by Phil Davis - June 25th, 2014 8:30 am
Does this look healthy to you?
We did manage to pull out of a tailspin back in 2011 – the last time our GDP went negative but, funny story – in July of 2011, the S&P fell from 1,350 to 1,100 by August 9th and it gyrated between 1,100 and 1,200 until October when the Fed's "Operation Twist" (because "Operation Screw the Poor" got bad test scores) gave us a boost.
Notice how this post picks up right where yesterday's post left off – I'm clever that way! Yesterday we had the chart that showed us that 10% of our GDP ($1.5Tn) is the result of Fed fiddling and, without it, the GDP would be right back at those 2009 lows. Whether or not you THINK QE will ever end, you sure as hell better have a plan for what you will do in case it does!
Russell Investments put out their Economic Indicators Dashboard yesterday and it's a nice snapshot of the where the economy is.
The lines over the boxes are the 3-month trends and, thanks to the Fed, 10-year yeilds are just 2.48% and that's keeping home prices high (because you don't buy a home, you buy a mortgage).
Inflation is creeping up and expansion (today's topic) is negative and getting lower. Meanwhile, consumers remain oblivious as the Corporate Media fills them with happy talk. Meanwhile, this BLS chart (via Barry Ritholtz) says it all as manufacturing (good) jobs continue to leave our country at alarming rates:
Almost all of the growth spots are from fracking with a little auto production picking up as well. Overall, 1.6M net manufacturing jobs have been lost since 2007 and, much more alarming, the median household income for those lucky enough to still have jobs is down almost 10% over the same period of time.
In other words, if it wasn't for Fed Money, we'd have no money at all! In yesterday's Webinar (replay available here) we talked about how the Fed is like a…
by Phil Davis - April 25th, 2012 8:28 am
A meteoric 10% rise pre-market is being celebrated by the Global markets even though it's really only part of the way back to the $644 high that was, very recently, supposed to be a stepping stone on the way to $1,000. Are we really going to get all excited just because AAPL's earnings didn't suck? That seems kind of silly as I'm pretty sure they were never going to get to $1,000 by just earning $10 a share per quarter, were they?
I have nothing bad to say about AAPL. We were bearish on them at $640 but $550 was our buy target and we didn't take direct action on AAPL yesterday as we were worried they might disappoint so our 1:31 bullish trade idea for Members was the QQQ June $60/63 bull call spread at $2.35 and those should be well on their way to $3 this morning as the Qs are up 2% to $66 pre-market already.
I mentioned in yesterday's post that we had already played TQQQ (ultra-long Nasdaq) the day before and that one was the more aggressive May $103/110 bull call spread at $4, selling ISRG Jan $350 puts for $4.40 for a net .40 credit on the $10 spread. Any offset would do, of course but we REALLY wouldn't mind owning ISRG for $350 if it goes on sale (now $560) but, if not, we'll take the free money. As a 3x ultra, TQQQ will be up 6% this morning, already at our $110 goal and, if they can hold it, we're looking at a very nice 150% gain on just the bull spread with a 2,600% gain on the full spread – either way, not a bad way to play!
We had also taken the QQQ MAY $63/66 bull call spread at $1.90 on Monday and that deal was so good we didn't feel we needed an offset. That's the difference between catching the bottom, like we did on Monday and chasing a run, as we did with the Qs on Tuesday – the rewards of being contrarian investors!
One trade that may not be going well for us was the AAPL weekly $575 calls, which we bought for $20.75 against the sale of the May $590s for $22 for a net $1.25 credit. We didn't think AAPL would pop $600 so fast, so we're a…
by Phil Davis - February 24th, 2011 6:33 am
I’ve seen the needle
and the damage done
A little part of it in everyone
But every junkie’s
like a settin’ sun. - Neil Young
Come on Bennie, give us another hit!
We’re hurting man, we need the good stuff. The markets love to get high and, just when we thought the trip was never going to end – we crash hard! Big Ben and his Central Banking buddies fed our commodity addiction with a flow of easy money and the speculators got so hooked that they have now overdosed and the price of commodities is now killing the host (the Global Economy).
Gee, who could have ever seen that coming?
Oh yeah, right, it was me. Well, very good then… I guess. There’s nothing like a good correction to make some fast money. In yesterday’s post (and Tuesday’s) I mentioned our TZA and EDZ hedges and thank goodness we dumped XLE as they flew back to $78 on the oil madness (more on that later). In yesterday morning’s Alert to Members we added IWM $83 puts at $3 and they finished the day at $3.93 (up 31%) but we were done with them earlier as we flipped bullish when they pulled back to $3.75 and grabbed the IWM weekly $80 calls at 1:03 at .66 and we flipped out of those at .93 (up 40%) for a nice, quick gain.
We also lost .20 on an SSO trade, trying to catch one more bear wave that didn’t come but, on the whole – Wheeeeeeeeeeeeeee! This is the best ride EVER!!! We love a volatile market, especially when it gooses the VIX (something we were also long on) as that gives us better and better prices for the options we sell to suckers who think they are smarter than the market. Yes, we buy them too – but look how fast we dump them. Options are great for momentum trading and for controlled leverage but the REAL MONEY is made BEING THE HOUSE – not the gambler and what we really love to do is SELL options, not buy them.
by ilene - September 24th, 2010 2:06 pm
Courtesy of Jake at Econompic Data
I apologize in advance for the title… it’s a Friday and I’m in a weird mood. WSJ details:
Demand for U.S. manufactured durable goods tumbled more than expected in August, held back by steep drops in airplanes and cars.
Durable-goods orders declined by 1.3% to a seasonally adjusted $191.17 billion, the Commerce Department said Friday. This is the biggest drop since August 2009.
Economists surveyed by Dow Jones Newswires expected a 1.0% decline. Friday’s report was mixed, as there were gains in machinery, computers and fabricated metal products. Also, a barometer of capital spending by businesses rose; orders for nondefense capital goods excluding aircraft increased by 4.1%.
Still, overall transportation equipment orders dropped 10.3% in August — restrained by a 40.3% decline in orders for nondefense aircraft and parts. Motor vehicles and parts were also down, falling 4.4%.
August was not as bad as the headline figure would indicate… without non-defense aircraft, durable goods were up 0.6% and without all transportation, durable goods were up 2%.
HOWEVER, the overall trend is ugly with the three month change in durable goods new orders down -0.8% and only two categories showing growth (electronics [thanks Apple!] and fabricated metals).
by Phil Davis - September 24th, 2010 8:33 am
What a fun day for debate!
Former Fed Chair, Paul Volcker went way off-script in Chicago yesterday and "moved unsparingly from banks to regulators to business schools to the Fed to money-market funds during his luncheon speech. He praised the new financial overhaul law, but said the system remained at risk because it is subject to future “judgments” of individual regulators, who he said would be relentlessly lobbied by banks and politicians to soften the rules."
Banking — Investment banks became “trading machines instead of investment banks [leading to] encroachment on the territory of commercial banks, and commercial banks encroached on the territory of others in a way that couldn’t easily be managed by the old supervisory system.”
Financial system — “The financial system is broken. We can use that term in late 2008, and I think it’s fair to still use the term unfortunately. We know that parts of it are absolutely broken, like the mortgage market which only happens to be the most important part of our capital markets [and has] become a subsidiary of the U.S. government.”
Risk management — “Markets that are prone to excesses in one direction or another are not simply managed under the assumption that we can assume that everybody follows a normal distribution curve. Normal distribution curves — if I would submit to you — do not exist in financial markets. Its not that they are fat tails, they don’t exist. I keep hearing about fat tails, and Jesus, it’s only supposed to occur every 100 years, and it appears every 10 years.”
The recession — “It’s so difficult to get out of this recession because of the basic disequilibrium in the real economy.”
This afternoon, Richmond Fed President Jeffrey Lacker will speak in Kentucky (his hometown) on "Reflections on Economics, Policy and Financial Crisis!" and it always makes me nervous when Fed Presidents put exclamation marks on the word "crisis" so we’ll be paying attention to that one. After market hours, at 4:30, Uncle Ben comes to the plate with "Implications of the Financial Crisis for Economics," which sounds like a snoozer but that’s three Fed guys in a row saying "crisis" in the same day – I don’t like it!
by ilene - July 15th, 2010 4:57 pm
Courtesy of Mish
The Philly Fed manufacturing index slowed for a second consecutive month and is nearly, but not quite in contraction. New orders and prices received are already in contraction.
Please consider the latest Philly Fed Business Outlook Survey.
Results from the Business Outlook Survey suggest that regional manufacturing activity continues to expand in July but has slowed over the past two months.
Large Gap Between Current Conditions and Expectations 6 Months from Now
History shows gaps narrow over time and most of the time are in sync, except at turning points.
The key question which we will get to in a minute is "Will the gap narrow by future expectations falling or current conditions rising?"
Philly Fed Components
click on chart for sharper image
Note that prices received is in contraction for a second consecutive month. That is not good for profits to say the least. Also note that new orders are falling. That is also not good for profits.
Yet, the overall diffusion index is 5.1 now vs. +25.0 six months from now, new orders expectations -4.3 now vs. 17.9 six months from now, and prices received -6.5 now vs. 10.1 six months from now.
Also note that Employees and Workweek were both in contraction last month but are now barely positive with expectations higher again.
Where To From Here?
If manufactures are ramping up production, even modestly, in expectations for a better second half, they are going to regret it.
Data suggests durable goods sales are about to collapse.
I made the case for a significant manufacturing slowdown in Expect Second-Half Housing and Durable Goods Crash. Please take a look.
Manufacturers may be more optimistic six months from now, but consumer attitudes suggest something dramatically different. Ramping up production is the wrong thing to do.
by ilene - February 25th, 2010 4:30 pm
Courtesy of Mish
Fed Chairman Ben Bernanke is one of the best contrarian indicators one could possibly find. Yesterday, Bernanke told the House Financial Services Committee that the U.S. economy is in a “nascent” recovery.
Given his historical track record of complete failure on matters like housing, the recession, and jobs, his yapping about the “nascent” recovery suggests the very best we can expect is for the recovery to stall, and more likely enter a double dip recession if not completely collapse.
Unexpectedly Bad News
Let’s recap some recent "unexpected" bad news.
Durable Goods "Unexpectedly" Drops
Please consider Equipment Demand Slows to Start 2010
Orders for durable goods excluding transportation unexpectedly fell 0.6 percent, the most since August, while a measure of bookings for business equipment showed its biggest decrease in nine months, the Commerce Department in Washington said. The Labor Department said new claims for unemployment insurance rose to a three-month high.
Factories may be taking a pause to gauge demand after boosting production in the second half of 2009 to replenish inventories. Reports earlier this week showed weaker consumer sentiment and home sales, underscoring Federal Reserve Chairman Ben S. Bernanke’s view that the recovery is “nascent” and still requires interest rates near zero.
“There’s no reason to think this is the start of a double-dip — some back and fill is standard operating procedure in recoveries,” Chris Low, chief economist at FTN Financial in New York, said in an e-mail to clients. “Rising jobless claims, weaker orders and falling consumer confidence suggest the economy is retrenching in the first half of the first quarter.”
Happy Talk On Durable Goods
Just take a look at that happy talk. There is every reason to think this may be the start of a double-dip recession. All we have seen is inventory replenishment, government spending, and various stimulus measures like cash-for-clunkers and housing tax credits that have withered on the vine.
Durable Goods Details
- Orders for non-defense capital goods excluding aircraft, a proxy for future business spending, fell 2.9 percent last month, the biggest drop since April 2009.
- Orders for machinery slumped 9.7 percent in January, the most in a year.
- Orders for motor vehicles and parts dropped 2.2 percent in January after a 5.5 percent gain.
- The big bright spot was Boeing received orders for 59 aircraft
by ilene - February 25th, 2010 2:21 pm
Courtesy of Karl Denninger at The Market Ticker
New orders for manufactured durable goods in January increased $5.2 billion or 3.0 percent to $175.7 billion, the U.S. Census Bureau announced today. This was the second consecutive monthly increase and followed a 1.9 percent December increase. Excluding transportation, new orders decreased 0.6 percent. Excluding defense, new orders increased 1.6 percent.
Ex-transports it’s down.
Internals are not all that good either. Inventory on computers and electronics are being rapidly depleted – manufacturers (despite the BS claims of the media) are NOT replenishing stock. Take the so-called "pumping" and stuff it.
Not-seasonally-adjusted new orders and shipments are down significantly. Since most Christmas "stuff" is ordered and shipped in advance of December, this isn’t very positive at all.
Most important in the "new orders" column is the decrease in computers and electronic components. Remember, we keep hearing how wonderful it has been in earnings reports. Well, if that’s so, then explain the decrease from 31,577 to 23,146 in new orders month/over/month – that is almost a THIRTY PERCENT decrease!
Someone’s been lying.
It’s across the board too – not just computers, but also the subindex for communications equipment. NOT GOOD.
This is a leading indicator for hiring activity folks. I’ve harped on it before and will keep doing so. New employees = more computers and cell phones. If you’re not seeing it there (and you’re not) then the entire premise of "a recovering employment picture" is absolute crap.
Best-a-luck with that "recovery" thesis folks.
by ilene - January 25th, 2010 8:59 pm
Courtesy of Karl Denninger at The Market Ticker
On January 5th the durables report for November was ‘released’.
It showed a 0.2% increase. I didn’t write on it at the time, as it didn’t appear to be particularly consequential. The report, of course, came in the middle of the first-week January market rally.
But now, in the dark of night, the number has been revised – to a decrease of 0.7%. The reason is a claimed "statistical error."
This, by the way, should have been obvious from the retail sales report, which I did write on.
Here’s the ugly – the Census’ link to the report is now listed as missing (that is, intentionally removed!) and what’s worse the link they refer you to, the "Historical M3 Releases" does not have the corrected November data – it only has releases through October on it.
That is, November’s report has disappeared.
No, the "historical" tab doesn’t have it either. Attempting to retrieve it off the link in Google’s search returns a "not currently available, see historical" message – but it’s not there.
You would think that such an "error" would result in an immediate press release by Census identifying the cause of the error and a corrected report, along with CNBS and the rest of "ToutTV" talking about how this "mistake" happened and alerting investors to the fact that they had made decisions based on "mistaken" information and in fact durables had suffered a second sequential decline.
YOU WOULD BE WRONG.
Are we now down to rank fraud in "data releases" from our government, revised in the dark of night without public notice or press release, with the agencies claiming "statistical error"?
Folks, honest errors are immediately admitted to when discovered and disseminated to all of the people who the government or agency knows relies on these figures for economic decisions.
But when "errors" are less than honest the person or agency committing them attempts to hide the evidence instead of admitting to and publicly exposing their mistake.
by Chart School - September 25th, 2009 3:56 pm
Courtesy of Jake at Econompic Data
We noted last month that the jump in July durable goods came from a spike in commercial plane purchases, thus no surprise here that durable goods came full circle. Thus our surprise that "real" reporters and/or "real" analysts were "surprised".
ABC news reports:
New orders for long-lasting U.S. manufactured goods fell unexpectedly in August, dropping by their biggest margin in seven months, following a plunge in commercial aircraft orders, the government reported on Friday.
The Commerce Department said durable goods orders tumbled 2.4 percent, the largest decline since January, after rising by a revised 4.8 percent in July.
Analysts polled by Reuters forecast orders rising 0.5 percent in August. Compared with the same period last year, new orders were down 24.9 percent.