Historical Performance Following State of the Union Addresses

By Rob Hanna

With tonight being the State of the Union Address I decided to take another look at an old study that examined SPX performance following past speeches. The data table below looks back to 1982. There were a few instances, such as 2001 and 2009 where the speech was not an official “State of the Union”, but was delivered under a different name. I have included those speeches in the results as well.

2019-02-05-1

The stats do not suggest much of an edge. But the profit curves seem to tell a more interesting story. Here is the 5-day curve.

Continue reading Historical Performance Following State of the Union Addresses

FAANG’s Bitemarks

By Tim Knight

As the earnings season starts to wind down, it seems the big message from the FAANG stocks is that, earnings projections be damned, this market wants to go up. Just look at what we’ve seen from the components:

  • FB: reported after the close on the 30th; company clearly has turned itself around and price exploded nearly 20% the next day;
  • AMZN: reported after the close on the 31st; stock got absolutely reamed, losing nearly $100 the next day; market didn’t budge;
  • AAPL: reported after the close on the 29th; in spite of softening sales and weakness from China, stock skyrocketed the next day;
  • NFLX: reported after the close on the 17th; stock slumped for a few days but has since recovered and is now rumored to be a buyout candidate from fellow FAANG member AAPL;
  • GOOGL: reported after yesterday’s close……..

……and got smacked all over the room……….

Continue reading FAANG’s Bitemarks

Misconceptions About US Bank Reserves

By Steve Saville

Bank reserves are a throwback to a time when the amount of receipts for money (gold) that could be issued by a bank was limited by the amount of money (gold) the bank held in reserve. Under the current monetary system bank reserves have no real meaning, since it isn’t possible for a dollar in a bank deposit to be genuinely backed by a dollar held somewhere else. The dollar can’t back itself! However, it is still important to understand what today’s bank reserves are/aren’t and how changes in the reserves quantity are linked to changes in the economy-wide money supply. Remarkably, these bank-reserve basics are misunderstood by almost everyone who comments on the topic.

The simplest way for me to deal with the common misunderstandings about bank reserves is in point form, so that’s how I’ll do it. Here goes:

Continue reading Misconceptions About US Bank Reserves

Who Knows the Right Interest Rate, Report

By Keith Weiner

On January 6, we wrote the Surest Way to Overthrow Capitalism. We said:

“In a future article, we will expand on why these two statements are true principles: (1) there is no way a central planner could set the right rate, even if he knew and (2) only a free market can know the right rate.”

Today’s article is part one of that promised article.

Let’s consider how to know the right rate, first. It should not be controversial to say that if the government sets a price cap, say on a loaf of bread, that this harms bakers. So the bakers will seek every possible way out of it. First, they may try shrinking the loaf. But, gotcha! The government regulator anticipated that, and there is a heap of rules dictating the minimum size of a loaf, weight, length, width, depth, density, etc. Next, the bakery industry changes the name. They don’t sell loaves of bread any more, they call them bread cakes. And so on.

Continue reading Who Knows the Right Interest Rate, Report

Financial Center and Reserve Currency

By Bob Hoye

Click image for full PDF…

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Finally Some US Data, and it’s Payrolls?

By Jeffrey Snider

It’s been awhile since we’ve had any data on the US economy. With the federal government having been shut down, especially the Census Bureau, the figures have gone dark. The current short-term government reopening will lead to an eventual rush of estimates, perhaps a few series that will be updated two months at a time.

In lieu of all that, the dataset that breaks the silence is the payroll report. Hooray. When we last left it the US economy was booming big, at least according to the BLS headline. The release was a perfect smash, the Establishment Survey coming in at +312k and with flawless timing to help soothe rather dire market sentiment after a traumatic December.

The new data for January 2019, released today, includes the standard annual benchmark update. There wasn’t much change in either direction from the revisions, save December’s number. Just like that it’s gone, vanished. That extremely helpful +312k has been replaced by +222k instead.

Continue reading Finally Some US Data, and it’s Payrolls?

As Goes January…? Really?

By Tom McClellan

Annual Seasonal Pattern

The stock market’s relationship to its normal seasonality has gotten wacky lately.  October to December is supposed to be an up period for stock prices, and instead we saw a very sharp correction.  In recent years, January has typically seen a meaningful decline, but the stock market instead powered higher.  In fact, the DJIA’s 7.2% gain in January 2019 was the strongest January since 1989.

Continue reading As Goes January…? Really?

Top 5 Charts of the Week: Investor confidence, Global trade, Asian currencies, US labor market

By Callum Thomas

Here’s some of the standout economic and markets charts on my radar. I aim to pick a good mix of charts covering key global macro trends, and ones which highlight risks and opportunities across asset classes. Hope you enjoy!

1. Institutional Investor Confidence – Panic Mode: The January reading of the State Street investor confidence index for North America entered into panic-mode territory. This is the lowest reading on record. I will be covering this topic in more detail in my weekly report on Friday (quite a bit to talk about).

Continue reading Top 5 Charts of the Week: Investor confidence, Global trade, Asian currencies, US labor market

Everything You Wanted to Know About MMT (but were afraid to ask)

By Kevin Muir

If you read only one MacroTourist post all year, this is the one I want you to read. I think it’s that important.

Today’s topic is sure to incite some pretty strong reactions. There will be cries of “no! that’s just wrong!” from the hard-money advocates. The cynics will proclaim “that’s going to end in disaster” and the pessimists will shake their head in disbelief while muttering something about “the follies of the ivory tower academics” as they walk away.

For some of you, the topic of Modern Monetary Theory (MMT) will be old hat. For others, this will be a new term. For those who are not familiar, I suggest you take some time to learn about this new branch of economic thinking as it is coming to a screen near you.

Continue reading Everything You Wanted to Know About MMT (but were afraid to ask)