Do Stocks Perform Better When Manufacturing Is Booming?

By Charlie Bilello

US manufacturing is booming.

In a report released this week, the ISM Manufacturing Index moved up to 61.3, the second-highest level in the last 30 years.

Data Source for all charts/tables herein: FRED, Bloomberg

Many are saying that’s great news for the stock market because increased manufacturing activity is evidence of a stronger economy. This seems logical but does the data support such a conclusion? And is it prudent to use manufacturing indicators to time your exposure to stocks.

Let’s take a look…

Continue reading Do Stocks Perform Better When Manufacturing Is Booming?

Capex and Taxes; What The Corporate Sector Is Saying About the Economy

By Jeffrey Snider

Private US businesses are not building new facilities, or renovating old ones, at a rate that suggests the economy is doing well. Let alone booming. For more than two years now, the aggregate level of Private Non-residential Construction Spending has been flat.

According to the Census Bureau in figures released today, construction capex in July 2018 (seasonally adjusted) was less than 2% above what took place in July 2016. Compared to November 2016, there was less spending in the latest month than during the height of Reflation #3.

Continue reading Capex and Taxes; What The Corporate Sector Is Saying About the Economy

Chart: Tis the Season for a Higher VIX

By Callum Thomas

Studying historical averages can produce useful and interesting insights on the market.  Looking at the historical average level of the VIX we can see that the CBOE Volatility Index tends to be higher around this time of the year.  We showed elsewhere that this tendency is also mirrored in US high yield credit spreads (which makes sense as they are both basically market measures of risk pricing).  The key conclusion then is that there is a decent chance, based solely on historical seasonal patterns, that the VIX heads higher over the coming weeks.  There are always exceptions to historical average rules, but it is something to consider given the global macro risk backdrop (stress in EM, Fed tightening, political risk, softer global growth pulse).

Continue reading Chart: Tis the Season for a Higher VIX

Bull-Bear Index At Highest Since 1969 (What Kind Of Bear Is Best?)

By Anthony B. Sanders

What kind of bear is best?  The kind that doesn’t happen!

But alas, the Goldman Sach Bull/Bear index is signalling a possible bear market.

“Low unemployment … and strong growth momentum at such an advanced stage in the economic cycle would normally already be associated with higher wages and, consequently, higher inflation and tighter monetary policy,” Goldman Sachs  strategists said.

But “it is because of the lack of inflation that some of these variables can appear stretched without ringing alarm bells for equity investors. Put another way, it is very unlikely that without core inflation rising much, policy rates will rise sufficiently in the US or elsewhere to invert yield curves and/or force a recession in the near future,” the strategists said.

It doesn’t mean the bull market will end soon. But after a 9 1/2-year rally where the S&P 500 rose 19 percent annually, investors should be prepared for lower returns in coming years.

gsbb

Continue reading Bull-Bear Index At Highest Since 1969 (What Kind Of Bear Is Best?)

Gold and Silver Shorts Highest Ever!

By Anthony B. Sanders

Non-commercial shorts for gold and silver have hit the highest levels … ever!

goldsilvershortsrec

Actually, Silver shorts hit an all-time high and gold shorts are down slightly since yesterday.

Support 100% ad-free Biiwii.com by making a donation of your choice!

Or better yet, subscribe to NFTRH Premium for an in-depth weekly market report, interim updates and NFTRH+ chart and trade ideas to get even more bang for your buck. You can also keep up to date with plenty of actionable public content at NFTRH.com by using the email form on the right sidebar. Or follow via Twitter @BiiwiiNFTRH, StockTwits or RSS. Also check out the quality market writers at Biiwii.com.

The 445,672 Most HOLY FUCKING BATSHIT Moments In Bob Woodward’s New Trump Book (SO FAR!)

By Evan Hurst

Are we still liveblogging the Brett Kavanaugh confirmation hearing from hell? WE ARE. But because we are a badass who can write two blog posts at the same time while also drinking all the wine for Wine O’Clock, we need to direct your attention to the new HOLY SHIT Washington Post preview of Bob Woodward’s new book Fear, which is about the fear that should grip every patriotic American when they consider the fact that Donald Fucking Trump is president of the United States.

Remember how apeshit Trump went over Fire & Fury? Yeah, well, the portrait here is WAY worse. Let’s look at some highlights!

The stuff about Trump’s former lawyer John Dowd!

Remember how John Dowd used to be the only real lawyer on Donald Trump’s team, but even he was kind of a big idiot? Anyway, he quit-fired himself from the Trump team back in March, after a wild and crazy weekend of emailing Daily Beast reporters crazy messages in purple comic sans (for real).

But before that, back in January …

Continue reading The 445,672 Most HOLY FUCKING BATSHIT Moments In Bob Woodward’s New Trump Book (SO FAR!)

Illicit Arbitrage Cut by Tax Cuts and Jobs Act, Report 3 Sep 2018

By Keith Weiner

This week, we are back to our ongoing series on capital destruction. Let’s consider the simple transaction of issuing a bond. Party X sells a bond to Party Y. We will first offer something entirely uncontroversial. If the interest rate rises after Y buys the bond, then Y takes a loss. Or if the interest rate falls, then Y makes a capital gain. This is simply saying that the bond price moves inverse to the interest rate.

However, it is highly controversial for some reason, to note that X is on the other side of the trade. If Y takes a loss then it is X’s gain. If Y makes a gain, then it is X’s loss. Party X is short the bond, and Party Y is long. When the price of an asset moves up, shorts lose and longs win. When it moves down, shorts win and longs lose.

Continue reading Illicit Arbitrage Cut by Tax Cuts and Jobs Act, Report 3 Sep 2018

The Uncomfortable Hiatus

By James Howard Kunstler

And so the sun seems to stand still this last day before the resumption of business-as-usual, and whatever remains of labor in this sclerotic republic takes its ease in the ominous late summer heat, and the people across this land marinate in anxious uncertainty. What can be done?

Some kind of epic national restructuring is in the works. It will either happen consciously and deliberately or it will be forced on us by circumstance. One side wants to magically reenact the 1950s; the other wants a Gnostic transhuman utopia. Neither of these is a plausible outcome. Most of the arguments ranging around them are what Jordan Peterson calls “pseudo issues.” Let’s try to take stock of what the real issues might be.

Energy: The shale oil “miracle” was a stunt enabled by supernaturally low interest rates, i.e. Federal Reserve policy. Even The New York Times said so yesterday (The Next Financial Crisis Lurks Underground). For all that, the shale oil producers still couldn’t make money at it. If interest rates go up, the industry will choke on the debt it has already accumulated and lose access to new loans. If the Fed reverses its current course — say, to rescue the stock and bond markets — then the shale oil industry has perhaps three more years before it collapses on a geological basis, maybe less. After that, we’re out of tricks. It will affect everything.

Continue reading The Uncomfortable Hiatus

Chart: TED Spread and LIBOR-OIS

By Callum Thomas

Here’s a couple of interesting charts which are behaving in a boring fashion.  The first is the 3 month LIBOR-OIS spread, and the second is the TED spread.  Both are basically measures of funding stress/bank credit risk, and ever since the financial crisis have attracted as much attention as risk gauges as the VIX (equity volatility index).  Even in an environment of quantitative tightening both are behaving in a fairly subdued manner.  It goes to show how unperturbed US markets have been in the face of risk flareups in Europe and in particular emerging markets.  Of course, as with the VIX, contrarians will note that the time to worry is not when these metrics are spiking, but when they are “too low” and indicate complacency.  Certainly indicators to have on your radar.

 

Looking for deeper insights?  Try taking a free trial of our institutional research service.

Support 100% ad-free Biiwii.com by making a donation of your choice!

Or better yet, subscribe to NFTRH Premium for an in-depth weekly market report, interim updates and NFTRH+ chart and trade ideas to get even more bang for your buck. You can also keep up to date with plenty of actionable public content at NFTRH.com by using the email form on the right sidebar. Or follow via Twitter @BiiwiiNFTRH, StockTwits or RSS. Also check out the quality market writers at Biiwii.com.

Unassailable

By Doug Noland

I’ve been here before and, candidly, it’s not much fun. Lodged in my mind this week was the brilliant quote from the 19th century German philosopher Arthur Schopenhauer: “All truth passes through three stages: First, it is ridiculed. Second, it is violently opposed. Third, it is accepted as self-evident.”

It’s fascinating how it all works. Looking back, there was definitely a Bubble in 1999. Clearly, 2007 was one huge Bubble. Everything is obvious in hindsight, and most look back now and contend it was pretty conspicuous even at the time. Having toiled through both prolonged Bubble periods – arguing against deeply embedded bullish conventional wisdom – I can attest to the fact that the Bubble viewpoint was violently opposed at the late stages of both cycles.

I don’t feel I’m venturing out on a limb to predict that some years into the future the 2018 Bubble backdrop will be recalled as rather self-evident. Years of experimental “whatever it takes” global monetary stimulus (rates, QE and market manipulation) nurtured excess and imbalances on an unparalleled global scale. EM borrowed excessively, too much denominated in foreign (U.S. dollar!) currencies. The Federal Reserve (all central banks) held rates too low for much too long. Prices for virtually all asset classes were inflated to dangerous extremes.

Continue reading Unassailable

7 Charts on Quantitative Tightening

By Callum Thomas

As the Fed is steadily progressing through its balance sheet normalization plan, it’s worth checking in on a few charts that highlight the path to normalcy, and some of the potential stumbling blocks along the way.  This article provides an update and follow on from a previous post “5 Charts on Quantitative Tightening“.

The beginning of large scale asset purchases (or QE – Quantitative Easing) in the wake of the financial crisis was a grand monetary policy experiment, and we are now entering into another grand monetary policy experiment which will test portfolio managers and asset allocators.

Already we have seen plenty of examples of how Fed tightening is presenting ripple effects across global markets, with a stronger US dollar and higher interest rates putting stress on emerging markets, shaking commodities, and presenting more uncertainty for stock prices and bond yields.  Given the importance of monetary policy for the economic and financial market outlook, this is a topic worthy of your attention.
Continue reading 7 Charts on Quantitative Tightening