US & Canada Archives - Page 119 of 174

November 13, 2012

President Obama Has Drawn A Dangerous Line In The Sand – Business Insider

Bruce Krating’s analysis of the fiscal cliff stoush:

The headlines make it seem like B&O are ready to work together, and achieve the necessary compromises to avoid falling off a cliff. I think the press has it wrong. We’re headed into a bitter fight; in part, because the President has drawn a very dangerous line in the sand…..

via President Obama's Has Drawn A Dangerous Line In The Sand – Business Insider.

Colin Twiggs

Colin Twiggs is a former investment banker with almost 40 years of experience in financial markets. He co-founded Incredible Charts and writes the popular Trading Diary and Patient Investor newsletters.

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

Focusing on interest rates and financial market liquidity as primary drivers of the economic cycle, he warned of the 2008/2009 and 2020 bear markets well ahead of actual events.
He founded PVT Capital (AFSL No. 546090) in May 2023, which offers investment strategy and advice to wholesale clients.

November 13, 2012

Jan Hatzius Connects All the Dots | Business Insider

Important insight from Jan Hatzius at Goldman Sachs, reported by Cullen Roche:

The US private sector continues to run a large financial surplus of 5.5% of GDP, more than 3 percentage points above the historical average. This is the flip side of the deleveraging of private sector balance sheet. We expect a normalization in this surplus over the next few years to provide a boost to real GDP growth. This is the key reason why we see US economic growth picking up gradually in the course of 2013 and into 2014, despite the near-term downside risks from the increase in fiscal restraint……..

via Jan Hatzius Connects All the Dots – Business Insider.

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

November 13, 2012

Stopping the Runaway Train: The Case for Privatizing Amtrak | Randal O'Toole | Cato Institute

Interesting analysis by Randal O’Toole on the future of Amtrak:

When Congress created Amtrak in 1970, passenger-rail advocates hoped that it would become an efficient and attractive mode of travel. More than 40 years of Amtrak operations have disappointed them, as Amtrak has become the highest-cost mode of intercity travel and remains an insignificant player in the nation’s transportation system. Nationally, average Amtrak fares are more than twice as much, per passenger mile, as airfares. Despite these high fares, per-passenger-mile subsidies to Amtrak are nearly nine times as much as subsidies to airlines, and more than 20 times as much as subsidies to driving. When fares and subsidies are combined, Amtrak’s costs per passenger mile are nearly four times as great as airline costs…….

via Stopping the Runaway Train: The Case for Privatizing Amtrak | Randal O’Toole | Cato Institute: Policy Analysis.

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

November 12, 2012

Canada: TSX Composite ranging

The TSX Composite monthly chart shows the market ranging between 11000 and 12800. Oscillation of 13-week Twiggs Money Flow above zero reflects buying support at 11000. Downward breakout is unlikely, while recovery above 12800 would offer a target of 14000*.

TSX Composite Index

* Target calculation: 12500 + ( 12500 – 11000 ) = 14000

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

November 12, 2012

US losing momentum

The S&P 500 found short-term support at 1370 after penetrating the rising trendline on a weekly chart. Loss of momentum warns that a top is forming. Reversal of 63-day Twiggs Momentum below zero would strengthen the signal. Breach of support would test the primary level at 1270.

S&P 500 Index

Note how the S&P 500 lately moves in increments of fifty: 1270, 1320, 1370, 1420, 1470…….

The Nasdaq 100 similarly penetrated its rising trendline — shown here on a monthly chart — warning that a top is forming. 63-Day Twiggs Momentum (not shown) is below zero, strengthening the signal. Breach of primary support at 2450 would confirm the primary down-trend signaled by bearish divergence on 13-week Twiggs Money Flow. Respect of primary support is unlikely, but would indicate another advance.

Nasdaq 100 Index

* Target calculation: 2400 – ( 2800 – 2400 ) = 2000

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

November 11, 2012

Taking the leverage out of economic growth | Reuters

Edward Hadas points out that long-term credit growth has exceeded growth in nominal GDP (real GDP plus inflation) in the US and Europe for some time. Not only does this fuel a credit bubble but it leads to a build up of inflationary pressure within the economy. If not evident in consumer prices it is likely to emerge as an asset bubble.

For the last two decades, accelerating credit has been closely correlated with the change in GDP – both in the United States and the euro zone. GDP growth tended to speed up shortly after the rate of credit growth increased, and slowed down after credit growth started to decrease.

This correlation implies there is an equilibrium rate of credit growth – the rate that corresponds to the long-term pace of nominal GDP growth. Though the pace of credit growth can vary from year to year, over time private debt and nominal GDP have to expand at the same rate for overall leverage to stay constant. That’s not what happened in the past two decades. Since 1990, Deutsche found a significant gap between credit and GDP growth in the United States and the euro zone.

In both, the neutral rate of credit growth – the rate associated with the economy’s long-term growth rate – was 7 percent. Those long-term nominal GDP growth rates were lower: 4.8 percent in the United States and 4 percent in the euro zone. In a single year, the difference of 2-3 percentage points doesn’t have much effect. Over a generation, though, it leads to a massive increase in the ratio of private debt to GDP.

The gap between growth in Domestic Debt and Nominal GDP widened in 2004/5 during the height of the property bubble and has narrowed to near zero since 2010.
Domestic Debt Growth Compared to GDP Growth
Hopefully the Fed have learned their lesson and maintain this course in future.

via Analysis & Opinion | Reuters.

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

November 10, 2012

What Good Are Republicans if They Can't Protect Us from Class Warfare? | Jim Powell | Cato Institute: Commentary

Jim Powell of the Cato Institute gives his view on why Romney lost the election:

Romney lost for several reasons. The bulk of his primary advertising seems to have been spent attacking opponents, rather than defining himself, with the consequence that by the time the primaries were over, his reputation was a blank slate as far as the general public was concerned — an irresistible target for Obama’s early advertising blitz that defined him as an out-of-touch rich guy who destroyed American jobs. Romney was on the defensive from the get-go……

via What Good Are Republicans if They Can't Protect Us from Class Warfare? | Jim Powell | Cato Institute: Commentary.

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

November 8, 2012

Canada: TSX Composite

The TSX Composite Index continues to consolidate below 12500. Reversal below 12100 and the rising trendline would warn of another test of primary support at 11200. Reversal of 63-day Twiggs Momentum below zero would strengthen the bear signal. Breakout above 12500, however, would signal a primary advance, while follow-through above 12800 would confirm.

TSX Composite Index

* Target calculation: 12500 + ( 12500 – 11000 ) = 14000

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

November 8, 2012

US: Honeymoon is over

The S&P 500 broke support at 1400, warning that a top is forming. A 21-day Twiggs Money Flow peak below zero would indicate medium-term selling pressure. The “honeymoon” period leading up to the election is over. It is back to “business as usual” as the President and the Republican-controlled Congress arm-wrestle over taxes, entitlements and the budget deficit. Speaker of the House John Boehner extended an olive-branch of sorts, saying that Republicans were willing to accept additional tax revenues, but his emphasis remains on reforming entitlement programs and curbing “special interest loopholes and deductions”.

S&P 500 Index
The Dow Jones Industrial Average similarly broke support at 13000 on the weekly chart. Breach of support and the primary trendline warn that a top is forming. Reversal of 63-day Twiggs Momentum below zero would suggest a primary down-trend. Recovery above 13300 is unlikely at present but would indicate another advance.

Dow Jones Industrial Average

* Target calculation: 13000 + ( 13000 – 12000 ) = 14000

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

November 7, 2012

Markets Worry About Fiscal Cliff

Michael S. Derby writes about the looming fiscal cliff:

The central problem is the lack of change. President Barack Obama was reelected. Democrats retained control of the Senate, while Republicans held on to the House of Representatives. The fiscal cliff can only be resolved if lawmakers work together. “Returning to status quo likely means all sides see the voters as supporting their views, which means reaching compromise is not likely to get any easier,” economists at Bank of America Merrill Lynch warned clients.

Speaker of the House John Boehner (R-Ohio) says “the Republican majority in the House stands ready to work with [the President] to do what’s best for our country.” Republicans appear willing to accept additional tax revenues but their emphasis is on reforming entitlement programs and curbing “special interest loopholes and deductions”.

The Congressional Budget Office summarizes the fiscal cliff as:

Among the policy changes that are due to occur in January under current law, the following will have the largest impact on the budget and the economy:

A host of significant provisions of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (Public Law 111-312) are set to expire, including provisions that extended reductions in tax rates and expansions of tax credits and deductions originally enacted in 2001, 2003, or 2009. (Provisions designed to limit the reach of the alternative minimum tax, or AMT, expired on December 31, 2011.)

Sharp reductions in Medicare’s payment rates for physicians’ services are scheduled to take effect.

Automatic enforcement procedures established by the Budget Control Act of 2011 to restrain discretionary and mandatory spending are set to go into effect.

Extensions of emergency unemployment benefits and a reduction of 2 percentage points in the payroll tax for Social Security are scheduled to expire.

The CBO estimates that increases in federal taxes and reductions in federal spending, totaling almost
$500 billion, will cause a 0.5 percent drop in GDP in 2013.

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.