts, Refuses to See

Less Certainty in FOMC…

By Alhambra Investment Partners

There Is Less Certainty In FOMC Words Maybe Even A Little Fear, And Money Markets Know It

The FOMC policy statement released last month wasn’t improved by the “minutes” publicized today. If you believe the committee is “hawkish” then there is plenty for you to find agreement; the opposing equally so. From what I see, they spend an inordinate amount of time and words on the labor market, but after repeated emphasis that instead of fashioning confidence actually begins toward confusion. The labor market is clearly great and getting better, but…

If that were the case, there would be no qualification necessary; and they know it. Right at the outset is the Fed’s first official mandate which has been twisted by mathematical trickery into somehow finding 2% inflation as an intended target which creates price “stability.” Yet, for all their conjuring and QE’s, the PCE deflator has remained underneath that target for going on now three full years. In the orthodox understanding, that is a major problem and indicates more than something amiss.

Continue reading Less Certainty in FOMC…

One of These PMI’s…

By Alhambra Investment Partners

One Of These PMI’s Is Not Like The Others

The ISM Manufacturing PMI for June was up to 53.5 which was the best monthly showing this year. That has been taken as inarguable insistence that the US factory sector is doing what economists expect, even though 53.5 is significantly below both June 2014 and the 12-month average (which includes four months beginning February below 53) of 54.7. As usual, the PMI is abused as to what it may actually mean:

U.S. manufacturers ended the second quarter on stable footing, reporting a strong flow of orders that could help support the overall economy in coming months.

The Institute for Supply Management on Wednesday said its purchasing managers’ index edged up to 53.5 in June from 52.8 in May. The index, based on a survey of supply-chain executives, is back up to its January reading after stalling in the early spring. A reading above 50 denotes expansion in the sector.

“Manufacturing is over its winter hump,” said Ward McCarthy, chief financial economist at Jefferies, pointing to first-quarter drags from the bad weather and shipping delays caused by the West Coast port slowdown.

That proclamation from the credentialed economist looks strikingly overwrought in light of highly contradictory and contractionary information about factory orders, which sank 8% in May. Even if the ISM PMI is correct about June being better it isn’t appearing so significant in its inflection as to erase all 8% to just get back to zero.

ABOOK July 2015 Factory Orders NSA Continue reading One of These PMI’s…

Around the Web

By Biiwii

Market Analysis & News From Around the Pipes…


Gold Ratios Today; Ag-Au & Au-Pd

By Biiwii

A couple of our most recently watched gold ratios..

Silver-Gold ratio bounced today, keeping the hopes of the ‘inflation trade’ alive.


Gold was down hard today, but the problem for the Palladium-Gold ratio is that the cyclical metal, Pd was down harder.


Here’s the weekly view, showing what looks like a shoe-in that a negative macro signal is going to come about.


<Insert here > the usual caveats about tolerances on timing and individual indicators not being taken in a vacuum; but if this indicator is going to work as it has before, it’s message is not a pleasant one.  And no, I don’t have a clue about how this squares with the bullish things I am seeing in the Semi Equipment sector, another ‘canary’ that chirped the post-2012 up cycle.

It’s why you’ve got to love this market I guess.  It’s wonderfully dysfunctional IMO mostly thanks to the historically vigorous levels of policy input post-2008.

NFTRH 348 Out Now

By Biiwii

A good report, as usual.  That may sound smug but #348 is another report helped me personally because as usual I don’t go into these things so much trying to put what I think down on virtual paper.  I go into them seeking answers or at least, clarity.  Check.


Gold’s Ratio Signals

By NFTRH.com

A brief snapshot of counter-cyclical gold’s macro signals vs. other metals (and broad commodities) that are more positively correlated to economies, using weekly charts…

Each week NFTRH updates many charts of nominal US and global stock markets, commodities, precious metals and currencies over multiple time frames.  But we also cover economic data and indicators, with the first macro chart below (Palladium vs. Gold) still barely holding its economic ‘UP’ signal from January, 2013.  At that time a coming economic up phase did not seem likely, but PALL-Gold and fundamental information gleaned from a personal source in the Semiconductor Equipment sector gave us a good risk vs. reward on that stance.

While it can be argued that using an indicator like Palladium (positive economic correlation) to Gold (counter cyclical) is subject to the discrete supply/demand fundamentals of the two assets, it has worked to signal up and down economic phases, with the most recent shown in Q1 2013 (green arrow).  This indicator has been whipsawing since topping out a year ago and the moving averages are near a trigger point.


A related indicator is Gold vs. Commodities.  Gold-CRB made an impulsive rise in late 2014 as the global deflationary phase topped out.  As policy makers (ECB, BoJ, China Central Planning and US with ongoing ZIRP) continue to promote inflation 24/7, 365 Gold-CRB has dropped as it should when inflation is starting to ‘work’ and inflation expectations start to take hold.  But a problem for hopeful inflationists is that so far at least, counter-cyclical Gold-CRB appears to be in a bullish consolidation.


If cyclical PALL-Gold were to break down and counter-cyclical Gold-CRB to hold support and resume its uptrend the indication for the global economy would be negative.

Another chart worth considering is Gold vs. Copper, the traditionally cyclical red industrial metal.  A series of higher highs and higher lows began in late 2013 and is still in play.


To put perspective on this, behold how bearish nominal Copper is and has been by viewing this monthly chart similar to those we have reviewed in NFTRH for years now to maintain a big picture bearish outlook on this metal.  We have allowed for the current bounce/rally/bear flag, but until $3/lb. is exceeded and held, this is a very bearish picture.


Finally, let’s review Gold vs. its primary running mate, Silver.  Actually, flipping Gold vs. Silver over to the Silver-Gold ratio works best visually at this time.

We are allowing for a bounce in Silver vs. Gold.  This could come about if the Fed rolls over again today and plays nice with its language.  Or it could just come about simply because it is due.  This would go hand in hand with a resumption of the mini inflation bounce implied in TIPs vs. regular Treasury bonds and in nominal Treasury bond yields.  The message of Silver-Gold however, is similar to the charts above on the bigger picture because it is locked below very strong resistance.


Bottom Line

I consider Gold vs. Palladium and Gold vs. Copper to be indicators on the global economy whereas Silver vs. Gold is more an early indicator on inflationary pressure.

The conclusion is that the economy is in danger of decelerating (Pd-Au, Au-CRB, Au-Cu) amidst a dis-inflationary environment (Ag-Au).  The timing could be by this fall.  First, a resumed bounce in the ‘inflation trade’ has a chance to get reanimated.  But that is not the dominant longer-term trend.

Redefining Anomaly Through Inventory

By Alhambra Investment Partners

While the latest business inventory estimates are not yet updated for May, only through April, there is still a great deal of consistency provided by the top to bottom shifts in the economic supply chain. It usually takes an inventory build of tremendous disproportion to trigger the kinds of cutbacks and downstream negative pressures that amount to a recession. The estimates for inventory building provided from the GDP statistics certainly qualify, as do the Census Bureau’s own data.

ABOOK June 2015 Inventory Total Busn Ratio Continue reading Redefining Anomaly Through Inventory