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David Rosenberg Looks At The Sugar High Light... And Picks The Dark
Whereas Alphaville presents several statutory observations by David Rosenberg as to a variety of reasons over which one "could" be bullishly inclined based on a goal seeked read of the data (if one so chose), his daily letter is once again capped with yet another bearish summation: the bad news more than drowns out all the positivity, even if that means that another double dip is practically priced in.
The suggestion that somehow generating 3% real GDP growth a year after a bottom is bullish ignores the deep the hole we are still trying to climb out of. Normally, two years after a recession starts, nominal GDP is up 16% and real GDP is up 7.5%. Currently, nominal GDP is up 1.1% while real GDP is down 1.5% from pre-recession peaks.
According to earlier White House projections, that $800 billion fiscal gorilla unveiled last year was supposed to pull down the unemployment rate to 7% by now. Instead, we are at 9.5%. In fact, it's really even worse than that, for if the participation rate had stayed constant at the April level, than unemployment rate would be 10.2% today.
What about jobless claims? They lead employment. Below 400k, you can have a bullish stance. Above 500k – the opposite, and recession risks rise materially. Well, that rise in the past week to 464k from 427k was even worse than it appears because the non-idling of auto plants this summer has given a temporary downward skew to the claims data – the underlying number is now closer to 475k. The upcoming seasonal factors that are "looking for" a decline are actually going to end up boosting the adjusted claims data and a test of 500k in the weeks ahead is a good bet.
What would that trigger?
Answer: more talk of a "double dip". Claims back above 500k would be horrible for the markets (not bonds though).
The earnings news has, on net, been positive but not a slam dunk. The stock market is responding well to the Q2 reports but remember that the quarter was skewed by a strong start – after all, April was when the ISM hit its peak (in other words, it would be reasonable to assume that much of the Q2 earnings growth was "front loaded") . The economic data are interesting because they reveal a serious loss of momentum as the quarter drew to a close and there does not appear to have been a pickup in July at least based on the limited amount of survey data at hand.Housing is still in disarray – existing home sales are a bit of a lagging indicator but even with the extension of the tax credits to deals signed but not yet closed, turnover still dropped 5.1% last month ( -10% was expected) taking sales back to March levels.
What was more critical was the huge jump in months supply… now at 8.9 months' versus 8.3 months' in May – the highest since August 2009, and well above the 5-6 months' that would typify a well-balanced market.
Of course, we also had the "official" leading indicator come out and verify what the ECRI has been saying – when the financial market components are stripped out, the decline goes to -0.4% (as opposed to -0.2%) which is the second decline in the past three months. And the coincident/lagging ratio, a favourite among some pundits (like a book-to-bill ratio for the entire economy) dipped for the first time since February of this year.
The stock market still seems to be driven largely by technicals and momentum trading. The economy has clearly reached an inflection point and this won't be ignored indefinitely. The gains yesterday were large and broad-based, but lacked volume again, which calls into question the overall level of conviction.
And the fact that the Treasury market retains such a positive overall tone is a development that is failing to ratify the whippy bounce in the major averages back to their 50-day moving averages.
The summer rally came, we shall see soon enough if it is over, but with all the sturm and drang, let's face it – we’re exactly where we were one month ago – on June 22nd, the S&P 500 was sitting around 1,095. And with 10 of the 22 trading days producing moves of 1% or more, one usually has to go to Six Flags for rides like this (thanks Josh!).
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quote of the day - stress tests like asking a heroin addict if he is still using
hobbs
hilarious fraud tests - everything is fab
The light at the end of the tunnel is the train coming towards us.
can you change your avatar ?
people are sick of seeing some twat staring them in the face..
Speak for yourself - Spitzer.
I bet you had a bad experience once. Perhaps you paid too much for something.
Ain't it priceless? Self-assessments accepted as truthful representations of current capital condition - and then "released" to the world in a bizzaro rendition of "So You Think You Can Dance(Bank)" finalists.
Yet another steaming pile.
Bloodstool
And the SPX makes a run at the 200DMA.
There are lots of technical data to debate, but the most obvious question mark on this "recovery" is the bond market. Why is it suggesting deflation when TPTB are relentless with the bright future talk?
The illusion needs to be sold as realistically as possible Cursive. TPTB need to be seen "believing" what they know is non-existent. It sets them up to be able to "do what's in the public best interest" when we get slammed again.
Their mouth speaks recovery, their mind begs destruction in the interest of keeping the debt roll ponzi financed.
Rosie has been taking shots because he's too bearish, so he whistles past the graveyard as well:
https://ems.gluskinsheff.net/Articles.aspx
- Ned
The economy has clearly reached an inflection point and this won't be ignored indefinitely.
Doesn't this guy know THE STOCK MARKET IS THE ECONOMY?
When it goes up, everyone thinks things are great, even if they actually KNOW it's not, but they all love the fantasy. Go out and look how busy restaurants and stores will be this weekend.....
' even if that means that another double dip is practically priced in. '
At 900 perhaps. Not 1100
and yet there it is in plain Democratic Senatorial English straight from the heartland: no new taxes. Pleeassssee tell me true ZH: what does a potato farmers know that you don't know, too? God forbid if I start a discussion of your woman buying shoes....
Rosie has all the facts except for the only one that matters. Government will do whatever they want to keep this going. They will continue De Facto dollar depreciation with QE. They will Mark to fantasy with Banks Cook-ed Books. They will tax your Gold eventually so you won't want to own it anymore, then force you back into the almighty dollar. There is nowhere to hide.
Love the 'profit with Cramer' ads showing up on the Rosenberg article page.