“It’s hard to be optimistic,” says NYU professor and Nobel laureate Michael Spence. “There’s huge disagreements. Important policy issues are being held hostage to other things.” – Yahoo Finance from September 23, 2011.
[gigya src=”http://d.yimg.com/nl/techticker/breakout/player.swf” width=”576″ height=”324″ quality=”high” wmode=”transparent” allowFullScreen=”true” flashVars=”vid=26714533&repeat=true&browseCarouselUI=hide&”]
Consumer credit in the U.S. unexpectedly dropped in August by the most in over a year. The $9.5 billion decrease followed an $11.9 billion increase the previous month, the Federal Reserve said today in Washington. Non-revolving credit, which includes student loans and financing for automobile purchases, slumped by the most in three years. Decreasing credit shows American households are either continuing to pay down debt or lack the confidence to boost spending on non-essential goods.
via U.S. Consumer Credit Fell $9.5 Billion in August, Biggest Drop in a Year – Bloomberg.
I say this rather flippantly as we are in the middle of a bear market, and I do not believe we are ready, but a reader asked what it would take to signal a bull market. My answer: three decent blue candles on the weekly chart followed by a correction of at least two red candles that respects the preceding low. The weekly chart of the S&P 500 index displays a blue candle with a long tail, signaling buying support. That would qualify as candle #1.
* Target calculation: 1100 – ( 1250 – 1100 ) = 950
There is no supporting divergence on 13-week Twiggs Money Flow to signal a change in the underlying selling pressure. Reversal to an up-trend is unlikely but would take a rally of at least 3 blue candles to break resistance at 1250 followed by a correction that finishes above 1100 — and re-crosses 1250. What is more likely is a failed attempt or false break at 1250 followed by penetration of support at 1100, signaling a decline to 1000/950*.
Nonfarm payrolls rose by 103,000 in September as the private sector added 137,000 jobs, the Labor Department said Friday in its survey of employers. Payrolls data for the previous two months were revised up by a total 99,000 to show 57,000 jobs were added in August and 127,000 jobs in July. However, the September payrolls data was boosted by a one-time event: 45,000 telecom workers returning to their jobs following a strike at Verizon Communications Inc. in August.
Highlighting the stubborn weakness of the labor market, the unemployment rate—which is obtained from a separate household survey—was stuck at 9.1% for the third month in a row.
American economists, central bankers and fiscal policy makers have reinterpreted British economist John Maynard Keynes’s clever idea that government spending is the best way to counteract a serious economic downturn — and have turned it into a permanent prescription. In their version of the Keynesian theory, declining growth or tumbling stock prices should prompt central banks to lower interest rates and governments to come to the rescue with economic stimulus programs. US economists call this “kick-starting” the economy.
….The only problem is that this method of encouraging growth has not stimulated the US economy in recent years, but in fact has put it on a crash course. From the Asian economic crisis to the Internet and subprime mortgage bubbles, economic stimulus programs by monetary and fiscal policy makers have regularly laid the groundwork for the next crash instead of encouraging sustainable growth. In the last decade, the volume of lending in the United States grew five times as fast as the real economy.
With thanks to Barry Ritholz
WSJ interview with Herman Cain:
[gigya src=”http://s.wsj.net/media/swf/VideoPlayerMain.swf” width=”512″ height=”363″ quality=”high” wmode=”transparent” allowFullScreen=”true” flashVars=”videoGUID={C0F27595-4101-4E21-83A0-A65A8C53D4F0}&playerid=1000&plyMediaEnabled=1&configURL=http://wsj.vo.llnwd.net/o28/players/&autoStart=false”]
His plan ticks many of the right boxes:
Consumption taxes are often seen as regressive — because everyone pays the same rate — but can easily cater for the poor/unemployed through food stamps and/or changes to unemployment benefits. The worst thing is to create an administrative nightmare with a two-tier system where some items (e.g. basic food or medicines) are exempt from the tax.
Individuals tell pollsters the economy is bad, bad, bad. But they are still shopping…… September U.S. chain-store sales rose by 5.5% on a year-over-year basis, according to the International Council of Shopping Centers.
via Widening Gap Between Sentiment and Action – Real Time Economics – WSJ.
Apologies. I messed up the links at the bottom of the Trading Diary newsletter. For the correct link click here. Correct links are also available on the Trading Diary web page and under Recent Posts in the right margin of this page.
Falling commodity prices have started a primary down-trend on both the Australian and Canadian dollar. The Aussie rallied off support at its target of $0.94, but respect of the (secondary) declining trendline would warn of further losses.
* Target calculation: 1.02 – ( 1.10 – 1.02 ) = 0.94
The Loonie also bounced of $0.94 and is testing the first line of resistance at $0.9650. Respect would again warn of further losses.
* Target calculation: 1.00 – ( 1.06 – 1.00 ) = 0.94
The price of oil, Canada’s biggest commodity export, reached a new 2011 low Tuesday.
November oil slipped as much as $74.95 US a barrel, its lowest since September of 2010. It recovered somewhat, but still closed down $1.94 at $75.67 on the New York Mercantile Exchange, its third straight day of losses.
Crude rose to three-year highs this year, but the reasons often cited for that increase — fears of growing Middle East tensions, rising Chinese demand, bullish views from investment banks and expectations of an aggressive U.S. stimulus plan — have diminished.
Other market watchers have suggested the price gained solely because of rampant speculation on the commodities markets.
The reason we are in the inflation camp is that the case for more inflation in the US doesn’t depend on private-sector credit expansion; it depends on the ability and willingness of the Fed to monetise sufficient debt to keep the total supply of money growing. A consistent theme in our commentaries over the past 10 years has been that the Fed could and would keep the inflation going after the private sector became saturated with debt.
Up until 2008 there was very little in the way of empirical evidence to support the view that the Fed COULD inflate in the face of a private sector credit contraction, but that’s no longer the situation. Thanks to what happened during 2008-2009, we can now be certain that the Fed has the ability to counteract the effects on the money supply of widespread private sector de-leveraging. The only question left open to debate is: will the Fed CHOOSE to do whatever it takes to keep the inflation going in the future?
via The Sceptical Inflationist | Steve Saville | Safehaven.com.
