Posts Tagged ‘de-leveraging’

IS GOLD GETTING OVERBOUGHT?

IS GOLD GETTING OVERBOUGHT?

Courtesy of The Pragmatic Capitalist 

In a recent piece Nomura Group highlighted some of the more interesting gold ratios with the implication that gold is bumping up against some high historically levels:

gold overbought IS GOLD GETTING OVERBOUGHT?

 

Personally, I still believe the “irrational” move in gold is very much alive and will likely find support on any significant weakness.  Gold is likely to remain the “go to” asset for investors looking for a hedge to the fear and uncertainty of the current environment.  The Euro is being viewed as a faulty fiat currency (incorrectly I believe) and the US dollar is believed to be in long-term disarray due to the actions of the Fed.  As long as the de-leveraging cycle persists and the sovereign debt woes continue we are likely to continue to see strong demand for gold.

Source: Nomura Group


Tags: , , , , ,




CONSUMER CREDIT CONTINUES TO CONTRACT

CONSUMER CREDIT CONTINUES TO CONTRACT

Courtesy of The Pragmatic Capitalist 

Consumer credit contracted $3.6B in July.  In short, the year over year rate is improving, but the bottom line is that consumer credit continues to contract as the de-leveraging continues at the household level (via Econoday):

“Consumer credit outstanding in June contracted $1.3 billion-but at least it was at a slower pace than in recent months. Credit in May fell $5.3 billion while April dropped a particularly severe $14.9 billion. Simply, the consumer sector is showing weak demand for loans combined with tight bank lending and heavy charge offs by banks.”

CC CONSUMER CREDIT CONTINUES TO CONTRACT


Tags: , , , ,




THE DETERIORATING MACRO PICTURE

THE DETERIORATING MACRO PICTURE

Courtesy of The Pragmatic Capitalist 

a statue of a man levering a rock with a stick

Over the course of the last 18 months I’ve been adhering to a macro view that can best be summed up as follows:

1) The explosion in private sector debt (excessive housing borrowing, excessive corporate debt, etc) levels would reveal the private sector as unable to sustain positive economic growth, de-leveraging and deflation would ensue.

2) Government intervention would help moderately boost aggregate demand, improve bank balance sheets, improve sentiment, boost asset prices but fail to result in sustained economic recovery as private sector balance sheet recession persists.

3)  Extremely depressed estimates and corporate cost cutting would improve margins and generate a moderate earnings rebound, but would come under pressure in 2010 as margin expansion failed to continue at the 2009 rate.

4)  The end of government intervention in H2 2010 will reveal severe strains in housing and will reveal the private sector as still very weak and unable to sustain economic growth on its own.

The rebound in assets was surprisingly strong and the ability of corporations to sustain bottom line growth has been truly impressive – far better than I expected.  However, I am growing increasingly concerned that the market has priced in overly optimistic earnings sustainability – in other words, estimates and expectations have overshot to the upside.

What we’ve seen over the last few years is not terribly complex in my opinion.  The housing boom created what was in essence a massively leveraged household sector.  The problems were compounded by the leveraging in the financial sector, however, this was merely a symptom of the real underlying problem and not the cause of the financial crisis (despite what Mr. Bernanke continues to say and do to fix the economy).

As the consumer balance sheet imploded the economy imploded with it.  This shocked aggregate demand like we haven’t seen in nearly a century. This resulted in collapsing corporate revenues.  The decrease in corporate revenues, due to this decline in aggregate demand, resulted in massive cost cutting and defensive posturing by corporations.  This exacerbated the problems as job losses further weakened the consumer balance sheet position.  Consumers, like, corporations, got defensive and began cutting expenses and paying down liabilities.  Sentiment collapsed and we all know what unfolded in 2008.

The government responded by largely targeting the banking sector based on the belief that fixing the banks would fix Main…
continue reading


Tags: , , , , , , , , , , , , , , ,




Fed Z1: Blah

Fed Z1: Blah

Courtesy of Karl Denninger at The Market Ticker 

Well, there’s nothing here that indicates any sort of real change.  Let’s start with the grand-daddy chart:

The arrow is approximately where the outstanding credit in the system began to decline.  Note that the slope of each sub-component hasn’t done much in terms of change in this last report.

Has there been ANY improvement?  Let’s zoom in:

debt

Well, not really.

Households and non-profits contracted their outstanding credit by $60 billion in non-mortgage instruments and a sizable $99 billion in mortgages.  Non-financial business credit expanded very slightly (about $30 billion in the quarter) as did state and local governments ($25 billion.)  Interestingly enough it appears that farm credit decreased while non-farm increased – I will do some more digging in that area, as it may be a leading indicator of distress in the farm space – particularly family farms.  The Federal Government increased its debt by a net $361.5 billion (!) while financial instrument credit decreased awhopping $638.5 billion.  Rounding out the numbers is the rest of the world (exposure in the US), which was up a modest $28.6 billion, continuing a trend that has run since the end of 2008.

All-in all, nothing to see here.  Anyone who claims that "activity in credit is increasing" has to explain how, when consumers and non-financial businesses continue to de-lever and financial instruments are literally being shunned like a leper colony - the contraction this quarter ran at a seventeen percent annualized rate while the actual annual rate of change over the last 12 months is only 13.5%.  In other words, the deleveraging is accelerating, not stabilizing, among financial instruments.

As for the "de-levering" of the consumer, that’s still to come.  Outstanding credit has contracted a mere 2.7% since this mess began with credit peaking in the second quarter of 2008, or about 1.5% annualized.  Mortgages have delevered only 3.7% from the top in the first quarter of 08 in total, or about 1.9% annualized.

The short form here folks is that all the "prop jobs" have been intended to do one thing and one thing only - protect the banks from having to recognize their bad loans.

To believe that consumers and non-profits could have only de-levered at a rate of less than 2% annualized including all the bad mortgage debt that is out there, and is now "recovering", is not only ludicrous but is utterly unsupported by the data, which is not showing the alleged "growth."

What has…
continue reading


Tags: , , , , , , , ,




SHOULD YOU SHORT THE TREASURY MARKET?

SHOULD YOU SHORT THE TREASURY MARKET?

Courtesy of The Pragmatic Capitalist 

Good thoughts on the credit markets from this week’s episode of Wealth Track.  Nassim Taleb has described treasuries as a “no brainer” short position.  Marc Faber refers to treasuries as junk bonds.  Bond experts David Darst and Robert Kessler provide their outlooks for obtaining yield in a de-leveraging world:

Source: Wealth Track 


Tags: , , ,




 
 
 

Phil's Favorites

Seeing Your Blind Spots

 

Seeing Your Blind Spots

Courtesy of 

“The first principle is that you must not fool yourself — and you are the easiest person to fool.”

-Richard Feynman

Anybody who has ever tried to beat the market knows that understanding psychology is just as important as understanding a business. You can know a company’s return on equity to the third decimal and what management likes to do with excess capital, but if you don’t understand prospect theory or confirmation bias, you’re missing the most important elements of what it takes to be a successful investor...



more from Ilene

Zero Hedge

OPEC Pops The Question - Will Russia Say "I Do"?

Courtesy of ZeroHedge. View original post here.

Authored by Herman Wang via Platt's "The Barrel" blog,

OPEC is drafting an agreement to tie Russia into a so-called “super group” of oil producers.

Details on the proposal are vague and the Kremlin’s willingness to consider such a betrothal is uncertain, despite some positive vibes between Russia and OPEC kingpin Saudi Arabia at the moment.

In tryi...



more from Tyler

ValueWalk

Warren Buffett's Advice for Small Business 2018

By joniferdingcong. Originally published at ValueWalk.

The Master Investor gives top tips for budding entrepreneurs, startups, and small businesses.

]]> Get The Full Warren Buffett Series in PDF

Get the entire 10-part series on Warren Buffett in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues

The post Warren Buffett’s Advice for Small Business 2018 appeared first on ValueWalk.

Sign up for ValueWalk's free newsletter ...



more from ValueWalk

Chart School

Weekly Market Recap Feb 18, 2017

Courtesy of Blain.

BOO YAH! Now that’s more like it!  Your regularly scheduled non stop up market returned this past week with a “5 for 5” week (all 5 days up).  Three of those days were >1% so it was a return of the bulls.  That said to return to the “Trump market” we need to get back to almost no volatility and incremental up days of 0.3% or so 80% of the time.   We noted in last week’s recap the NYSE McClellan Oscillator was still VERY oversold so a “snapback rally” was still on the docket.  That was quite a snapback rally!  So the “easy part” of the bounce just happened – now we will see if we are going to return to a more volatile future or go right back to the sleepy market that tacks on a little 4 out of 5 ...



more from Chart School

Digital Currencies

As Bitcoin Nears $11,000, Here's A History Of Its Biggest Ups And Downs

Courtesy of ZeroHedge. View original post here.

The cryptocurrency rebound off Feb 5th's bloodbath lows (below $6,000 for Bitcoin) has been impressive, as a 'mysterious' massive buyer 'bought the dip' and momentum took care of the rest.

With Bitcoin now nearing $11,000 (almost a double off the lows), ...



more from Bitcoin

Insider Scoop

Walmart, Target Are Susquehanna's Top Picks Ahead Of Retail Earnings Season

Courtesy of Benzinga.

Related WMT Upcoming Earnings: Hurricane Effects Still Trickling Through For Home Depot? Did Walmart Meet It...

http://www.insidercow.com/ more from Insider

Biotech

What is 'right to try,' and could it help?

Reminder: Pharmboy is available to chat with Members, comments are found below each post.

 

What is 'right to try,' and could it help?

In this March 18, 2011 photo, Cassidy Hempel waved at hospital staff as she was being treated for a rare disorder. Her mother Chris, left, fought to gain permission for an experimental drug. AP Photo/Marcio Jose Sanchez

Morten Wendelbo, Texas A&M University and Timothy Callaghan, ...



more from Biotech

Mapping The Market

The tricks propagandists use to beat science

Via Jean-Luc

How propagandist beat science – they did it for the tobacco industry and now it's in favor of the energy companies:

The tricks propagandists use to beat science

The original tobacco strategy involved several lines of attack. One of these was to fund research that supported the industry and then publish only the results that fit the required narrative. “For instance, in 1954 the TIRC distributed a pamphlet entitled ‘A Scientific Perspective on the Cigarette Controversy’ to nearly 200,000 doctors, journalists, and policy-makers, in which they emphasized favorable research and questioned results supporting the contrary view,” say Weatherall and co, who call this approach biased production.

A second approach promoted independent research that happened to support ...



more from M.T.M.

Members' Corner

An Interview with David Brin

Our guest David Brin is an astrophysicist, technology consultant, and best-selling author who speaks, writes, and advises on a range of topics including national defense, creativity, and space exploration. He is also a well-known and influential futurist (one of four “World's Best Futurists,” according to The Urban Developer), and it is his ideas on the future, specifically the future of civilization, that I hope to learn about here.   

Ilene: David, you base many of your predictions of the future on a theory of historica...



more from Our Members

OpTrader

Swing trading portfolio - week of September 11th, 2017

Reminder: OpTrader is available to chat with Members, comments are found below each post.

 

This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current  trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).

We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options. 

Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.

To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here ...



more from OpTrader

Promotions

NewsWare: Watch Today's Webinar!

 

We have a great guest at today's webinar!

Bill Olsen from NewsWare will be giving us a fun and lively demonstration of the advantages that real-time news provides. NewsWare is a market intelligence tool for news. In today's data driven markets, it is truly beneficial to have a tool that delivers access to the professional sources where you can obtain the facts in real time.

Join our webinar, free, it's open to all. 

Just click here at 1 pm est and join in!

[For more information on NewsWare, click here. For a list of prices: NewsWar...



more from Promotions

Kimble Charting Solutions

Brazil; Waterfall in prices starting? Impact U.S.?

Courtesy of Chris Kimble.

Below looks at the Brazil ETF (EWZ) over the last decade. The rally over the past year has it facing a critical level, from a Power of the Pattern perspective.

CLICK ON CHART TO ENLARGE

EWZ is facing dual resistance at (1), while in a 9-year down trend of lower highs and lower lows. The counter trend rally over the past 17-months has it testing key falling resistance. Did the counter trend reflation rally just end at dual resistance???

If EWZ b...



more from Kimble C.S.

All About Trends

Mid-Day Update

Reminder: Harlan is available to chat with Members, comments are found below each post.

Click here for the full report.




To learn more, sign up for David's free newsletter and receive the free report from All About Trends - "How To Outperform 90% Of Wall Street With Just $500 A Week." Tell David PSW sent you. - Ilene...

more from David





About Phil:

Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

Learn more About Phil >>


As Seen On:




About Ilene:

Ilene is editor and affiliate program coordinator for PSW. She manages the site market shadows, archives, more. Contact Ilene to learn about our affiliate and content sharing programs.

Market Shadows >>