US & Canada Archives - Page 83 of 179

July 1, 2014

EconoMonitor » China, Not Piketty, Explains ‘Confused Signals’ in U.S. Asset Prices

From Benn Steil & Dinah Walker:

As for bond prices, China’s central bank holds the key.After more than three years of steady appreciation, the RMB has declined over 3% this year – erasing the past year’s rise. Driven by the Chinese government’s desire to re-juice failing economic growth, RMB depreciation has naturally been accompanied by an increase in China’s foreign exchange reserves.China usually allocates about 40 percent of its foreign exchange reserves to Treasuries; so far this year, however, its official holdings of Treasuries have actually declined. What explains this? Given that China comes under pressure from the U.S. Treasury and Congress whenever it appears to be pushing down its currency, China is almost certainly disguising its Treasury purchases by holding them in Belgium.

July 1, 2014

Explaining Richard Koo to Paul Krugman | SNBCHF.com

George Dorgan writes:

….Prof. Steve Keen’s and Richard Koo’s recipe is to increase public debt, when the private sector is de-leveraging and to reduce public debt when the private sector is leveraging. According to Keen, the Americans are currently doing the complete opposite of what they should do. They should continue reducing private liabilities, but they should increase public spending.

The Fed wants the average American to spend, even deficit spending, while the state is doing austerity. According to Keen, the current increase of private US debt could lead to a new recession.

July 1, 2014

Will Inflation Remain Low? | FRBSF

From Yifan Cao and Adam Shapiro at the Federal Reserve Bank of San Francisco:

The well-known Phillips curve suggests that future inflation depends on current and past inflation and a measure of economic slack or resource utilization. Using the unemployment gap to measure slack, a simple Phillips curve currently predicts that inflation will remain quite low through 2015. Two variations of the model, which impose a higher anchor for inflation expectations or focus only on a short-term unemployment gap, still predict that inflation will remain low, albeit higher than implied by the basic model.

June 30, 2014

Canada: TSX 60 up-trend continues

Canada’s TSX 60 continues towards its target of the 2008 high at 900. Rising troughs on 13-week Twiggs Money Flow signal strong buying pressure. Reversal below support at 845 remains unlikely.

TSX 60

June 28, 2014

Desperately seeking moderate Syrian rebels | Threat Matrix

By Lisa Lundquist:

Following the news that the Obama administration, in a sudden about-face, is asking Congress for $500 million to train and equip “vetted” members of the “moderate” Syrian opposition, The Associated Press yesterday published a list, headlined “Syrian rebels likely to receive US aid.” The list raises more questions than it answers — two of the listed groups have been designated by the US as terrorist organizations….

June 27, 2014

S&P 500 unfazed

Summary:

S&P 500 continues a primary advance.
China respects primary support.
ASX 200 continues to signal weakness.
Momentum investors need to hold positions.

The S&P 500 retraced to test its latest support level at 1950 after a downward GDP revision for the first quarter. Respect indicates medium-term buying pressure — also evidenced by rising 21-day Twiggs Money Flow. Follow-through above 1970 would confirm a test of 2000*. Reversal below 1950 is unlikely, but penetration of the secondary trendline would warn of a correction.

S&P 500

* Target calculation: 1900 + ( 1900 – 1800 ) = 2000

The CBOE Volatility Index (VIX) remains low, indicative of a bull market.

S&P 500 VIX

The Shanghai Composite Index respected primary support at 1990/2000. 21-Day Twiggs Money Flow oscillating above zero indicates buying support, but this may be due to the managed “soft landing”. What we do know is that a fall below zero would definitely signal selling pressure. Breach of support would signal a decline to 1850*. The primary trend is expected to continue its downward path, but further ranging between 2000 and 2150 is likely. An abrupt fall is a fairly remote possibility.

Shanghai Composite

* Target calculation: 2000 – ( 2150 – 2000 ) = 1850

The ASX 200 made a false break above 5470, but 21-day Twiggs Money Flow below zero warns of medium-term selling pressure. Breach of support remains likely and would indicate a correction to 5300. The long-term trend, however, remains upward. Support at 5300/5400 would offer a great entry point for long-term investors. Recovery above 5470 is unlikely at present, but would signal a test of resistance at 5550.

ASX 200

* Target calculation: 5400 + ( 5400 – 5000 ) = 5800

I repeat my warning from last week: Momentum investors should not attempt to time secondary corrections and need to endure the present volatility in order to reach their intended investment goals.

June 27, 2014

Middle class is drowning in debt, hobbling the economy | Rex Nutting

From Rex Nutting at MarketWatch:

For decades, economic growth in America was driven by a powerful and sustainable force: increased consumption paid for by the rising incomes for middle-class and working-class Americans.

But somewhere around 1980, that model broke down. Wages flattened out, but consumption didn’t. Americans cut back on their savings, and took on more debt — mostly mortgage debt — to satisfy their needs and desires.

It’s not a sustainable model, but it did persist for nearly 30 years until the credit bubble burst in 2007. Millions of Americans lost their jobs, and millions lost their homes when the credit spigot was shut off, forcing average families to cut back on their consumption and live within their means once again.

And now, with the economy only partially healed, it seems we’re going back to the lend-and-spend economy that failed us before.For the past six or seven years, most of what the Federal Reserve has done to fix the problem has been focused on getting the credit spigot turned back on: cutting interest rates and hectoring banks to start lending again, even though demand for loans was weak….

June 27, 2014

Russell shake-up likely to drive heavy volume at Friday’s close | Reuters

From Reuters:

Investors can expect a surge in volume at the close of trading on Friday, when Russell Investments announces the annual rebalance of its series of indexes that will affect more than $5 trillion in assets…..Credit Suisse anticipates about $42 billion will trade on Friday as a result of the reconstitution, which will make it one of the biggest trading days of the year in terms of dollar volume.

June 27, 2014

US inflation: Will the recent uptrend persist?

From Elliot Clarke at Westpac:

…it seems as though these price movements have not been driven by demand. This is particularly true for food services, which has seen growth in consumption volumes fall from 5.3% in November to –0.6% in May. Housing and utility demand has remained highly volatile, but there was no evidence of a ‘break out’ move in this component of personal consumption in early 2014, and growth has since slumped back to 0.2%. This is not to say that rents have not contributed materially to the level of housing inflation in recent years; more below.

This then points to an exogenous shock being to blame for the recent jump. Further, the coincident nature of the inflation uptrends for food and housing services alludes to a common cause: the cost of energy. The 6.1% gain in total PCE energy prices from April 2013 to May 2014 corroborates this belief. To the extent that shifts in energy costs typically prove temporary, this inflationary impulse will likely dissipate in coming months – leaving aside current geopolitical concerns.

June 26, 2014

The tragic record of American policy in the Middle East | BillMoyers.com

Investigative journalist Charles Lewis, author of 935 Lies: The Future of Truth and the Decline of America’s Moral Integrity tells Bill Moyer:

An outrageous thing happened. We lost $2 trillion. More than 100,000 people died. Folks are going to be maimed for life in the tens of thousands… And no one has ever acknowledged that this [Iraq] was a war on a lark. It was a complete war of choice, because a certain little faction wanted to do it and they orchestrated it… Did they make statements that weren’t true? The answer is yes…

A complicit partner, he says, is a media “intent on preserving the status quo …and never offending the ruling elite”.

Washington Post’s Walter Pincus:

More and more the media become, I think, common carriers of administration statements and critics of the administration….We’ve sort of given up being independent on our own.