This page has been archived and commenting is disabled.

The Bull/Bear Weekly Recap - August 20

Tyler Durden's picture





 

Submitted by RCS Investments

The Bull/Bear Weekly Recap

Bullish

+More signs surface
that banks are beginning to loosen lending standards and is a critical
element in sustaining and further boosting the economic recovery.  The demand-side is stabilizing as well after quarters of contraction. 

+ Industrial Production shows a healthy rise led by auto production and was larger than expected.  The manufacturing recovery continues and has not fallen off a cliff by any stretch.  Coupled
with last weeks report of the UCLA-Ceridian Pulse of Commerce (a
leading indicator), we can be sure that this sector will continue to
contribute to Q3 growth.

+Confidence in Europe continues to show as Irish and Spanish auctions go on without a hitch, while the German ZEW current conditions rose the most in its history in August.  Economic performance in the country continues to defy skeptics.

+ The Mortgage Bankers Association reports that their Refi-Index has reached the highest level since May 2009.  Increased refinancings will help in freeing up disposable income for increased consumption. 

+ Abroad, the Shanghai and Sensex stock markets show improving prospects for economic growth in those regions.  Lower inflation gauges will support more stimulus measures in China, while India’s Sensex is near 30 month highs. 

+
In Europe, Greece is surpassing expectations in controlling its budget
deficit and has helped ease sovereign debt concerns, while the German
Bundesbank raised its 2010 growth forecast. The global recovery
continues with China and Germany leading the way.   
 

  

Bearish  

- Empire and Philly
Manufacturing Indexes show a slowly fading recovery in this sector as
both readings come in less than expected.  For the both indexes, New
Orders move into negative territory for the first time in over a year.
 End demand better come soon!

- Jobless Claims are strongly pointing to a double-dip on the horizon as job losses are increasing. The job market is not improving as the bulls state.  Looking at the details of the Philly Manufacturing index, the “Average Employee Workweek" sub-index fell from +1.7 to -17.1.  Demand for labor from this sector is decreasing as the inventory restocking phase is complete.     

- NAHB Index fell to the lowest reading since the March of 2009,
when the stock market was plunging to its lows.  Given that every
recovery has been presaged by a rebound in this sector, can we be
confident that this whole "recovery" is sustainable and that a double
dip can be averted? While housing accounts for a smaller portion of GDP,
home prices are still extremely important to consumer confidence.  
A struggling sector, along with the huge glut of homes, will ensure that housing prices will take another leg down and with it, consumption and the banks. Need proof?  Check
the latest Mortgage Applications report from the MBA as it seems that
demand is showing stabilization after some increased readings in the
past few weeks.  If this is where new demand is, prepare for the housing “ice age” this winter. (Link Courtesy of
CalculatedRiskBlog

- Consumer confidence remains in the doldrums as per the ABC and Gallup Polls.  No recovery is being seen on Main Street.  This is translating to weakening consumption trends as the second most important shopping period for retailers, back-to-school, is thus far turning out to be a dud.  Weekly consumption metrics, Goldman and Redbook, are showing renewed weakening in YoY consumption growth rates as well.  Earnings growth penciled in by analysts is too high given this metric.

- Leading indicators point to a slowing economy.  However,
one must note that most of the positive impetus in the past months has
been due to the “Interest Rate Spread”, which has been artificially
maintained by the Fed’s ZIRP policy.  Subtracting this from
the metric and you get an economy that is facing a higher probability
of entering a double-dip recession with every passing month.
 

-  The
ECRI leading indicator growth rate just declined back into double digit
territory @ -10.0, while the prior week was revised from -9.8 to -10.2,
so in reality we have no been in double digit negative growth for 3
weeks.  The signs of a double-dip continue to grow despite the consensus clearly not expecting one.    

  

Observations/Thoughts  

 Looks like their will be little to no help coming from the fiscal side for a while.  That one last stimulus based on fear that I was expecting in my Q2 Outlook has come and gone (though I thought it would be bigger), meanwhile, … 

…the warning flags are waving more aggressively: housing, treasury
yields, jobless claims, manufacturing, and consumer confidence.   Is the other side of this hurricane upon us? 


What I had harped about for months is now finally hitting the mainstream.  Structural issues have not been dealt with.  

As an investor, these are the types of articles you
do NOT want to see on Bloomberg.  It shows that consumers are still
struggling and that the second most important period for retailers is
turning out to be a dud.

An excellent synopsis of
the impending protectionism that investors are failing to discount
(only beginning to get slightly mentioned in the media). (Link Courtesy
of 
Mish' Global Economic Trend Analysis)     

What you see here are countries that are dependent on exports.  China has the same problem as they have kept the Yuan from strengthening.  Speculation is that England may do another round of QE.  Obama is promising to double exports.  Not everyone can be an exporter ladies and gents.  The
world economy will remain set back until emerging markets can formulate
sustainable recoveries in their underdeveloped domestic economies.  That development would be a step in the right direction.
 

…our Fed continues to believe that QE is the best solution to our problems.  For a good analogy regarding stimulus and the economy, check this out.  I wrote it a while back.  Note: QE qualifies as monetary “stimulus”. 

Here we go again. 

It’s been a great run for Treasuries for quite a while.  My Bullish call on this asset class was spot on.  But the gains are unlikely to continue now that we are seeing “capitulation” from the most ardent Treasury bears and high levels of bullishness in general.  Everyone
is now on the same side of the boat, which means that there’s little
impetus for further considerable bullish moves for the time being.  I’m considering moving to a neutral stance…stay tuned. 

 


- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Fri, 08/20/2010 - 18:29 | Link to Comment Mr Lennon Hendrix
Mr Lennon Hendrix's picture

DXY poked above the range today, only because what, Europe is going to fail?  If I see Grease in flames, without seeing a march on DC, then I will move to the other side.  However, it appears Europe's complacency rivals only America's.  I expect the dollar to fall through the top of its recent range (80.5 to 82.5) and test the low next week; M2 is back up, BS has his back against the wall, and just like Katla hurt Europe's investments, the GOM will destroy the US'.  I am looking at a large break to the downside on the DXY very soon, but maybe it stays in its recent range for another week....maybe.

Either way it goes, for gold, the sky is the limit.  Now, and for months, when the Doelarr strengthens, gold moves with it.  Since last year, and still, doelarr weakness sends gold higher.  The only thing keeping it low in NOMINAL terms is by creating panic in the markets, and maintaining the paradigm of "Keynsian" economics in place.  Vs. the indices and bonds gold is churning butter.  The thought paradigm is on the verge of collapse, as everyone and their brother are more than unemployed but almost homeless.  This is the Tipping Point, how much longer can it last?

The Roots - Guns Are Drawn:

http://www.youtube.com/watch?v=hP9nrCYoOmY

Fri, 08/20/2010 - 18:31 | Link to Comment TraderTimm
TraderTimm's picture

Waiting for the right moment, but I'll be piling on the put side soon enough. Think we have one more 'psyche-out' move before then.

Trade well...

 

Fri, 08/20/2010 - 22:44 | Link to Comment traderjoe
traderjoe's picture

It's a relatively slow eco news week next week. They could try to pump it a bit, but I'm not so sure. I think - in my reverse psychology sort of way - that the PTB want a mild Republican victory this Fall as it will distract the masses from the economic deterioration and give the impression that there is a "choice" for the elections and that the masses are "taking their country back". I target Dow 9000 for the low in the next 6-7 weeks. Of course, I think that level is still over-valued...

Sat, 08/21/2010 - 11:24 | Link to Comment 99er
99er's picture

Chart: SPX

Gartley (Bear) Pattern and a downward channel: looks bearish, folks.

http://www.screencast.com/t/MWUzMTUyYjI

Sat, 08/21/2010 - 17:27 | Link to Comment spekulatn
spekulatn's picture

Great stuff RCS Investments.

Fri, 10/01/2010 - 07:40 | Link to Comment Herry12
Herry12's picture

Thanks for such a great post and the review, I am totally impressed! Keep stuff like this coming!...
cheap site hosting
windows web hosting
windows vps hosting
windows vps

Do NOT follow this link or you will be banned from the site!