Industrial Production Revisions Erased the Recovery

By Jeffrey Snider of Alhambra

Far Too Late, Industrial Production Revisions Predictably Erased The Recovery

Industrial production contracted for the eighth straight month in April, dropping 1.07% year-over-year. That’s a slight improvement from those prior months but likely only until April’s estimate is revised lower in the coming months. That has been the trend of late in both immediate terms as well as serious long-term revision to benchmarks. As far as the former, it suggests that even though contracting there is a very good chance that US industrial production is doing so at a moderately steeper pace than indicated now.

ABOOK May 2016 IP SA YY, industrial production

In monthly terms, IP rose in April but again there is no reason to believe that gain will last once the Federal Reserve receives more complete data to incorporate into regular monthly revisions. Even if there was an actual gain in April over March, as you can see below it doesn’t amount to anything more than monthly variation. The trend remains entirely undisturbed, counting now 17 months since the recent peak in November 2014. By comparison, the entirety of the dot-com recession lasted just 17 months in terms of industrial production, yet there is every reason to suspect (more below) the US economy in 2016 is still just getting started in contraction.

Continue reading Industrial Production Revisions Erased the Recovery

Fed Running Out of Excuses on Interest Rates

By Chris Ciovacco

Fed Has A Difficult Job

In terms of government policy, the economy has two primary types of stimulus, fiscal and monetary. The Fed controls monetary policy. Congress is the primary driver of fiscal policy.

In recent years, Congress has left all the heavy lifting to the Fed. Having stated the Fed is in a difficult position, their focus in recent years appears to have shifted almost solely to keeping asset prices propped up, a concept that has not gone unnoticed by the financial markets.

2012 Plan Was To Raise Rates When Unemployment Hit 6.5%

In December 2012, the Federal Reserve provided a 6.5% unemployment target with respect to allowing rates to remain near zero. From USA Today:

The Federal Reserve on Wednesday agreed to keep a key short-term rate near zero until the 7.7% unemployment rate is 6.5% or lower.

Goalpost Taken Down In 2014

The chart below shows the unemployment rate between 2012 and 2016. As you can see, unemployment has been below the Fed’s 6.5% target for some time.

Since it would be a constant source of “why are you still waiting to raise rates” questions, the Fed decided in April 2014 to remove the unemployment goalpost. From CNBC:

Continue reading Fed Running Out of Excuses on Interest Rates


By Michael Ashton

Core PCE, after all of the temporary effects are removed, is essentially at or slightly above the Fed’s 2% target

Below is a summary of my post-CPI tweets. You can (and should!) follow me @inflation_guy or sign up for email updates to my occasional articles here. Investors with interests in this area be sure to stop by Enduring Investments. Plus…buy my book about money and inflation, just published! The title of the book is What’s Wrong with Money? The Biggest Bubble of All; order from Amazon here.

  • In prep for CPI: Econs forecasting about 0.15% core; Cleveland Fed’s Nowcast is 0.18%; avg of last 4 months is 0.20%.
  • So, econs which have been too bullish on econ for a year (see citi surprise index) are bearish on CPI.
  • If we get any m/m core less than 0.20% (even 0.19%), y/y will round to 2.1% b/c dropping off high 2015 April.
  • But after that, next 8 months from 2015 were <0.20% so any downtick wouldn’t be start of something new.
  • Hard to tell but the core CPI print was SLIGHTLY above expectations. 0.195%, so y/y was 2.147%.
  • In other words, if someone charged another nickel for a candy bar somewhere we would have had 2.2% again. <<hyperbole
  • That 0.195% m/m was lower than April 2015, but higher than May, June, July, Aug, Sep, Nov, and Dec.
  • Core services unch at 3.0%; core goods downticked to -0.5% y/y.
  • y/y Medical Care decelerated for second month in a row, down to 2.98% y/y; still looks to be in a broad uptrend from 2% in 2014. [ed note: chart added for clarity]

medcarecpi Continue reading Post-CPI

Dead Lee

By Tim Knight

[biiwii comment: another sign of the end times, as a devoutly religious person might say… to me it’s just more societal retardation]

For reasons I won’t bother going into, I found myself in the Merchandising Department of the Cypress Lawn funeral home. I’ve always found the business of selling stuff for dead people (particularly really, really overpriced stuff) to be tacky, to put it gently, but it’s a thriving, multi-billion dollar industry.


As I was looking around, I noticed a kind of cheesy doll’s house on the floor near all the coffins. I assumed it must be to keep young children entertained while their parents browsed the various corpse crates. It was a pretty lame little dollhouse, flimsy and made of paper, but I figured it was better than nothing.

Continue reading Dead Lee

Bonds Building Beautiful Bases


The 10-, 20-, and 30-year US Treasury Bonds are all in the final stage of what appears to be textbook cup-with-handle consolidation patterns.  Just in case you don’t know, cup-with-handle patterns are one of the most tried-and-true bullish consolidation patterns out there.  If you’re interested in learning more on this specific formation or maybe you just need a refresher, offers a nice explanation.  So first, here are the charts:

Picture, us treasury bonds

Continue reading Bonds Building Beautiful Bases

History Says a Big Move is Coming for Stocks

By Chris Ciovacco

What Can We Learn From Last Three Years?

The chart of the NYSE Composite Stock Index below shows equities have been indecisive since the second half of 2013.

stock market: NYSE comp

The lack of sustained progress in either direction tells us the battle between the bulls and bears has been fairly evenly matched.

1993-1995 Bullish Example

A similar indecisive period took place in the mid-1990s.

Continue reading History Says a Big Move is Coming for Stocks

Gold Demand Falling

By Monetary Metals

We now calculate a fundamental on the gold-silver ratio over 81

The price of gold moved down about sixteen bucks, while that of silver dropped about three dimes. In other words, the dollar gained 0.3 milligrams of gold and 0.04 grams of silver.

We continue to read stories of the “loss of confidence in central banks.” We may not know the last detail of what that will look like—when it occurs one day. However, we will wager an ounce of fine gold against a soggy dollar bill that it will not look like today with the market bidding dollars higher.

Loss of confidence is just a meme used by gold bettors. What are they using to make their bets? Dollars. What are they trying to win? More of the dollars they say will soon go bidless.


One benefit to looking at the supply and demand fundamentals is that it tells us, more accurately than price action, what confidence in the central banks is really doing. So let’s take a look at that picture. But first, here’s the graph of the metals’ prices.

The Prices of Gold and Silver
letter may 15 prices, gold and silver

Next, this is a graph of the gold price measured in silver, otherwise known as the gold to silver ratio. The ratio was up this week.

Continue reading Gold Demand Falling

Ominous Portents

By Doug Noland

Credit Bubble Bulletin: The downshift of Credit and “hot money” flows helps explain the weakness in both corporate profits and the overall stock market

Friday headlines from Bloomberg: “Retail Sales Rise Most in a Year, Marking U.S. Consumer Comeback” and “Consumers Turn Out to Be U.S. Growth Lifeline After All.” Ironically, U.S. retail stocks (SPDR S&P Retail ETF) were slammed 4.3% this week, trading back to almost three-month lows. Poor earnings were the culprit. Macy’s sank 15% on Wednesday’s earnings disappointment. Kohl’s missed, along with Nordstrom and JC Penney.

It may be subtle, yet it’s turning pervasive. Support for the burst global Bubble thesis mounts by the week. With stated U.S. unemployment at 5.0% and consumer confidence at this point still in decent shape, spending has enjoyed somewhat of a tailwind. Yet the overall U.S. economy has begun to succumb to a general Credit slowdown. Despite the bounce in crude, the energy sector bust continues to gather momentum. The tech and biotech Bubbles have peaked. Cracks have quickly surfaced in fintech. There are as well indications that some overheated real estate markets across the country have cooled. Whether it is from China or Latin America or Europe, the rush of “hot money” into U.S. real estate and securities markets has slowed meaningfully.

The downshift of Credit and “hot money” flows helps explain the weakness in both corporate profits and the overall stock market. And with stock prices down year-on-year, Household Net Worth has essentially stagnated. Keep in mind that Net Worth inflated from $56.5 TN at year-end 2008 to a record $86.8 TN to close 2015. Over the past six years, Net Worth increased on average $4.76 TN annually. Such extraordinary inflation in household perceived wealth supported spending – which bolstered profits and underpinned asset price inflation and more spending.

Continue reading Ominous Portents

Strong Summation Index Promises Higher Highs

By Tom McCellan

Strong Summation Index Promises Higher Highs

Ratio-Adjusted McClellan Summation Index, stock market
May 13, 2016

The strong breadth numbers which produced a new all-time high for the A-D Line this year also produced a really high reading for the Ratio-Adjusted Summation Index (RASI), the highest since 2012.  And that action conveys to us the promise of higher price highs.

But it does not preclude a meaningful correction first, and we appear to be in the midst of that right now.  The RASI is falling, as it typically does during corrective periods.

The basic point is that after a correction like we saw earlier this year, with the Feb. 11, 2016 price bottom, the RASI shows a strong market by rising well up above the +500 level.  When the RASI can do that, we like to say that it signals that the new rally has demonstrated “escape velocity”, like a rocket trying to leave Earth’s gravity, and thus the price averages do not need to fall back down to test the prior low.  More importantly, while the RASI may top out and lead to a corrective period, we are promised a higher high after that correction.

Exactly when that higher high comes, and how much higher, are not points revealed by the RASI.  We have to turn to other tools to divine those. But the uptrend should be expected to continue until such time as there is a failure by the RASI to climb back up above the +500 level after dropping below it

Still Focused on Crude

By Tim Knight

Happy Friday the 13th, everyone.

I’m still almost completely focused on crude oil for the overall direction of the market. The good news, for me, is that at least it seems to have stalled out: 0513-cr, crude oil

If crude begins to weaken in any meaningful way, I think you’re going to see the high-yield ETF start to crumble again, which could be one of the great trades of 2016.

Continue reading Still Focused on Crude