Monday, August 30, 2010

BEA NEWS: Personal Income and Outlays, July 2010

The U.S. Bureau of Economic Analysis (BEA) has issued the following news release today:  
Personal income increased $30.0 billion, or 0.2 percent, and disposable personal income (DPI) increased $17.6 billion, or 0.2 percent, in July, according to the Bureau of Economic Analysis. Personal consumption expenditures (PCE) increased $44.1 billion, or 0.4 percent. 
The full text of the release on BEA's Web site can be found at
http://www.bea.gov/newsreleases/national/pi/pinewsrelease.htm


U.S. Bureau of Economic Analysis · 1441 L Street NW · Washington DC 20230 · 202-606-9900

Sunday, August 29, 2010

Market Data & Monthly Charts: Week Ending August 27, 2010


Market Index 2009 Close 8/27 Close Week Change Simple YTD %
Dow Industrials Avg 10428.05 10,150.65 -0.62% -2.66%
S&P 500 1115.1 1,064.59 -0.66% -4.74%
Fed Funds Rate 0.25% 0.25% 0% 0%
10 yr T-bond Yld 3.85% 2.64% 0.03% -1.21%
5 yr T-note Yld
1.49% 0.04%
5 yr infl adj Note
0.12% -0.02%
Implied 5 yr Inflation %
1.37% 0.06%
2 yr T-note Yld 1.14% 0.55% 0.06% -0.59%
2-10 Yr Slope 2.70% 2.09% -0.03% -0.61%
90 day T-bill Yld
0.14% -0.01%
Gold ($/oz) $1,096.95 $1,237.90 0.74% 12.85%
WTI Oil ($/brl) $79.36 $75.17 1.83% -5.28%
VIX "Worry Index" 21.68 24.45 -4.08% 12.78%





Credit Spreads
8/27 Close Week Change
Inv Grade Credit Idx
4.39% 0.06%
Low Grade Credit Idx
8.52% 0.04%
Markit CDX Inv Grd Idx
115 5.50%
Markit CDX Mid Grd Idx
166 5.06%

Friday, August 27, 2010

BEA News: GDP, 2nd Qtr 2010 (second estimate), and Corporate Profits

The U.S. Bureau of Economic Analysis (BEA) has issued the following news release today:
Real gross domestic product -- the output of goods and services produced by labor and property located in the United States -- increased at an annual rate of 1.6 percent in the second quarter of 2010, (that is, from the first quarter to the second quarter), according to the "second" estimate released by the Bureau of Economic Analysis. In the first quarter, real GDP increased 3.7 percent.
The full text of the release on BEA's Web site can be found at
http://www.bea.gov/newsreleases/national/gdp/gdpnewsrelease.htm



U.S. Bureau of Economic Analysis · 1441 L Street NW · Washington DC 20230 · 202-606-9900

Tuesday, August 24, 2010

Bullish or Bearish?

This is such an important and difficult discussion topic. A lot of net worth is at risk to a bear market mauling. Saving it from the potential value destruction depends on having a plan or at least having a clear idea of what market orientation is reflected in the asset allocation strategy at work now. Is it a bull market strategy or a bear market one? Having a position provides a base of information. My observations from talks with peers and industry colleagues is that many are paralyzed bulls and remaining at risk to the bear. There is nothing bad with being a bull or a bear. Losing money is what is bad and that is what I'm concerned about. If this period is recognized as a secular bear market period, which many call it now, losing money will be the outcome for those who could not get comfortable zipping on a bear coat for a while.

Here are a pair of perspectives to define the distinction between the bullish and bearish economic outlook, mostly measured by the stock market. Bob Doll, who is paid to be a bull, represents his investment manufacturing employer. The bear is David Rosenberg. His employer is a wealth management firm in Canada where he is chief economist, a position he held previously at Merrill Lynch. He should be expected to walk his talk. This interview was conducted back in March. After the video clip, there are some graphs that try to look at the economy from the positions taken by Doll and Rosenberg to examine what has changed compared with their expectations. They have not changed their market outlooks since March. One of them should, which one?

Monday, August 23, 2010

Market Data: Week Ending August 20, 2010


Market Index 2009 Close 8/20 Close Week Change Simple YTD %
Dow Industrials Avg 10428.05 10,213.62 -0.87% -2.06%
S&P 500 1115.1 1,071.69 -0.70% -4.05%
Fed Funds Rate 0.25% 0.25% 0% 0%
10 yr T-bond Yld 3.85% 2.61% -0.06% -1.24%
5 yr T-note Yld
1.45% 0.00%
5 yr infl adj Note
0.14% 0.08%
Implied 5 yr Inflation %
1.31% -0.08%
2 yr T-note Yld 1.14% 0.49% -0.04% -0.65%
2-10 Yr Slope 2.70% 2.12% -0.02% -0.58%
90 day T-bill Yld
0.15% 0.00%
Gold ($/oz) $1,096.95 $1,228.80 0.99% 12.02%
WTI Oil ($/brl) $79.36 $73.82 -2.08% -6.98%
VIX "Worry Index" 21.68 25.49 -2.86% 17.57%





Credit Spreads
8/20 Close Week Change
Inv Grade Credit Idx
4.33% -0.09%
Low Grade Credit Idx
8.48% 0.01%
Markit CDX Inv Grd Idx
109 0.00%
Markit CDX Mid Grd Idx
158 1.94%

Wednesday, August 18, 2010

S&P 500, 10 Yr UST, Fed Funds Rate Long-term Charts

On dshort.com, I see a great tool to illustrate the impact, across markets, of changes in the Fed Funds rate and in the yield of the 10 yr Treasury, shown adjusted and not adjusted for inflation. He titled his post Treasury Yields in Perspective. It also provides a hint at what we might experience someday, when the Fed begins hiking the Fed Funds Rate.

Tuesday, August 17, 2010

Sustainable Recovery or Recession Part 2

Perma-bear, David Rosenberg, faces a stiff challenge from two main street challengers in this video clip recorded Friday, Aug. 13. Rosenberg re-emphasizes that the stock market and economic recovery we are enjoying is mostly a bounce from a very low level, stimulated by corporate inventory replacement and cash as stimulus that is now drying up. He points out that comparisons of recent recessions and their recoveries is a comparison of unlike situations. What distinguishes the current economic period is the need for credit to be reduced substantially before real intrinsic growth can resume on a sustainable basis. He says that US consumers represent the biggest balance sheet in the world and are carrying debt equal to 20% of their assets. The long-term average level is 12.5%.

Monday, August 16, 2010

Market Data: Week Ending August 13, 2010


Market Index 2009 Close 8/13 Close Week Change Simple YTD %
Dow Industrials Avg 10428.05 10,303.15 -3.29% -1.20%
S&P 500 1115.1 1,079.25 -3.78% -3.32%
Fed Funds Rate 0.25% 0.25% 0% 0%
10 yr T-bond Yld 3.85% 2.67% -0.15% -1.18%
5 yr T-note Yld
1.45% -0.05%
5 yr infl adj Note
0.06% 0.09%
Implied 5 yr Inflation %
1.39% -0.14%
2 yr T-note Yld 1.14% 0.53% 0.02% -0.61%
2-10 Yr Slope 2.70% 2.14% -0.17% -0.56%
90 day T-bill Yld
0.15% 0.01%
Gold ($/oz) $1,096.95 $1,216.60 0.93% 10.91%
WTI Oil ($/brl) $79.36 $75.39 -6.58% -5.00%
VIX "Worry Index" 21.68 26.24 20.70% 21.03%





Credit Spreads
8/13 Close Week Change
Inv Grade Credit Idx
4.42% -0.02%
Low Grade Credit Idx
8.47% 0.17%
Markit CDX Inv Grd Idx
109 6.86%
Markit CDX Mid Grd Idx
155 7.64%

Friday, August 13, 2010

July 2010 Consumer Price Index

A bump up in energy costs led to a rebound in CPI inflation, ending a three month string of declines. Meanwhile, the core rate remained soft. In June overall CPI inflation rebounded 0.3 percent, following a 0.1 percent decline in June. July's rise equaled analysts' forecast for a 0.3 percent increase. Excluding food and energy, the CPI eased to a 0.1 percent gain after a 0.2 percent boost in June. The consensus projection was for a 0.1 percent increase.

Within the core, a lot was going on. Probably the biggest item of note was the continuation of soft shelter costs which rose only 0.1 percent for the fourth month in a row. This reflects the weak housing market which has resulted in more unsold homes going to the rental market. Medical care cost fell back 0.1 percent after jumping 0.3 percent in June.

But some components showed some strength. Apparel jumped 0.6 percent. Tobacco spiked 1.6 percent. And new & used motor vehicles gained 0.3 percent.

[Chart] Yearly changes tend to smooth out more severe monthly fluctuations and give a better idea of the underlying rate of inflation. Even with the smoother trend, note that the core CPI does not fluctuate as much as the total CPI.
Data Source: Haver Analytics

Wednesday, August 11, 2010

Stupid Policy Guarantees Another Crisis

William Black is Associate Professor of Economics and Law at the University of Missouri-Kansas City

One Eye on the Fed: Quantitative Easing

Yesterday, the FOMC meeting was held. There was a lot of interest among financial observers on how they would use the carefully designed language in the press release from the group, and most importantly use the Fed's balance sheet to turn the slowing economy from a course that they acknowledge could be deflationary for assets and GDP. Today is a good time to reflect on my expectation and the reality.

In my post, Sustainable Rally or a Bear Trap?, I wrote about St Louis Fed Pres. James Bullard's recent public statements. His analysis of the economy concludes that deflation in the US is possible, even though he describes himself as an inflation hawk. His solution is for the Fed to initiate a new QE program that is a huge, targeted and managed release of money. This is a big departure from what I would expect from him as an inflationist. It increases my curiousity about his motive.

Monday, August 9, 2010

Structured Notes: Too Good?

Structured notes offer above market interest income for investors who are willing to speculate that what sounds too good to be true might be good. So they take the income and run to the bank. It works great. Note to self... Ponzi schemes worked great too, for a long time. The danger with these complex investment products is that people do get lulled into a comfortable complacency and end up being unaware of a rising river until they are in the flow, heading swiftly downstream. I do not know this product very well. I base my opinion on the fundamental knowledge that above market interest rates are achieved by employing some form of investment derivative that multiplies the cash flow. This is not a natural, simple to understand, feature. And it may even have risks associated with the mixture of the natural cash flow with the unnatural cash multiplier that are not easily recognized.

Market Data: Week Ending August 6, 2010


Market Index 2009 Close 8/06 Close Week Change Simple YTD %
Dow Industrials Avg 10428.05 10,653.56 1.79% 2.16%
S&P 500 1115.1 1,121.64 1.82% 0.58%
Fed Funds Rate 0.25% 0.25% 0% 0%
10 yr T-bond Yld 3.85% 2.82% -0.09% -1.03%
5 yr T-note Yld
1.50% -0.10%
5 yr infl adj Note
-0.03% -0.13%
Implied 5 yr Inflation %
1.53% 0.03%
2 yr T-note Yld 1.14% 0.51% -0.07% -0.63%
2-10 Yr Slope 2.70% 2.31% -0.02% -0.39%
90 day T-bill Yld
0.14% 0.00%
Gold ($/oz) $1,096.95 $1,205.30 1.78% 9.88%
WTI Oil ($/brl) $79.36 $80.70 2.22% 1.69%
VIX "Worry Index" 21.68 21.74 -7.49% 0.28%





Credit Spreads
8/06 Close Week Change
Inv Grade Credit Idx
4.44% -0.04%
Low Grade Credit Idx
8.30% -0.14%
Markit CDX Inv Grd Idx
102 -1.92%
Markit CDX Mid Grd Idx
144 -2.70%

Tuesday, August 3, 2010

Sustainable Rally or a Bear Trap?

Summer is providing a welcomed distraction in my reading. It is a good time for me to write what my observations add up to. It is not surprising that the stock market has moved up since I decided to fully hedge equities at the beginning of July. At that time, there was no lack of clear heads describing the increased level of risk that has formed in the stock market. That risk has not diminished in my mind and it has not discouraged traders from bidding prices higher. But the question continues, what do I see?

Monday, August 2, 2010

Market Data & Monthly Charts: Week Ending July 30, 2010

Below the "Read More" are updates of the charts last posted on June 28.
Market Index 2009 Close 7/30 Close Week Change Simple YTD %
Dow Industrials Avg 10428.05 10,465.94 0.40% 0.36%
S&P 500 1115.1 1,101.60 -0.10% -1.23%
Fed Funds Rate 0.25% 0.25% 0% 0%
10 yr T-bond Yld 3.85% 2.91% -0.08% -0.94%
5 yr T-note Yld
1.60% -0.13%
5 yr infl adj Note
0.10% -0.20%
Implied 5 yr Inflation %
1.50% 0.07%
2 yr T-note Yld 1.14% 0.58% 0.00% -0.56%
2-10 Yr Slope 2.70% 2.33% -0.08% -0.37%
90 day T-bill Yld
0.14% -0.01%
Gold ($/oz) $1,096.95 $1,183.90 -0.33% 7.93%
WTI Oil ($/brl) $79.36 $78.95 -0.04% -0.52%
VIX "Worry Index" 21.68 23.5 0.13% 8.39%





Credit Spreads
7/30 Close Week Change
Inv Grade Credit Idx
4.48% -0.10%
Low Grade Credit Idx
8.44% -0.16%
Markit CDX Inv Grd Idx
104 -3.70%
Markit CDX Mid Grd Idx
148 -3.90%  

Sunday, August 1, 2010

BEA News: GDP, 2nd Qtr 2010 (advance estimate)

The U.S. Bureau of Economic Analysis (BEA) has issued the following news release today:
Real gross domestic product -- the output of goods and services produced by labor and property located in the United States -- increased at an annual rate of 2.4 percent in the second quarter of 2010, (that is, from the first quarter to the second quarter), according to the "advance" estimate released by the Bureau of Economic Analysis.  In the first quarter, real GDP increased 3.7 percent. 
The full text of the release on BEA's Web site can be found at
http://www.bea.gov/newsreleases/national/gdp/gdpnewsrelease.htm 

U.S. Bureau of Economic Analysis · 1441 L Street NW · Washington DC 20230 · 202-606-9900