Lousy Deals and Turning Wheels

By James Howard Kunstler

[biiwii comment: sometimes we swing politically to the right, sometimes to the left, and other times to the Kunstler :-) ]

In that long ago yesteryear of 1979, before blogging, tweeting, twerking, hacking, posting, ghosting, doxing, and all the other Internet-enabled compulsions of the present day, a gang of inflamed young men, said to be students, invaded the US embassy compound in Teheran and took fifty-two American embassy personnel hostage — crossing an age-old line of geopolitical conduct that kicked off the epic conflict between global Islam and a USA-led West, still on-going as you read.

I followed the Iran Hostage Crisis avidly… the gibbering mullahs, the blindfolded captives, the rotating cast of double-taking prime ministers who lectured Jimmy Carter on the Nightly News, the rescue attempt fiasco that killed eight American soldiers out in the Persian desert. Oddly, what I remember most after all these years was the fact that the hostages ran out of dental floss and had to swap around between them the same recycled last strand for weeks on end — a ticket to periodontal hell, if ever there was one.

Continue reading Lousy Deals and Turning Wheels

The Fed Model

By Kevin Muir

Way back in 1997, the Federal Reserve surprised the financial community with comments relating to the S&P 500 and interest rates.

“The run-up in stock prices in the spring was bolstered by unexpectedly strong corporate profits for the first quarter. Still, the ratio of prices in the S&P 500 to consensus estimates of earnings over the coming twelve months has risen further from levels that were already unusually high. Changes in this ratio have often been inversely related to changes in long-term Treasury yields, but this year’s stock price gains were not matched by a significant net decline in interest rates. As a result, the yield on ten-year Treasury notes now exceeds the ratio of twelve-month-ahead earnings to prices by the largest amount since 1991, when earnings were depressed by the economic slowdown.”

They even went as far as to include a chart of the S&P 500 earnings-price ratio versus US 10-year Treasury note yield.

Continue reading The Fed Model

Incomplete Silver CoT Analysis

By Steve Saville

During March and April a number of articles appeared at precious-metals-focused web sites describing the silver market’s Commitments of Traders (COT) situation as extremely bullish. However, this unequivocally bullish interpretation overlooked aspects of the COT data that were bearish for silver. Taking all aspects of the data into consideration, my interpretation at the time (as presented in TSI commentaries) was that silver’s COT situation was neutral and that the setup for a large rally was not yet in place.

The enthusiastically-bullish interpretation of silver’s COT situation fixated on the positioning of large speculators in Comex silver futures. As illustrated by the following chart, over the past two months the large specs (called “NonCommercials” on the chart) first went ‘flat’ and then went net-short. This suggested that large specs had become more pessimistic about silver’s prospects than they had been in a very long time, which was clearly a bullish development given the contrary nature of speculative sentiment.

Chart source: http://www.goldchartsrus.com/

Continue reading Incomplete Silver CoT Analysis

It Is What It Is (NFTRH 499 Excerpt)


Below is NFTRH 499‘s opening segment and the first part of the US Stock Market segment. As for the entire report, here’s what subscriber JF had to say before giving me some of his views on the market. Interactions with NFTRH subscribers, an astute bunch, is a hidden benefit I receive from this service.

“Will write more later when in front of PC, but this is a great report. Fucking absurdly solidly enjoyable thorough and easy to read and ponder. Well done.”

It Is What It Is

We will update charts of US stock indexes and sectors, along with global markets in the report below, as usual. But for this week’s intro segment I want to think about the origin of Biiwii.com’s URL (but it is what it is) because there are echoes of inputs from 2004 in play, which were part of the reason for the name of the website.

Specifically, back in 2003-2004 most people were still bearish in expectation of an ongoing secular bear market to follow the secular bull that had concluded in 2000. Personally, I had been leaning toward a resumption of the bear after the 2003 double (‘W’) bottom and bounce. But at some point in 2004 I realized that it wasn’t happening and that inflation was lifting stocks while it lifted gold, silver and commodities even more. But it was what it was, Alan Greenspan had cooked up new bubbles.

Continue reading It Is What It Is (NFTRH 499 Excerpt)

Bitcoin Still Blazing Trail for Stocks

By Tom McClellan

Bitcoin and SP500
May 11, 2018

Back in January, I introduced readers to the revelation that all throughout 2017, the DJIA had been following in the footsteps of Bitcoin prices, with a lag time of about 8 weeks (56 calendar days).  And it continues working even now, albeit with a slight adjustment.

Why would this relationship work?  My answer is that there are cycles of human emotion which affect our collective attraction to and repulsion from speculative investments like the stock market.  It appears that those same cycles of trader emotion are at work on Bitcoin traders, who are feeling those surges and lags in enthusiasm before they reach the hearts of stock investors.

Continue reading Bitcoin Still Blazing Trail for Stocks

Not So Fast, Oil Bulls

By Callum Thomas

The geopolitical backdrop and news flow is creating ripples across commodity markets, and giving the rebound in crude oil a boost as tensions rise in the Middle East.  But is it time to step up bullishness on the oil price? …or has the meat of the move already been eaten?  I look at a couple of near term downside risks for oil, which as a minimum will present headwinds and likely make oil bulls think twice about jumping on the momentum bandwagon.

The key takeaways on the risk outlook for crude oil prices are:

-Typically the oil price moves inversely with the US dollar.

-Thus when you get a scenario of a stronger US dollar, with potential upside to come, it means headwinds for oil.

-At the same time, long oil looks like a crowded trade, meaning downside risks are elevated.

1. Crude Oil Price vs the US Dollar:  While there have been times where the US dollar and the crude oil price decouple, the typical relationship is that as the dollar strengthens, the crude oil price weakens.  There’s a few good reasons for this: firstly, WTI crude oil is priced in US dollars (so there is a simple exchange rate effect), second, a stronger US dollar can often have a tightening effect on financial conditions domestically and abroad (thereby negatively impacting demand for oil), and thirdly a stronger US dollar implies a higher price of oil for those whose currencies are weakening against the US dollar (making crude oil appear more expensive to them).

The chart below shows this relationship between the change in oil prices and the change in the US dollar (which has been inverted, in line with the economic logic described above).  The extension of the red line past that blue bar is simply what the YoY (year on year) change in the US dollar would look like if you just held the current level of the US dollar index (DXY) unchanged from now until the end of the year.  As I noted elsewhere, my view is there is actually further upside risk for the US dollar, so this potential headwind for oil prices could get worse in the coming months.

Continue reading Not So Fast, Oil Bulls

The Ceaseless Ascent

By Tim Knight

Well, I’m glad the site is doing so well, because the markets over the past week have made me feel pretty lousy. It’s nice to at least have Slope humming along to comfort me.

I’d like to offer the following off-the-wall musings as a very different take on the market. It’s a disposition that many, many people share, and perhaps it would help me get in sync with the rest of the planet to actually type what everyone else is thinking. I submit this to be neither facetious nor wry. So here goes.

(1) Just as humanity has made sufficient advancements in technology to, for example, feed everyone on the planet, so, too, have we reached a sophistication in knowledge and financial management rendering bear markets permanently extinct. Yes, there will be occasional dips from time to time (see green tints), but these will swiftly be pushed aside by a new ascent. If a solid decade of evidence isn’t enough, I’m not sure what is.

Continue reading The Ceaseless Ascent

Post-CPI Summary

By Michael Ashton

Below is a summary of my post-CPI tweets.

  • OK, 20 minutes to CPI. Let’s get started.
  • Although chatter isn’t part of the CPI, it’s interesting to me as a CPI guy. The chatter seems less this month than last month (maybe because of two readings <0.2%). I guess no easy ‘cell phone story’ to latch onto.
  • Last month there was of course that talk about cell phones, and the jump in core did excite breakevens…a little. 10y breaks now at 2.18%, highest in 4 years. But, as I recently pointed out, You Haven’t Missed It.
  • Consensus expectations this month are for 0.19 on core or a little softer. Y/Y will rise to 2.2% if core m/m is 0.13 or above. Outlier of 0.23 would move us to 2.3% and be a surprise to many.
  • Average over last 6 months is 2.56% rate. I saw a funny article saying ‘but that’s due to cell phones.’ Of course, the m/m rate is not due to cell phones dropping off from March of last year. Median CPI is at 2.48%. So this is not the new normal. It’s the old normal.
  • No one is much more bullish than expecting an 0.2% every month…that’s a 2.4% annually; most economists see that as something close to the high of sustainable inflation. But again, that’s the old normal. It just seems new because it has been a LONG time since we’ve been higher.
  • They’re wrong on that! Just not sure how soon this all comes through.
  • So last month, in addition to the bump in core services y/y (because of cell phones), core goods also moved to -0.3% from -0.5% and -0.7% the prior mo. The lagged weakness in the dollar, along with the rise in goods prices caused by trucker shortages, should be showing up here.
  • Lodging Away from Home took a big y/y jump last month, but it’s a volatile category with a small weight. It’s usually an excuse to people who expected something different on the month.
  • I continue to watch medical care, which is important in core services. Doctor’s services still showing y/y inflation as of last report, but both Doctors Services and Hospital Services rose last mo.
  • 15 minutes until the number!
  • Buying in the interbank market for the monthly reset (for headline) is 250.68.
  • Very weak number. 0.10% on core CPI. y/y ticks up only slightly, to 2.12% from 2.11%.
  • Last 12. Surprising. Note that last April was 0.09% so might be some seasonal issue with April. Sometimes Easter plays havoc, and Easter was early. But that’s usually more a Europe thing.

  • Massive drop in CPI for Used Cars and Trucks. -1.59% m/m, taking y/y to -0.9 from +0.4. That’s odd – very different from what the surveys are saying.
  • The Mannheim Survey actually ticked UP this month.

Continue reading Post-CPI Summary

Unpleasant Surprises on the Global Economy

By Callum Thomas

Something unusual has happened to the global economic surprise indexes. Not only have the emerging markets and G10 indexes fallen sharply, but the breadth of global economic surprise indexes has dropped to levels rarely seen outside of recession.

The chart in question comes from a broader discussion on the path of global trade, early warning signs, and the global economic cycle from a recent Weekly Macro Themes report.

The chart shows the G10 & emerging markets economic surprise index, alongside the breadth of the various economic surprise indexes across countries.

For clarity, the Citi economic surprise indexes track the degree to which economic data is surprising to the upside vs downside.  High readings on the index indicate more positive surprises in the data vs expectations.  This can reflect either economists being too pessimistic and the data turning out average, or it can reflect average or even optimistic expectations which are blown away by outstanding data.

Continue reading Unpleasant Surprises on the Global Economy