S&P 500 Snapshot: The Wednesday Dip
Feb 22, 2012 Doug Short
The S&P 500 opened lower and spent the day in the red, save for a couple of minutes mid-morning. It closed with a modest loss of 0.33%. Year-to-date the index has posted a gain of 7.96% and is only 0.44% below its interim high at the end of April 2011.
From an intermediate perspective, the S&P 500 is 100.7% above the March 2009 closing low and 13.3% below the nominal all-time high of October 2007.
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Charting Down Under: The Australia All Ordinaries Index
Feb 22, 2012 Doug Short
Note from dshort: Chris Kimble's technical look at the Australian Dollar posted earlier today (here) reminded me that several months have passed since my last look at the benchmark All Ordinaries Index. The All Ords is currently 13.8% below its interim high, set on April 11th of last year, and 36.3% below its all-time high in 2007. Here is an update of my All Ords S&P 500 overlay.
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The Aussie Dollar and Risk Management
Feb 22, 2012 Chris Kimble
Over the past year when the Australian Dollar reached certain levels, the S&P 500 happened to be at a peak in prices as well. The Aussie $ is now back at the key level that also saw the 500 index at a short-term peak in prices over the past nine months.
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S&P 500 Update: Where's the Volume?
Feb 22, 2012 Doug Short
The S&P 500 closed yesterday at a new year-to-date high, up 8.32% in the first 44 days of trading versus 5.59% over the same timeframe in 2011, which was also an excellent start to the year (one that finished flat).
But what about volume? I've posted comparisons with 2011 after the first 12 and first 24 days of trading. Here is an updated comparison after the first 34 days.
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Media Headlines Will Lead You To Ruin
Feb 21, 2012 Lance Roberts
It's quite amazing actually. Two weeks ago Barron's ran the cover page of "Dow 15,000". Over the weekend Alan Abelson ran a column titled "Everyone In The Pool". Today, CNBC leads with "Dow 13,000 May Finally Lure Investors Back Into Stocks". Unfortunately, for most investors, the CNBC headline is probably right. Investors, on the whole, have a tendency to do exactly the opposite of what they should do when it comes to investing: "Buy High and Sell Low."
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Weekly Gasoline Update: Up 36 Cents in Nine Weeks
Feb 21, 2012 Doug Short
Here is my weekly gasoline chart update from the Energy Information Administration (EIA) data with an overlay of West Texas Crude (WTIC). Gasoline prices at the pump, both regular and premium, increased 7 cents over the past week, continuing their steady increase since mid-December. Both are up 36 cents from the interim low in the December 19th EIA report. WTIC closed today at 106.25. It is 6.7% off its 2011 interim high, which dates from early May 2011.
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Will Greece Survive the Ides of March?
Feb 21, 2012 Mike Shedlock
As a point of curiosity, the Greek 1-Year Bond Yield touched 682% today, now down to a mere 666%. Bloomberg quotes the open as 566%, if correct, the one year yield soared 116 percentage points from the open to the high.
Deal "Really" Finalized?
Open Europe says Many questions around the second Greek bailout remain unanswered.
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No Other Choices?
Feb 21, 2012 Eric Schaefer
In a recently released NY Times/CBS poll, the pollsters told us of what most already are feeling in their gut: the choices for the Oval Office in this coming November are less than compelling. Perhaps, some new faces are what the American electorate needs to reinvigorate the contest.We think of political battles as waged between two parties. Indeed, for most of our nation's history, two parties have dominated the stage.
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Vehicle Miles Driven And the Ongoing Economic Contraction
Feb 21, 2012 Doug Short
The Depart of Transportation's Federal Highway Commission has released the latest report on Traffic Volume Trends, data through December. Travel on all roads and streets changed by 1.3% (3.2 billion vehicle miles) for December 2011 as compared with December 2010. However, the 12-month moving average shrank by 1.2%, the sixth consecutive month of moving-average decline.
For a deeper understanding of this metric, we're going to adjust it for population growth.
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Chicago Fed: Economic Growth Improved Again in January
Feb 21, 2012 Doug Short
According to the Chicago Fed National Activity Index, in January economic activity decreased from December, but remained positive for the second consecutive month -- the first time that has happened in twelve months. Here are excerpts from the report:
The index's three-month moving average, CFNAI-MA3, increased from +0.06 in December to +0.14 in January, reaching its highest level since March 2011. January's CFNAI-MA3 suggests that growth in national economic activity was slightly above its historical trend.
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Weighing the Week Ahead: Time for a Turn in Housing?
Feb 20, 2012 Jeff Miller
Since the start of the Great Recession there has been little reason for enthusiasm about the US housing market. The home construction industry and related sectors have been a continuing drag on the recovery. In my circle of friends I know of several first-time home purchases in the last couple of years. I was reminded of this last night when visiting my niece and her husband, seeing their beautiful new urban home and enjoying a wonderful "Restaurant Week" dinner at a place new to us all.
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World Markets in Review: The Rally Shifts Back into High Gear
Feb 18, 2012 Doug Short
The 2012 rally accelerated last week as the average gain of our basket of eight markets rose from 0.06% the previous week to a stellar finish of 2.27%. World leadership was generally consistent with last week, with the Asia-Pacific region taking three of the top four spots. The Shanghai Composite is the exception to the geographic pattern, dropping from second place to the cellar. Despite its weekly gain of 1.38%, the S&P 500 again found itself in the bottom half of the pack, but finishing above the FTSE 100 and Shanghai Composite.
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Best Stock Market Indicator Ever: Weekend Update
Feb 18, 2012 John F. Carlucci
As we all know, the key to successful investing is very simple: "Buy low, sell high."
However, you enter a chaotic, fun-house world of uncertainty once you ponder the logical follow-up question: "When?"
The $OEXA200R (the percentage of S&P 100 stocks above their 200 DMA) is a technical indicator available on StockCharts.com used to accurately forecast conservative entry and exit points for the stock market.
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Getting Technical: Weekend Update
Feb 17, 2012 Serge Perreault
Here's the latest weekend update from Serge Perreault, a Chartered Accountant and market technician located near Montreal, Canada. Serge has been following the U.S. market in a series of weekly charts. Here is his update on the S&P 500.
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Two Measures of Inflation: New Update
Feb 17, 2012 Doug Short
Note from dshort: I've now updated the charts below to include today's Consumer Price Index data from the Bureau of Labor Statistics. The annualized rate of change is calculated to two decimal places for more precision in the side-by-side comparison.
The BLS's Consumer Price Index for January, released today, shows core inflation above the Federal Reserve's 2% target at 2.28%. Core PCE, at the end of last month, is fractionally below the target at 1.85%.
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A Long-Term Look at Inflation
Feb 17, 2012 Doug Short
Note from dshort: I've added a 10-year moving average to the first chart below, which highlights the volatility of this data series.
The February 2011 Consumer Price Index for Urban Consumers (CPI-U) released today puts the January year-over-year inflation rate at 2.93%, which is a full percent below the 3.95% average since the end of World War II.
Let's take a step back and look at the history of inflation over the past 140 years.
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No Wonder ECRI's Weekly Leading Index Data is Free
Feb 17, 2012 Kishor Bhatia
This commentary reports the findings of a study that compares the S&P 500 with ECRI's Weekly Leading Index (WLI), which is published every Friday on ECRI's website.
My analysis shows that WLI is very highly correlated (0.95) with S&P 500. I also discovered that by applying the formula used to compute ECRI's WLI growth index to S&P 500, we can establish an S&P 500 growth index -- one that, interestingly enough, leads the WLIg in identifying turning points.
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Inflation: A Five-Month X-Ray View: New Update
Feb 17, 2012 Doug Short
Here is a table showing the annualized change in Headline and Core CPI for each of the past five months. I've also included each of the eight components of Headline CPI and a separate entry for Energy, which is a collection of sub-indexes in Housing and Transportation.
We can make some inferences about how inflation is impacting our personal expenses depending on our relative exposure to the individual components.
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ECRI's Controversial Recession Call: Fifth Consecutive Improvement in the Growth Index
Feb 17, 2012 Doug Short
The Weekly Leading Index (WLI) growth indicator of the Economic Cycle Research Institute (ECRI) came in at -3.7 in today's public release of the data through February 10th. This is the fifth consecutive week of improvement (less negative) data for the Growth Index and the highest level (i.e., least negative) since August 26th of last year. The underlying WLI decreased fractionally from an adjusted 123.6 to 123.5 (see the third chart below).
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Conference Board Leading Economic Index: Fourth Consecutive Gain
Feb 17, 2012 Doug Short
The Conference Board Leading Economic Index (LEI) for January was released this morning. The index increased 0.4 percent in January to 94.9 (2004 = 100), following a 0.5 percent increase in December and a 0.3 percent increase in November. The Briefing.com consensus had been for 0.5% and Briefing.com's own estimate was spot-on at 0.4%.
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What Inflation Means to You: Inside the Consumer Price Index
Feb 17, 2012 Doug Short
Let's do some analysis of the Consumer Price Index, the best known measure of inflation. The Bureau of Labor Statistics (BLS) divides all expenditures into eight categories and assigns a relative size to each. The pie chart below illustrates the components of the Consumer Price Index for Urban Consumers, the CPI-U, which I'll refer to hereafter as the CPI.
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Inflation Watch: Highest Core Inflation Since September 2008
Feb 17, 2012 Doug Short
The Bureau of Labor Statistics released the CPI data for November this morning. Year-over-year Headline CPI came in at 2.93%, which the BLS rounds to 2.9%, down from 2.96% last month (BLS rounded to 3.0%). Year-over year-Core CPI came in at 2.28%, which the BLS rounds to 2.3%, up from 2.23% last month. Headline inflation posted the highest annual rate since September 2008.
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Profit Margin Squeeze: New Update
Feb 16, 2012 Doug Short
The accompanying charts offer clues for evaluating the risk of profit margin squeeze in the current economy. One is the ratio of crude to finished goods in the Producer Price Index. The other is an indicator constructed from two data series in the Philadelphia Fed's Business Outlook Survey through yesterday's release. It is the spread between the Philly Fed's prices paid (input costs) and received (prices charged) data.
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Philly Fed Business Outlook Survey: Moderate Expansion Continues
Feb 16, 2012 Doug Short
Note from Doug: Having lived for two years in a Paoli, PA, a suburb west of Philadelphia just south of Valley Forge, I have a special interest in this regional indicator. But, more importantly, it gives a generally reliable clue as to direction of the broader Chicago Fed's National Activity Index.
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Producer Price Index: Core Inflation Higher Than Expected
Feb 16, 2012 Doug Short
Today's release of the Producer Price Index (PPI) for January shows a smally month-over-month increase in headline inflation pressures. The seasonally adjusted finished goods number was up 0.1% MoM and up 4.1% year-over-year, a decline from last month's 4.8%. The interim YoY high was 7.2% in September of last year. However, Core PPI (ex food and energy) was up 0.4% MoM, the biggest monthly gain since last July. The YoY 3.0% was unchanged last month. At this level Core PPi is the highest since June 2009.
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Weekly Unemployment Claims Down by 13,000
Feb 16, 2012 Doug Short
The Unemployment Insurance Weekly Claims Report was released this morning for last week. The 348,000 new claims is a 13,000 decrease from an upward adjustment of 3,000 for the previous week (361K, previously 358K). The less volatile and closely watched four-week moving average came in at 365,250, the 14th week below 400K after 30 consecutive weeks above that benchmark. Here is the official statement from the Department of Labor:
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Taxes, Entitlements and the Growing Federal Debt Crisis
Feb 15, 2012 Doug Short
Earlier this week I shared my historical perspective on Debt, Taxes and Politics. Let's now take a closer look at Uncle Sam's balance sheet for last year and the official government projections for 2012 and the decade beyond. With the intensifying election year debates on the federal budget, it seems particularly appropriate to understand the broader context.
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The Shanghai Composite and Wilshire 5000 at Resistance
Feb 15, 2012 Chris Kimble
In April of 2011, we shared that the Shanghai Index was up against the top of its Flag/Pennant pattern in the 3-pack below (see post here). This resistance was sending a message to either harvest gains in the key global index or protect risk trade assets. The Shanghai index peaked at this time and fell in prices, as did stock prices around the world.
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Consumer Confidence Has Everything To Do With Retail Sales
Feb 14, 2012 Lance Roberts
Recently, Brian Wesbury released his latest economic commentary, one that paints a rather optimistic spin on the economy: "Be Confident In The Economic Recovery." It took me a little time to wrap my head around what Brian had written. Really? All you have to do is pull a chart of Consumer Confidence overlaid against automobile sales and the result is quite telling. Voila! Consumer confidence DOES MATTER. Then again why shouldn't it?
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At What Price the Presidency?
Feb 14, 2012 Eric Schaefer
If the projections are accurate, there will be no escape. Even if you decide to unplug your television or cancel your cable contract from now until the morning after Election Day, there is no sanctuary from the blizzard of attack ads expected as campaign season moves forward. A combination of money and technology, old and new, will be sure to find you where-ever you are. Junk mail and annoying "robo-calls" will be aided by internet tracking cookies, texting, and social media to deliver a candidate's message wherever you may seclude yourself.
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Pulse of Commerce Index: A 1.7% Drop in January
Feb 14, 2012 Doug Short
The latest Ceridian-UCLA Pulse of Commerce Index (PCI), a measure of the economy based on diesel fuel consumption, is now available.
The published report highlights the 1.7% December January decline with some interesting discussion of the ongoing disconnect between the PCI and other widely followed economic indicators.
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Retail Sales: A Disappointing 0.4% in January
Feb 14, 2012 Doug Short
The Retail Sales Report released this morning shows that retail sales in January were up 0.4% month-over-month from a 0.1% downward revision of December. (Note: the Census Bureau notes that the statistical confidence range is ±0.5%.) That was well below the Briefing.com consensus forecast of 0.8% and Briefing.com's own expectation of 1.2%. The more positive year-over-year change was 5.8%. The first chart shows the complete series from 1992, when the U.S. Census Bureau began tracking the data. I've highlighted recessions and the approximate range of two major economic episodes.
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Small Business Sentiment: ''In a Lull''
Feb 14, 2012 Doug Short
The latest issue of the NFIB Small Business Economic Trends is out today (see report). The February update for January is only 0.1 points above the December number. Still, the latest data is the highest level for the Small Business Optimism Index since February of last year. It is only fractionally below the level prior to the last recession.
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Debt, Taxes and Politics: The President's Budget for 2013
Feb 13, 2012 Doug Short
Earlier today President Obama released his Budget for Fiscal Year 2013. Let's take a moment to reflect on the history of U.S. federal debt and personal taxation, the latter of which began in 1913.
The first chart is a snapshot of federal debt based on data from the U.S. Treasury and the 2013 Federal Budget issued by the Office of Management and Budget (OMB). The chart also shows the OMB six-year forecast through 2017.
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Tech Note: Apple and 17-Year Resistance
Feb 13, 2012 Chris Kimble
Note from dshort: Apple made headlines in the mainstream financial press today by breaking above 500 in the early minutes of trading. Chris Kimble has been following Apple closely in recent weeks (February 9th and January 20th. Here is his latest perspective on Apple and the broader market.
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Money Supply and the Fed's Inflation Target
Feb 13, 2012 Chris Turner
How well historically has the Fed performed against a 2% inflation target? Milton Friedman, 1976 Economics Nobel Prize winner, immortalized the assertion that "Inflation is always and everywhere a monetary phenomenon." The concept is simple: An increase in money supply constitutes inflation, and a decrease in money supply constitutes deflation. At the simplest level, we can assume that an increase in the money supply may result in an increase in consumer prices.
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Weighing the Week Ahead: Time to Reconsider the Upside for Stocks?
Feb 12, 2012 Jeff Miller
I am going to take a little risk with my recent hot streak on the WTWA series. I am not highlighting Greece as the key story.
It would be easy to say that we will be focused on Greece, since that is the issue as I write this on Saturday night. There will probably be some sort of resolution by mid-week. Whatever it is, most will not be convinced.
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The Student Loan Debt Bomb
Feb 11, 2012 Mike Shedlock
It's interesting to watch some of the terms bandied about in headline news. For example, the LA Times headline reads "S&P says student loan debt could be next financial bubble". Next? Could Be? What with the word "next"? Also what's with the words "could be"? Without a doubt student loans are in a bubble and have been for many years. Another way to describe the situation is "Debt Bomb".
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Treasury Yields in Perspective
Feb 10, 2012 Doug Short
Let's have a look at a long-term perspective on Treasury yields. The chart below shows the 10-Year Constant Maturity yield since 1962 along with the Federal Funds Rate (FFR) and inflation. The range has been astonishing. The stagflation that set in after the 1973 Oil Embargo was finally ended after Paul Volcker raised the FFR to 20.06%.
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Michigan Consumer Sentiment Declines in Preliminary Survey
Feb 10, 2012 Doug Short
The University of Michigan Consumer Sentiment Index preliminary report for February came in at 72.5, a decline from the 75.0 January final report. Today's number was below the Briefing.com's consensus forecast of 74.0 and Briefing.com's more optimistic 75.5. See the chart below for a long-term perspective on this widely watched index.
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Treasuries Update: Operation Twist and the 30-Year Fixed Rate Mortgage
Feb 09, 2012 Doug Short
Note from dshort: The weekly Freddie Mac update released today shows the 30-year fixed rate mortgage at the historic low of 3.87% for the second consecutive week. The goal of Operation Twist to lower long-term rates appears to have had the desired impact on mortgage rates. The impact on Treasuries is less clear.
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Apple Computer and Newton's Law of Gravity
Feb 09, 2012 Chris Kimble
The Power of the Pattern suggested that Apple could run up to $500 on a breakout of resistance. See the first chart below, which I included in my January 20th post.
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The ''Non-Bounce'' in Non-Revolving Credit
Feb 09, 2012 Mike Shedlock
Joe Weisenthal, writing for Business Insider, reports that Consumer Credit Demolishes Expectations, Grows $19 Billion: " It's hard to think that the economy is going into any kind of recession with numbers like these. For the second straight month we just got a HUGE number on consumer credit." But a deeper analysis of the data suggests the opposite conclusion.
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Consumer Credit and the American Conundrum
Feb 08, 2012 Lance Roberts
What to do? This is not as an innocuous question as one might think. Why? Because most American families, who have to balance their living standards to their income, face this conundrum each and every month. Today, more than ever, the walk to the end of the driveway has become a dreaded thing as bills loom large in the dark abyss of the mailbox. What to do?
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Bernanke on the Unemployment Rate and Labor Weakness
Feb 08, 2012 Mike Shedlock
I nearly always disagree with Bernanke on monetary and fiscal policy. Specifically, the Fed ought not have a monetary policy for the simple reason the Fed should not exist.
Indeed, the Bernanke Fed and the Greenspan Fed have both proven beyond a shadow of a doubt they do not know what they are doing, where the economy is headed, or anything else of relevance in setting monetary policy.
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Syria, Assad and the Arab Spring
Feb 08, 2012 Doug Short
Last October I posted a commentary, Libya, Ghaddafi and the Arab Spring, shortly after Ghaddafi's death at the hands of the Libyan National Liberation Army. It was the third major Arab regime to be overthrown in 2011. Since that time Ali Abdullah Saleh has resigned the presidency of Yemen, which remains in a state of turmoil. And the media spotlight is currently on the escalating conflict in Syria.
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Fed Intervention and the Market: A New Update
Feb 08, 2012 Doug Short
About 4 1/2 months have passed since the latest Federal Reserve intervention, Operation Twist, was officially announced on September 21. We've now seen several bouts of aggressive Fed attempts to manage the economy following the collapse of the two Bear Stearns hedge funds in mid-2007 about three month before the all-time high in the S&P 500.
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Eulogy for the Money Fund?
Feb 07, 2012 Eric Schaefer
We confess reports of the demise of the money market mutual fund are premature. But, we cannot help but wonder if another nail in its coffin was not added last week when the Federal Reserve Board (FRB) released its Summary of Economic Projections (SEP). The January 25th forecast included, for the first time, Federal Open Market Committee (FOMC) members' assessment of when monetary policy may change.
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Pondering the Latest Employment Numbers
Feb 06, 2012 Mike Shedlock
Along with many others, I am pondering the latest employment numbers. Strong opinions are the norm.
Many are steadfast in their interpretations, some critically so, especially Bondad who blasted Zero Hedge in a scathing attack "No Rick Santelli and Zero Hedge, One Million People Did Not Drop Out of the Labor Force Last Month."
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Solving the ''Not in Labor Force'' Mystery
Feb 06, 2012 Lance Roberts
There has been much debate over the weekend regarding the 1.2 million individuals who moved into the "Not In Labor Force" category in Friday's Bureau of Labor Statistics report, which included an increase to the total population of 1.5 million.... As economist Betsey Stevenson Twittered: "What happened was Census found a bunch of old people we had assumed died."
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Employment Trends Signals Growth Ahead
Feb 06, 2012 Dwaine van Vuuren
Everyone treats employment figures as co-incident indication of an economy's status but a very useful leading economic indicator that deploys a wide range of labor market data is the Conference Board's Employment Trends Index (ETI).
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Today's Dow Moves up to Fourth Place
Feb 06, 2012 Doug Short
Here is the latest look at the "Sweet Sixteen" Dow recoveries adjusted for inflation/deflation I've been illustrating from time to time over the past two years. The charts below compare the current Dow recovery since the March 2009 low with fifteen other major recoveries dating from the origin of this legendary index in 1896. (See the footnote for my selection criteria.)
At this point the Dow is 734 market days beyond the 2009 low. The index has moved up a notch to fourth place in our Sweet Sixteen competition with a real gain of 86.1% off the low.
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Forecasting the Market: A Thought Experiment Revisited
Feb 06, 2012 Chris Turner
At the beginning of February with 70.2% of Q4 earnings reported, here is the latest update of my ongoing "thought experiment" for forecasting the S&P 500 price based on earnings fundamentals.
The chart below is based on the latest trailing twelve-month earnings (TTM) data published on the Standard & Poor's website as of February 2.
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Weighing the Week Ahead: Time for a Breather?
Feb 05, 2012 Jeff Miller
After last week's data and the recent market run, I sense that it might be time for a deep breath. There have been solid reasons behind the market rally, including all of the following:
• Improving economic reports
• Progress in Europe
• Reasonable growth in earnings
• A backdrop of low P/E multiple
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World Markets Weekend Review: The Rally Picks Up Steam
Feb 04, 2012 Doug Short
The 2012 rally picked up steam last week with the average gain of our basket of eight markets approximately doubling the average of the previous week. Europe was home to the best gains. The DAXK (i.e., the DAX ex dividends) was the week's top performer, followed by the CAC 40 and FTSE 100. The S&P 500's 2.17% gain earned fourth place. The Asia Pacific markets populated the bottom half with the Nikkei 225 as the only index with a negative weekly close, and a tiny one at that.
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Some Facts About the ''Falling'' Unemployment Rate
Feb 03, 2012 Mike Shedlock
Here are some quick notes about the today's announcement of a "falling" unemployment rate....
Some of those labor force numbers are due to annual revisions. However, the point remains: People are dropping out of the labor force at an astounding, almost unbelievable rate, holding the unemployment rate artificially low.
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Tech Note: The Bouncing Austrailan Dollar
Feb 03, 2012 Chris Kimble
The S&P 500 and the Australian Dollar have shown interesting degree of correlation over the past couple of years.
Over the past year several peaks in the 500 index coincided with peaks in the Aussie Dollar. Keep a close eye on the AUD$ to see how it acts at prior key resistance.
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Employment Rate Down 0.2% to 8.3% on 243K New Jobs
Feb 03, 2012 Doug Short
bNote from dshort: Today's release from the Bureau of Labor Statistics includes revisions as a result of the annual benchmarking process and the updating of seasonal adjustment factors. Also, household survey data for January 2012 reflect updated population estimates.
Here is the lead paragraph from the Employment Situation Summary released this morning by the Bureau of Labor Statistics:
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Earning Less - Why The Poor Get Poorer
Feb 02, 2012 Lance Roberts
Working harder - earning less. That is what today's release of productivity and labor costs showed us. With that report also comes the suspicion that a lot more people would be reciting the classic prose of Johnny Paycheck's "Take This Job And Shove It" if they thought they had an option to find work elsewhere.
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The Movie ''Groundhog Day'' and Resistance
Feb 02, 2012 Chris Kimble
Note from dshort: This commentary from Chris Kimble instantly grabbed my attention. Yes, the technical analysis is interesting, but the movie connection was what resonated.
In the movie Groundhog Day, actor Bill Murray plays a weatherman who finds himself living the same day, Groundhog Day, over and over again. The 3-pack below suggests that many key markets are experiencing the same thing: Resistance.
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The S&P 500, Dow and Nasdaq Since Their 2000 Highs
Feb 02, 2012 Doug Short
The January Effect in 2012 was quite strong, and the US markets have continued the rally that began last October. But let's take a step back and review the performance of the major US indexes in the 21st century through the end of January 2012.
Here is a update in response to a standing request from professor David England. David wants to disprove the standard message of Wall Street, "Don't worry! The market will always come back." I furnished David with some charts, and I shared them with regular visitors to my Advisor Perspectives pages.
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Market Valuation Indicators: Overvaluation Inreases
Feb 02, 2012 Doug Short
Below is a summary of the four market valuation indicators I regularly follow and updated yesterday through the January close. As I've frequently pointed out, these indicators aren't useful as short-term signals of market direction. Periods of over- and under-valuation can last for years. But they can play a role in framing longer-term expectations of investment returns.
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The Q Ratio and Market Valuation
Feb 01, 2012 Doug Short
The Q Ratio is a popular method of estimating the fair value of the stock market developed by Nobel Laureate James Tobin. It's a fairly simple concept, but laborious to calculate. The Q Ratio is the total price of the market divided by the replacement cost of all its companies. Fortunately, the government does the work of accumulating the data for the calculation. The numbers are supplied in the Federal Reserve Z.1 Flow of Funds Accounts of the United States, which is released quarterly.
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The Golden Cross in High Yields
Feb 01, 2012 Chris Kimble
Numerous times over the past couple of years we have highlighted how the high yield mutual funds price action has been a quality leading indicator in bull and bear markets, and I remain of the belief that the price action of high yield mutual funds can be a useful leading stock market indicator for portfolio management. If you are a believer that the Golden Cross is a bullish sign, you will be delighted to discover that a cross is about to take place in these high yield funds.
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Crestmont Market Valuation Update
Feb 01, 2012 Doug Short
The May 2011 article P/E: Future On The Horizon by Advisor Perspectives contributor Ed Easterling provided an overview of Ed's method for determining where the market is headed. His analysis is quite compelling. Accordingly I include the Crestmont data to my monthly market valuation updates.
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Is the Stock Market Cheap?
Feb 01, 2012 Doug Short
Here is a new update of a popular market valuation method using the most recent Standard & Poor's "as reported" earnings and earnings estimates and the index monthly averages of daily closes for December 2011, which is 1243.32. The ratios in parentheses use the monthly close of 1,257.60. For the earnings, see the table below created from Standard & Poor's latest earnings spreadsheet.
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Regression to Trend: A Perspective on Long-Term Market Performance
Feb 01, 2012 Doug Short
About the only certainty in the stock market is that, over the long haul, over performance turns into under performance and vice versa. Is there a pattern to this movement? Let's apply some simple regression analysis (see footnote below) to the question.
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Measuring the Performance of the Ivy Portfolio
Feb 01, 2012 Doug Short
I've been posting a monthly moving average update for the five ETFs in featured in Mebane Faber and Eric Richardson's Ivy Portfolio since the spring of 2009, when I featured my review of the book. Investing strategies are not the primary focus of my website, and I don't personally track the performance of the Ivy Portfolio other than to highlight the monthly signals.
For ETF performance tracking and backtesting, I use ETFReplay.com, an excellent website for analyzing the performance of individual ETFs and ETF portfolios based on customized moving-average strategies.
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Moving Averages: Month-End Update
Jan 31, 2012 Doug Short
The S&P 500 closed January with a gain of 4.36% from the December close. All three index signals indicated an invested position. See the specifics here.
The Ivy Portfolio
The table below shows the current 10-month simple moving average (SMA) signal for each of the five ETFs featured in The Ivy Portfolio.
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Last Share (Out) Standing
Jan 31, 2012 Eric Schaefer
Market commentators are at something of a loss to explain the stock market's steady advance in 2012. Through January 26th, the S&P 500 Index is up 4.8 percent; this compares to its flat performance (0.0 percent) in 2011.
Some contend the heady start in the New Year is simply a reversion to the mean. The problem with this explanation is many of the issues which hampered the market in 2011 are still unresolved, and look to remain unresolved for the foreseeable future.
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Consumer Confidence Takes an Unexpected Dive
Jan 31, 2012 Doug Short
The Latest Conference Board Consumer Confidence Index was released this morning based on data collected through January 19th. The 61.1 reading is substantially below the consensus estimate of 67.0 reported by Briefing.com, which is the same as Briefing.com's own estimate. Are we seeing a reversal of the holiday optimism reflected in last month's 64.8 level (which was an upward revision from 64.5)?
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Moving Averages: Month-End Preview
Jan 31, 2012 Doug Short
Here is a preview of the monthly moving averages I track before the market opens on the last business day of the month. All three S&P 500 and three of the five Ivy Portfolio ETF monthly moving averages are signaling "invested". The S&P 500 10- and 12-month simple moving averages are a change from last month's cash position. The one Ivy change from last month is that VTI, the US total market index, has flipped to "invested" after five months of "cash" signal.
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Weighing the Week Ahead: An Avalanche of Data
Jan 30, 2012 Jeff Miller
In a sharp change from recent times, this week will be all about US economic data. With recession worries still prominent, each release will be subject to special scrutiny. This will be especially true of Friday's employment situation report.
There will be continuing earnings news, although we have passed the peak of the season. The Greek default story has legs. Despite the headline potential from these sources, I see signs that there is less focus on Europe, and more attention (worry?) about the US economy.
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Real Personal Consumption Expenditures and Recessions
Jan 30, 2012 Doug Short
The latest release of Personal Consumption Expenditures, following Friday's release of the Advance Estimate of Q4 GDP, gives us an opportunity to analyze consumption at a monthly granularity, in contrast to the quarterly data in GDP.
The US economy is mostly about consumption, which accounts for about 70% of Gross Domestic Product. In fact, if we study the quarterly reporting of GDP from its inception in 1947, Personal Consumption Expenditures (PCE) have ranged from a low of 60.5% in Q3 1951 to a high of 71.2% in Q3 2009. As of Q4 2011, PCE is an even 71% of GDP.
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S&P 500 Fair Value: "Have it Your Way"
Jan 30, 2012 Chris Turner
When searching for the perfect S&P 500 fair value metric, readers will encounter a wide range of methods for establishing the "correct" fair value. Most of us interested in this pursuit have conflicting views on the accuracy or applicability of these methods when viewed in the context of current state of our economy. Many believe earnings for the S&P 500 will continue to rise; others believe they are destined to fall. Some believe averaging earnings over a period of time helps smooth data.
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Personal Consumption Expenditures: Price Index Update
Jan 30, 2012 Doug Short
The monthly Personal Income and Outlays report was published today by the Bureau of Economic Analysis. The first chart shows the monthly year-over-year change in the personal consumption expenditures (PCE) price index since 2000. I've also included an overlay of the Core PCE (less Food and Energy) price index, which is Fed's preferred indicator for gauging inflation. The latest Headline PCE price index YOY rate of 2.40% is a decrease from last month's 2.59%. The Core PCE index of 1.85% is an increase from the previous month's 1.70%.
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The New Conference Board LEI: First Look
Jan 29, 2012 Dwaine van Vuuren
The much anticipated Conference Board LEI revision is out. Many people were fearing that the removal of M2 from the composite would plunge it into recession territory, but that is not the case. Our own investigations into this matter in the lead up to the announcement revealed as such, but it is comforting to receive hard confirmation now.
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Q4 GDP: ''Prognosis Still Negative''
Jan 27, 2012 Lance Roberts
Last month we posted our analysis of Q3 GDP after the release of the final revision. We stated then: "It is important to remind you that a bounce in economic growth, as we will likely see in the coming Q4 GDP analysis beginning in January, does NOT in any way offset the probability of recession. As we stated during our initial analysis of Q3 GDP it is not uncommon for GDP to tick up just prior to a recession. In fact, in almost every instance, as shown in the table, the economy has had a positive growth rate, and in some cases a very strong growth rate, just prior to recession.
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Visualizing GDP: The Consumer Is Key
Jan 27, 2012 Doug Short
Note from dshort: The charts in this commentary have been updated to include the Q4 GDP Advance Estimate.
The chart below is my way to visualize real GDP change since 2007. I've used a stacked column chart to segment the four major components of GDP with a dashed line overlay to show the sum of the four, which is real GDP itself.
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The New Conference Board Leading Economic Index
Jan 27, 2012 Doug Short
Yesterday the Conference Board released its latest Leading Economic Index (LEI) for the U.S., an announcement I haven't yet featured with a series of charts and commentary. Frankly, I'm still grappling with the major overhaul of the index, which includes extensive changes that extend to its earliest data in 1959. But here is a first effort at highlighting the changes.
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Real GDP Per Capita, Year-over-Year Change, and the Next Recession
Jan 27, 2012 Doug Short
Note from dshort: This morning we learned that the Advance Estimate for Q4 real GDP came in below forecast at 2.8%, with the general consensus ranging from 3.1% to 3.5%. The latest data does not significantly change the long term view of real per-capita GDP, but it did slightly decrease the recession warning implicit in the latest real GDP year-over-year percent change, now at 1.6% (rounded up from 1.56%) from 1.5% (rounded up from 1.46%) after the Third Estimate of the previous quarter.
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GDP Q4 Advance Estimate Is 2.8%: Better Than Q3 But Below Expectations
Jan 27, 2012 Doug Short
The Advance Estimate for Q4 GDP came in at 2.8%, which is an improvement over the 1.8% Third Estimate for Q3 GDP, but below the general consensus. (Note: GDP for Q3 was initially put at 2.5%, with subsequent downward revisions to 2.0% and finally 1.8%). Here is an excerpt from the Bureau of Economic Analysis news release....
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Focusing on a Pair of Flags
Jan 26, 2012 Chris Kimble
The health/condition of the broad market should not be overlooked but also not overstated. In "focusing" on the broadest measures of the stock market (the NYSE and Wilshire 5000), the chart below illustrates that they both remain inside of large flag/pennant patterns.
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Durable Goods Orders Up 3%, Beating Expectations
Jan 26, 2012 Doug Short
The January Advance Report on December Durable Goods was released this morning by the Census Bureau. The new orders at 3.0 percent came in better than the Briefing.com consensus estimate of 2.0 percent, but Briefing.com's own estimate was spot on at 3.0 percent. The ex-transportation number of 2.1 percent far exceeded the consensus forecast of 0.7 percent.
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Why Home Prices Have Much Further To Fall
Jan 25, 2012 Lance Roberts
There has been a deluge of articles recently about the upticks in the housing data. The consensus is that these data points are surely indicating, finally, a bottom in the depressing decline of real estate. Let me acknowledge that I do not dispute the improvement in the data regarding home starts, permits, pending sales, etc. However, let's be clear that all of these data points are still mired at very depressed levels. So, while optimism is certainly always a welcome thing, for the average American, the world is quite different.
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The Four Totally Bad Bears
Jan 25, 2012 Doug Short
Note from dshort: At the request of an investment professional in San Francisco, I've updated this snapshot of our totally bad quartet through the market close on January 24.
The chart series features an overlay of the Four Bad Bears in U.S. history since the market peak in 1929. They are: 1) the Crash of 1929, 2) the Oil Embargo of 1973, 2) The 2000 Tech bust and 4) the post-2007 Financial Crisis. The series includes nominal, real, total-return and real total-return comparisons.
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Taking a Breather
Jan 25, 2012 Eric Schaefer
Never let it be said that investors do not have unrealistic expectations. This is true in both bull and bear markets. In the former, they come to believe the sky is the limit; and, yes, this time things are truly different, negating the value of past lessons learned. In the latter instance, they believe the sky is falling and there is little that can be done to forestall calamity.
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Gasoline Prices and Sales: What They Tell Us About the Economy
Jan 24, 2012 Doug Short
What is the relationship between retail gasoline prices and the volume of gasoline sales? The first chart below includes the latest data for U.S. Prime Supplier Sales Volumes, courtesy of the Depart of Energy's Energy Information Administration (EIA). The data is published monthly with about a two month lag. Because the numbers are highly volatile and have some seasonality, I've added a 12-month moving average (MA) to facilitate our understanding.
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The NYSE at Resistance and Portfolio Management
Jan 24, 2012 Chris Kimble
If one believes in building portfolios based upon the idea of "buying low and selling high," twice last year key support came into play in the broad based NYSE index, suggesting it was a time to "buy low on support."
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Complacency Risk Is High
Jan 23, 2012 Lance Roberts
As I was writing this past weekend's newsletter "A Technical Review Of The Markets", it really dawned on me just how complacent investors have become on the economy, the markets, and risk in general. The mainstream media, and most analysts, are looking at recent improvements in the economic data as a sign that the economy has begun to make a turn for the better. This view is further supported by the rise of the stock market.
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The S&P 500 and Its 800 Pound Gorilla: New Update
Jan 23, 2012 Chris Kimble
On January 11th a multi-year and multi-decade chart showed that heavy overhead resistance was in place a few percent above the market's price at that time.
Today's chart is an update to the 800 pound resistance line, reflecting that the 500 is now up against the line as the VIX is reaching very low levels.
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Is Silver the Great Trading Opportunity of 2012-2013?
Jan 23, 2012 John F. Carlucci
Silver tends to form a very periodic, predictably shaped asset bubble. Silver is also relatively volatile compared to most assets like large cap stocks and gold. These two factors – predictability and volatility – offer a potentially very lucrative trading opportunity for silver. I believe that window is opening right now. In this article, we will examine silver's predictability and volatility in great detail so as to prepare for this trade.
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Debt and Deleveraging: A Five-Pronged Solution
Jan 23, 2012 Mike Shedlock
Citing the latest report on "Debt and Deleveraging" by the McKinsey Global Institute, Ambrose Evans-Pritchard proclaims a light at the end of the tunnel and that America overcomes the debt crisis as Britain sinks deeper into the swamp. However, there is a big difference between alleged "light at the end of the tunnel" and "America Overcomes Debt Crisis" as Pritchard claims. US consumers may be one-third of the way through, but US debt-to-GDP ratios are low only because unsustainable government spending has taken up the slack.
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Weighing the Week Ahead: The State of the Union, Bernanke, Earnings
Jan 22, 2012 Jeff Miller
Normally the State of the Union Address would be the focal point for the week's events. In a general sense this is still true, but our focus in this weekly series is much narrower: What will influence markets?
This SOTU speech is unlikely to have a big market effect. The political lines have been drawn. We can all hope for initiatives that will generate some compromise, but I am not hopeful. I expect themes related to the major national problems -- housing and jobs.
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The Behavior of the Euro and Portfolio Construction
Jan 19, 2012 Chris Kimble
The Euro created bullish falling wedges in early 2009 and mid-year 2010. How did the S&P 500 index perform after the Euro broke to the upside of these bullish patterns? Each time the 500 index rallied at least 20% in price, and the 2009 rally was much bigger!
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Industrial Production Confirming Changes To LEI
Jan 18, 2012 Lance Roberts
For the last several months I have been scratching my head about the Leading Economic Indicator Index (LEI), as published by the Conference Board, due to the divergence between it and other leading indicators that we watch. The LEI has risen sharply while real indications of the economy such as changes to employment, industrial production, incomes and personal consumption expenditures have not. But now, we learn, the Conference Board will soon release a significant revision to the LEI.
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Whither Rates?
Jan 18, 2012 Eric Schaefer
It is that time of the year again: that brief moment when we confess that 2012 is the year for those overdue changes we now vow to see through. Not surprisingly, the resolutions we make annually are pretty consistent from person-to-person. Shed those ten pounds, save by forgoing the daily latte, spend more time with family or quit gripping and seek a better job -- all will recognize these ambitions since we all share the same foibles.
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A Portfolio-Construction Tip from the TIP ETF?
Jan 18, 2012 Chris Turner
A New Year has started, yet many of last year's financial debates remain the same. Will Inflation or Deflation be the major theme in 2012? Will the Currency winner will be a stronger Dollar or Euro as a rising wedge has formed? Will Global falling resistance hold or break? Flag/Pennant patterns in the broad stock market will be resolved to which side? Is TLT facing resistance at the 2008 financial crisis highs? Can TLT rally in 2012 like it did in 2011, up over 25%?
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Graphical Representations of the Fed's Effort to Stimulate Bank Lending
Jan 17, 2012 Mike Shedlock
Bernanke is trying every way he can to get banks to lend (printing coupled with a multitude of lending facilities and Fed programs). It's easy enough to prove the printing: Base money supply is up about $1.8 trillion since the start of the recession. The charts below offer a stunning narrative of the Fed\'s efforts and the results to date.
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Cycles in Dow Market History: Where Are We Now?
Jan 17, 2012 Peter Williams
Following on from my overall summary chart of 110 years of the Dow Jones Industrial Average (DJIA) published here last week, further detailed analysis serves to demonstrate that volatility has been reliably consistent for the past 110 years, and now is no different. Leading on from last week's DJIA summary, I discovered on the 10base LOG chart that there was an approximate 16.6 year bounding box with 43% depth that could be repeatedly applied throughout the entire DJIA price history – stacked vertically and added horizontally. I have since discovered this was no accident....
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Real Final Sales Set to Decelerate?
Jan 16, 2012 Bruce Carman
With the release of the Advance Estimate of Q4 2011 GDP less than two weeks away, the economists surveyed by the Wall Street Journal are forecasting accelerating growth for the US economy and generally discount the odds of a recession in the next 12 months. With this optimism for context, let's take a step back and look at some interesting correlations between components of GDP and the onset of recessions.
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WSJ Economists' GDP Forecasts: 3.1% in Q4, Falling to 2.2% in Q1 2012
Jan 16, 2012 Doug Short
On Friday of next week (January 27th) we'll get the Advance Estimate for Q4 GDP from the Bureau of Economic Analysis. Meanwhile, the Wall Street Journal's January Survey of economists is now available. Let's see what their crystal ball is telling them about Q4 GDP.
First, some context: The BEA's Final Estimate for Q3 GDP came in at 1.8 percent, a downward revision from the 2.0 percent Second Estimate, which was a downward revision from the Preliminary Estimate of 2.5 percent.
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Weighing the Week Ahead: Have Big Companies Lost Their Earnings Mojo?
Jan 15, 2012 Jeff Miller
Earnings season starts in earnest this week. There are a number of key questions. As I write this on Saturday, with a three-day weekend ahead, I know that the news from Greece will dominate on Tuesday. Whatever I write tonight could look silly, but I have been there before:) By Thursday, we'll all be talking earnings. I will discuss how to play this in the conclusion. First, let us do our regular review of last week's news.
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The Nasdaq 100 Twelve Years After the Tech Bubble
Jan 13, 2012 Chris Kimble
Post bubbles can be painful! The Nasdaq 100 (NDX) hit its all-time high back in 2000, yet 12 years later this key tech index has been unable to rally above its 38% Fibonacci retracement level.
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Demographic Headwinds: The Decline of Peak Spenders
Jan 12, 2012 Doug Short
Demographer Harry Dent was recently a featured guest on Bloomberg TV in an interview that was promoted with the frightening tease "S&P 500 to Fall 30-50% in 2012." See the video clip below for the complete interview.
The rationale for Dent's grim forecast is primarily based on the demographics of the peak spending years, an age cohort he refers to in the interview as ages 46 to 50. If we use the Census bureau five-year data groupings, the cohort in question is Age 45-49 (which is the range Dent normally refers to in his publications).
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The Philly Fed ADS Business Conditions Index
Jan 11, 2012 Doug Short
Note from dshort: In response to a reader's request, I've updated my chart series on the Philly Fed's ADS index.
The Philly Fed's Aruoba-Diebold-Scotti Business Conditions Index (hereafter the ADS index) is a fascinating but little known real-time indicator of business conditions for the U.S. economy, not just the Third Federal Reserve District, which covers eastern Pennsylvania, southern New Jersey, and Delaware. Thus it is comparable to the better-known Chicago Fed's National Activity Index, which is updated monthly (more about the comparison below).
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The S&P 500 and Its 800 Pound Gorilla
Jan 11, 2012 Chris Kimble
From a multi-year perspective, heavy resistance remains in place around 3% above yesterday's closing price. At the same time the S&P 500 index is nearing this resistance, a few sentiment indicators are getting a little long in the tooth, one of them being the Citigroup Economic Surprise Index.
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Consumer Spending May Disappoint
Jan 10, 2012 Lance Roberts
All eyes have been watching the retail sector as of late hoping for a resurgence of the American consumer. After all, consumer credit rose sharply in the most recent report by $20 Billion, even as the personal savings rate fell to 3.5%. So, while there is much less money in the bank, it did mean more money flowing into the economy. Those two data points bode well for a stronger 4th quarter GDP report coming this month, which we estimate should come in closer to 2.5% versus 1.8% in the 3rd quarter and 1.3% in the 2nd. That's the good news.
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The Great Repression: The Economic Collapse of 2012-2022 (New Update)
Jan 10, 2012 John F. Carlucci
Note: This article has been updated to incorporate some supporting research published by the San Francisco Federal Reserve.
In this article we will analyze the long term S&P chart developed by Doug Short (Figure 1), using it as a reference to "tease out" some very specific predictions of future trends. The estimates and scenarios are based on an unbiased interpretation of data derived from this chart. By following the cold data where it leads us, we arrive at some unnerving predictions which I will collectively refer to as The Great Repression.
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The Twin Peaks of Unemployment
Jan 10, 2012 Doug Short
Unemployment rates off their recent highs but still a matter of concern. Yesterday my friend Francois Gadenne, the Chairman and Executive Director of the Retirement Income Industry Association (RIIA), sent me some interesting commentary on historical unemployment rates by age cohorts. His email prompted me to investigate four Bureau of Labor Statistics (BLS) unemployment rate series, which date from 1948 to the present: Age 20 and over, Age 20-24, Age 25-54, Age 55 and over.
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The Dollar-Commodity Conundrum
Jan 10, 2012 Chris Kimble
Are you old enough to remember the game show "To Tell the Truth?" The show would have three people on a panel, one would be telling the truth about themselves and two would not be.
The chart below is one I shared with Premium Members yesterday, reflecting that the CRB index and the US Dollar were both facing key resistance at the same time. One of these charts is "not telling the truth!"
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The DAX versus the DAXK
Jan 09, 2012 Doug Short
I\'ve received several emails regarding my switch from the DAX to the DAXK for my weekly world markets update. The substitution was suggested by Joerg Willig, a finance professional in Germany, who pointed out that the more widely recognized DAX is a total return index whereas DAXK is a price-only version of the same index. Thus the substitution gives us an "apples to apples" comparison with the other world indexes.
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Equities as a Matter of Belief
Jan 09, 2012 Chris Turner
Sure, Adam Smith coined the phrase "All money is a matter of belief." Perhaps his description fits with equities as well. Lately, financial pundits tout the undervaluation of the S&P 500 "based on forward P/E." Readers may benefit from understanding some simple math and seeing a pair of charts to assist in ascertaining relative valuations. Catch phrases like "generational buy opportunity" entice investors, but let's consult the charts to evaluate those claims.
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Structurally High Unemployment for a Decade
Jan 09, 2012 Mike Shedlock
Since 2008 I have been stating the US would have "Structurally High Unemployment for a Decade".
Indeed, based on historical trends in labor force growth, the expected unemployment rate for the number of jobs created during the recovery would be well north of 11%. Yet, the unemployment rate is currently an artificially "low" 8.5% (not that 8.5% is anything to brag about).
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Weighing the Week Ahead: New Year, New Tone?
Jan 08, 2012 Jeff Miller
The theme has been the same for many weeks: Reasonable US data, bad news from Europe.
We start each trading day looking at the latest headline and how the Euro is trading. While the US economy has shown improvement, the European story is a huge overhang. This is mostly because no one knows how to quantify the possible impacts. The story plays in three different ways:
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110 years of Dow History Reveals a Little Secret: Volatility Is Normal
Jan 08, 2012 Peter Williams
My long-term historical perspective on the Dow illustrates how many periods of sideways range-bound movement had the same volatility. It showed the 2007-2009 peak to trough was the same in each instance of 1915, 1940, 1975. The real kicker was discovering the trough of 1932 to peaks in 1966 and 1973 lead to repeating ranges in 2008, and 'possibly' higher into 2015. The first range of 33.5 years was near enough to exactly repeat itself (hit the value, but peaked slightly early). The second range of 40.5 years is looking promising to date with an upside target of 14090 on/before May 2015.
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The Real Employment Situation Report For December 2011
Jan 07, 2012 Lance Roberts
In this month's update of the "real" employment situation we will dig down behind the headlines and look deeper into this morning's release of the Employment Situation report from the Bureau of Labor Statistics. On the positive side there were 200,000 jobs created in the previous month and the unemployment rate fell from an upwardly revised 8.7% to 8.5%. Furthermore, while October was revised higher by 12,000 jobs, November was revised lower by 20,000. Now it is time to dig behind the headlines.
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The Great Leading Indicator Smackdown: New Update
Jan 06, 2012 Doug Short
Periodically I update a series of overlays comparing the ECRI Weekly Leading Index (WLI) and the Conference Board's monthly updates of its index of Leading Economic Indicators (LEI). The most recent LEI update was published on December 22 (data through November), and today we have the latest WLI, based on data through December 30th. As we will see in the charts below, the two indicators continue to exhibit a major divergence.
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Hungary Marches Down Hyperinflation Path; What About the US?
Jan 05, 2012 Mike Shedlock
As I watch political events in Hungary, I cannot help but think Hungary is on a path towards hyperinflation.
Please consider Der Spiegel report 'Democracy Is Being Trampled On in Hungary' and see if you agree
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The Total Return Roller Coaster
Jan 04, 2012 Doug Short
Here's an interesting set of charts that will especially resonate with those of us who follow economic and market cycles. Imagine that ten years ago you invested $10,000 in the S&P 500. How much would it be worth today, with dividends reinvested but adjusted for inflation? Brace yourself: The purchasing power of your investment has grown to $10,298, a rather disappointing annualized real return of 0.29%.
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Meet the Millennials
Jan 03, 2012 Eric Schaefer
In a country riddled with divisions, there is one which may come to dominate all of the others. Ironically, it is the schism most neglected by the chattering classes; one which receives scant attention from business pundits and political savants, right and left. It is the new generation gap. There is a growing wedge between the concerns of the electorate's youngest members and the interests of its oldest.
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Weighing the Week Ahead: Back to Work!
Jan 02, 2012 Jeff Miller
The investing community goes back to work on Tuesday for a short week that could see plenty of action.
Everyone is doing a review of 2011, so I tried to do something really different -- The Year that Wasn't! Please take a look at what might have happened (but didn't) and offer your own take. I think the theme is worth consideration, so I might do it again if there is interest.
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The ''Real'' Mega-Bears: Weekend Update
Jan 01, 2012 Doug Short
It's time again for the weekend update of our "Real" Mega-Bears, an inflation-adjusted overlay of three secular bear markets. It aligns the current S&P 500 from the top of the Tech Bubble in March 2000, the Dow in of 1929, and the Nikkei 225 from its 1989 bubble high.
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Secular Bull and Bear Markets
Jan 01, 2012 Doug Short
Was the March 2009 low the end of a secular bear market and the beginning of a secular bull? Without crystal ball, we simply don't know. One thing we can do is examine the past to broaden our understanding of the range of possibilities. An obvious feature of this inflation-adjusted is the pattern of long-term alternations between up-and down-trends.
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Wrestling with the Big Picture
Dec 30, 2011 Chris Kimble
As we close out the year, a common tradition is to look back over the past 12 months for a sense of how the market is doing. Instead, let's take a broader perspective and examine the big picture over the past few decades. The chart below illustrate that the Dow and S&P 500 continue to be influenced by key falling channels and resistance lines.
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Weighing the Week Ahead: A Respite from European Concerns?
Dec 26, 2011 Jeff Miller
In the absence of fresh bad news from Europe, stocks managed some solid gains last week. Our trading model, Felix, reflected greater confidence than most traders and investors (including me). As noted last week I plan to focus on year-end matters, as well as enjoying time with family and friends. This is a somewhat abbreviated version of the regular weekly update. I want to provide continuity on the indicator updates, as well as capture important events in real time.
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''Real'' Disposable Income Per Capita Since 2000
Dec 23, 2011 Doug Short
Earlier today I posted my monthly update of the year-over-year change in the Bureau of Economic Analysis (BEA) Personal Consumption Expenditures (PCE) price index since 2000. My focus was on the PCE index as a measure of inflation. Now let's look at the PCE data to understand what the latest numbers are telling us about a key driver of the U.S. economy: "Real" Disposable Income Per Capita.
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Rebalancing Resurrected, Part 3
Dec 23, 2011 Adam Butler and Mike Philbrick
Prologue: This is a 'Canadian-ized' version of an article we published on Monday, December 19, 2011, which featured a study of US equity and fixed-income markets. As we are located in Canada, we were motivated to see how well the same techniques work in our home market using the S&P/TSX Composite. As expected, it turns out that they work quite well.
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The ''Real'' Goods on the Latest Durable Goods Orders
Dec 23, 2011 Doug Short
Earlier today I posted a commentary on the November Advance Report on October Durable Goods Orders. This Census Bureau series dates from 1992 and is not adjusted for either population growth or inflation. Here is a chart of the same data shown with two adjustments, the red line shows the goods orders divided by the Census Bureau's monthly population data, giving us durable goods orders per capita. The blue line goes a step further and adjusts for inflation based on the Producer Price Index, chained in current dollars. This gives us the "real" durable goods orders per capita.
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Conference Board Leading Economic Index Update
Dec 22, 2011 Doug Short
The Conference Board Leading Economic Index (LEI) for the U.S. increased 0.5 percent in November to 118.0 (2004 = 100), following a 0.9 percent increase in October, and a 0.1 percent increase in September. Here is an excerpt from the press release: "November's increase in the LEI for the U.S. was widespread among the leading indicators and continues to suggest that the risk of an economic downturn in the near term has receded.
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The Middle-Class Welfare State
Dec 21, 2011 Eric Schaefer
The Federal budget and budgetary process has its own lexicon. Most are familiar with some of the more common terms bandied about by the press and politicians as they debate how to bring the deficit under control. To the vocabulary of earmarks, discretionary and mandatory spending, and on- and off-budget, readers will be introduced in 2012 to the phrase "tax expenditures".
The subject of tax expenditures will prove as contentious as entitlement spending; and tax expenditure reform will be as critical as entitlement reform to fixing the nation's finances.
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The Eurozone Is Saved?
Dec 21, 2011 Lance Roberts
Overnight European banks swamped the ECB's first-ever three-year liquidity operation to the tune of, and much larger than expected, €489.2 Billion. That is the LARGEST EVER single refinancing operation in the ECB's history....
So, with a stroke of a pen on the dotted line the Euro-crisis is solved....right?
Not So Fast!
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The Message from the Dollar
Dec 21, 2011 Chris Kimble
The U.S. Dollar over the past few weeks looks to be forming a "bullish Cup & Handle" pattern. The Power of the Pattern first suggested that this bullish pattern could be forming a few weeks ago. It is very early in the day, yet the dollar looks to have created a bullish wick at support overnight. If this pattern read is correct, the Dollar could be pushing much higher from here, suggesting that investors and financial professionals should "Be Prepared" for some sizeable market action in the near future.
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Rebalancing Resurrected, Part 2
Dec 21, 2011 Adam Butler and Mike Philbrick
Prologue: This is a 'Japan-amized' version of an article we published on Monday, December 19, 2011, which featured a study of US equity and fixed-income markets. The Japanese experience since 1993 was dramatically different than the U.S. experience. While U.S. stocks climbed 267% over the past 18 years, Japanese stocks dropped 48% over the same period, which annualizes to losses of 3.43% per year.
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Does the Trend Matter?
Dec 20, 2011 Kay Conheady
I am fascinated by the growing body of research that revolves around the P/E10 ratio (and its siblings, the P/E5, P/E15 and so on), also known as the cyclically adjusted or normalized P/E ratio. In the past 5 years there have been numerous articles published at Advisor Perspectives as well as independently and in professional journals by numerous researchers: Robert Shiller, Doug Short, Wade Pfau, Michael Kitces, John Hussman, Crestmont Research, Jim Otar, the team of Mike Philbrick and Adam Butler, Rob Bennett and others.
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Another Preposterous Proposal to ''Fix the Unfixable''
Dec 20, 2011 Mike Shedlock
Political, Economic, and Mathematical Realities
The devalue-your-way to prosperity proponents are out in full force in spite of the mathematical silliness of it all.
Three writers of the Wall Street Journal article Weak Currency Stands to Buoy Zone Exports propose Europe is in the midst of a "weak recession" and a falling Euro will help exporters.
Weak recession? We will see about that.
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Rebalancing Resurrected
Dec 19, 2011 Adam Butler and Mike Philbrick
The investment community is in the midst of an identity crisis, though admittedly many in the industry don't know it yet. At the heart of the matter is the following misconception:
Investors perceive that investment professionals add value via security selection and market timing. What's worse, most investment professionals believe that they add value via security selection and market timing. This perception is dangerously misguided.
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Weighing the Week Ahead: What should we expect from Santa?
Dec 18, 2011 Jeff Miller
Market forecasts are made for many different time frames. Peter Lynch focused on the long term, famously saying that he could not tell you the direction of the next 1000 point move in the market, but he could for the next 10,000 points. Our Felix model makes a three-week forecast, although we take a fresh look and adjust positions (if needed) every day.
Each time period is a different battleground. Somehow everything changes at this time of year as you hear the question: Will there be a Santa Claus Rally?
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The Dow Panic of 1907 and the 2008 Financial Crisis
Dec 18, 2011 Doug Short
Note from dshort: During the summer I posted a set of charts illustrating the dramatic market behavior during the Panic of 1907 and the Financial Crisis of 2008. A century separated these two momentous market episodes, and the underlying causes were quite different. However, the overall volatility and general patterns of decline and rally are remarkably similar. In response to a request, I've updated the charts through December 16.
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Economists' GDP Forecasts: December 2011 versus December 2007
Dec 17, 2011 Doug Short
Last week I posted the latest GDP forecasts from the Wall Street Journal's December Survey of economists here. I focused on their forecasts for Q4 2011, Q1 2012 and the overall 2012 forecasts.
On Friday the Wall Street Rant blog posted an interesting overlay of the December WSJ GDP survey forecasts for 2012 with the equivalent 2008 forecasts made in December 2007.
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A Confederacy of Dunces?
Dec 15, 2011 Eric Schaefer
On January 9th, 1790, Secretary of the Treasury Alexander Hamilton issued his Report on Public Credit in response to a request by the House of Representatives. In it Hamilton argued the newly formed Federal government should assume the war debts incurred by the thirteen colonies during the Revolutionary War. Today European leaders are faced with a similar dilemma. All realize certain member states of the European Monetary Union have borrowed way more than they can ever hope to repay.
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The Shanghai Tower and Aftermath
Dec 15, 2011 Doug Short
Note from dshort: I've updated the charts to include today's 2.14% decline in the index.
Today all eyes are on the eurozone financial crisis, crashing commodities, and the potential drag on US markets. But what caught my eye was the Shanghai Composite, which logged its 5th consecutive daily decline and the 16th decline in the last 21 sessions.
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Estimating Future Stock Market Returns
Dec 14, 2011 Adam Butler and Mike Philbrick
Long-time readers will know that we do not make predictions in the normal sense. That is, we endorse the decisive evidence that markets and economies are complex, dynamic systems which are not reducible to normal cause-effect analysis. However, we are willing to acknowledge the likelihood that the future is likely to rhyme with the past. Thus, we apply simple statistical models to discover mean estimates of what the future may hold over meaningful investment horizons (10+ years), while acknowledging the wide range of possibilities that exist around these averages.
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Dollar Soars Following FOMC No Hint of QE3; Looking Ahead, What's Next?
Dec 13, 2011 Mike Shedlock
I have read countless articles recently regarding the inevitability of QE3. I have disagreed for four reasons.
- Price of oil near $100 give Fed little choice
- Rising price of food gives Fed little choice
- Stock market has risen on air and hype of European bailout giving Fed little reason
- Falling unemployment rate (even though it's totally bogus) gives Fed little reason
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The Dollar, Gold and the Market
Dec 13, 2011 Doug Short
Commodity expert Dennis Gartman certainly struck a nerve in the financial community as word hit the street of his call on gold in the latest Gartman Letter (subscription required). Here is the gist, as reported by Bloomberg:
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A Million Dollars Ain't What It Used To Be
Dec 12, 2011 Lance Roberts
If you had $1 Million in the bank you would be rich - right? That is what half of the respondents to a recent study by the Gallup Organization said. From the survey: "...Americans [were asked] how much net worth, or savings in cash, stocks, real estate, and other investments, they would need to consider themselves rich. The median figure Americans give is $1 million, the same as in Gallup's 2003 poll asking the same question.
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Those Russell 2000 Twins
Dec 12, 2011 Chris Kimble
The chart blow was posted on August 8th, reflected an almost perfect identical inverted wedge patterns in the Russell 2000 (see post here).
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Race to the Finish: The 1968 and 2000 Secular Bears
Dec 12, 2011 Doug Short
Note from dshort: I received a request to post an update of my overlay of the 1968-1982 secular bear with our current market from the peak in 2000.
Here's an update of a chart series I've occasionally shared that compares two secular bear markets -- the current decline since the peak in March 2000 and the S&P 500 from its peak on November 29, 1968 to its bottom on August 12, 1982.
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Two Measures of Inflation: New Update
Nov 30, -0001 Doug Short
em>Note from dshort: I've now updated the charts below to include today's Consumer Price Index data from the Bureau of Labor Statistics. The annualized rate of change is calculated to two decimal places for more precision in the side-by-side comparison.
The BLS's Consumer Price Index for January, released today, shows core inflation above the Federal Reserve's 2% target at 2.28%. Core PCE, at the end of last month, is fractionally below the target at 1.85%.
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