| Market Index | 2009 Close | 11/26 Close | Week Change | Simple YTD % |
| Dow Industrials Avg | 10428.05 | 11,092.00 | -1.00% | 6.37% |
| S&P 500 | 1115.1 | 1,189.40 | -0.86% | 6.25% |
| Fed Funds Rate | 0.25% | 0.20% | 0.00% | 0% |
| 10 yr T-note Yld | 3.85% | 2.87% | 0.00% | -0.98% |
| 5 yr T-note Yld | 1.53% | 0.01% | ||
| 5 yr TIPS - 'Real' Yld | -0.21% | -0.01% | ||
| Implied 5 yr Inflation % | 1.74% | 0.02% | ||
| 2 yr T-note Yld | 1.14% | 0.51% | 0.01% | -0.63% |
| 2-10 Yr Slope | 2.70% | 2.36% | -0.01% | -0.34% |
| 90 day T-bill Yld | 0.15% | 0.02% | ||
| Gold ($/oz) | $1,096.95 | $1,364.30 | 0.88% | 24.37% |
| WTI Oil ($/brl) | $79.36 | $83.76 | 2.17% | 5.54% |
| VIX "Worry Index" | 21.68 | 22.22 | 23.17% | 2.49% |
| Credit Spreads | 11/26 Close | Week Change | ||
| Inv Grade Credit Idx | 4.64% | 0.03% | ||
| Low Grade Credit Idx | 8.44% | 0.26% | ||
| Markit CDX Inv Grd Idx | 93 | 2.20% | ||
| Markit CDX Mid Grd Idx | 146 | 3.55% |
Monday, November 29, 2010
Market Data: Week Ending November 19, 2010
Thursday, November 25, 2010
Economic Condition Review, 3Q 2010
So far, the consumer is missing-in-action in the US economy,
placing all the pressure on both commercial and government balance
sheets. Commercial balance sheets are doing everything possible to
restore financial health, including cutting expenses, mainly by laying off
workers and paying off debt. Banks, the primary source of credit for consumers and commercial
borrowers, are lending only to prime customers, letting growth of credit remain below trend. Most businesses do not have pricing power,
so prices are holding the line. Exceptions are businesses with pricing power such as health care, food and energy. Interesting to include that food inflation is widely recognized in China too. Online newspaper Caixin reports that: A rise in food prices, driven by too much bank credit, quantitative
easing measures in the United States, speculation in commodities and
natural disasters, was mainly responsible for the worse-than-expected
inflation, according to the National Bureau of Statistics.
The government is using it's balance sheet (Federal Reserve as proxy) with the QE2 strategy, with the goals of increasing inflation in assets and stimulating job recovery, by creating new money with serial quantitative easing. John Hussman describes, in his Nov 15, 2010 letter, the financial recovery seen in 2010 as "an "economic recovery" that requires a tripling in the Fed's balance sheet, continues to average 450,000 new unemployment claims weekly, and relies on fiscal stimulus to counter utterly stagnant personal income, is ipso facto (by the fact itself) not a "standard" economic recovery. We have swept an enormous volume of bad debt under rugs, behind dams, and in back of curtains (not to mention in off-balance sheet vehicles such as Maiden Lane that were created by the Federal Reserve). But it is all effectively still there, festering. Meanwhile, our policy makers are trying to reignite financial bubbles in order to create an illusory "wealth effect" to propagate spending patterns that were inappropriate in the first place." These are conditions that are almost identical to a year ago, not overlooking isolated and significant price inflation over the year.
The government is using it's balance sheet (Federal Reserve as proxy) with the QE2 strategy, with the goals of increasing inflation in assets and stimulating job recovery, by creating new money with serial quantitative easing. John Hussman describes, in his Nov 15, 2010 letter, the financial recovery seen in 2010 as "an "economic recovery" that requires a tripling in the Fed's balance sheet, continues to average 450,000 new unemployment claims weekly, and relies on fiscal stimulus to counter utterly stagnant personal income, is ipso facto (by the fact itself) not a "standard" economic recovery. We have swept an enormous volume of bad debt under rugs, behind dams, and in back of curtains (not to mention in off-balance sheet vehicles such as Maiden Lane that were created by the Federal Reserve). But it is all effectively still there, festering. Meanwhile, our policy makers are trying to reignite financial bubbles in order to create an illusory "wealth effect" to propagate spending patterns that were inappropriate in the first place." These are conditions that are almost identical to a year ago, not overlooking isolated and significant price inflation over the year.
Tuesday, November 23, 2010
GDP (second estimate) and Corporate Profits (preliminary), 3rd Qtr 2010
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 2.5 percent in the third quarter of 2010, (that is, from the second quarter to the third quarter), according to the "second" estimate released by the Bureau of Economic Analysis. In the second quarter, real GDP increased 1.7 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
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 2.5 percent in the third quarter of 2010, (that is, from the second quarter to the third quarter), according to the "second" estimate released by the Bureau of Economic Analysis. In the second quarter, real GDP increased 1.7 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
Monday, November 22, 2010
Market Data: Week Ending November 19, 2010
| Market Index | 2009 Close | 11/19 Close | Week Change | Simple YTD % |
| Dow Industrials Avg | 10428.05 | 11,203.50 | 0.10% | 7.44% |
| S&P 500 | 1115.1 | 1,199.73 | 0.04% | 7.05% |
| Fed Funds Rate | 0.25% | 0.20% | -0.02% | 0% |
| 10 yr T-note Yld | 3.85% | 2.87% | 0.08% | -0.98% |
| 5 yr T-note Yld | 1.52% | 0.16% | ||
| 5 yr TIPS - 'Real' Yld | -0.20% | 0.13% | ||
| Implied 5 yr Inflation % | 1.72% | 0.03% | ||
| 2 yr T-note Yld | 1.14% | 0.50% | 0.00% | -0.64% |
| 2-10 Yr Slope | 2.70% | 2.37% | 0.08% | -0.33% |
| 90 day T-bill Yld | 0.13% | 0.01% | ||
| Gold ($/oz) | $1,096.95 | $1,352.30 | -0.98% | 23.28% |
| WTI Oil ($/brl) | $79.36 | $81.98 | -3.42% | 3.30% |
| VIX "Worry Index" | 21.68 | 18.04 | -12.47% | -16.79% |
| Credit Spreads | 11/19 Close | Week Change | ||
| Inv Grade Credit Idx | 4.61% | 0.09% | ||
| Low Grade Credit Idx | 8.18% | 0.12% | ||
| Markit CDX Inv Grd Idx | 91 | 1.11% | ||
| Markit CDX Mid Grd Idx | 141 | 0.71% |
Thursday, November 18, 2010
Fundamentally Speaking, Now is a Confusing Time
Quantitative easing (QE 2) has begun and the markets are pretty confused, based on volatility of commodity prices and daily currency exchange swings, and the VIX. It's a terrible time to try forecasting a market's direction amidst all the financial situations around the world (Ireland banks, China inflation, Yen direction, euro direction, US$ direction) as well as the economic influence of QE 2 operations. There is also speculation about the process the Fed has chosen for it's QE 2 plan and whether it will be successful soon, if ever. An interesting observation of the plan is described in "They Just Don't Get It", written by Paul Kasriel.
Kasriel observes that the Fed is targeting the middle-term sections of the maturity spectrum, avoiding the bill's, or short-term issues. He contends that the Fed may have to deliver more easing until they can move the needle of credit outstanding up. He writes "The Federal Reserve has the unique ability to be able to create credit figuratively "out of thin air." So does the commercial banking system, if the Fed provides the "seed money." The ability to create credit out of thin air implies that the recipients of that credit can increase their current spending without any other entity in the economy having to cut back on its current spending.
Kasriel observes that the Fed is targeting the middle-term sections of the maturity spectrum, avoiding the bill's, or short-term issues. He contends that the Fed may have to deliver more easing until they can move the needle of credit outstanding up. He writes "The Federal Reserve has the unique ability to be able to create credit figuratively "out of thin air." So does the commercial banking system, if the Fed provides the "seed money." The ability to create credit out of thin air implies that the recipients of that credit can increase their current spending without any other entity in the economy having to cut back on its current spending.
Leading Economic Indicator
Economic indications have been strengthening going into QE2 (Nov 3, 2010), gains
reflected by two strong back-to-back 0.5 percent gains for the
Conference Board's index of leading economic indicators (September
revised from plus 0.3 percent). A wide yield spread continues to be the
biggest positive though to a smaller degree given declines underway in
long rates, declines triggered and furthered by QE2. A rise in money
supply, also related to QE2, is an increasingly significant plus.
Another central positive is the factory workweek, strength that is
likely to continue given the uplift underway in the manufacturing
sector.
Other readings in today's report include a 0.1 percent uptick in the coincident index, a small gain that follows two unchanged readings in a reminder of the economy's mid-year soft patch and the contrasting acceleration now underway.
Other readings in today's report include a 0.1 percent uptick in the coincident index, a small gain that follows two unchanged readings in a reminder of the economy's mid-year soft patch and the contrasting acceleration now underway.
Monday, November 15, 2010
Market Data: Week Ending November 12, 2010
| Market Index | 2009 Close | 11/12 Close | Week Change | Simple YTD % |
| Dow Industrials Avg | 10428.05 | 11,192.60 | 0.67% | 7.33% |
| S&P 500 | 1115.1 | 1,199.21 | 1.35% | 7.01% |
| Fed Funds Rate | 0.25% | 0.22% | 0.00% | 0% |
| 10 yr T-note Yld | 3.85% | 2.79% | 0.19% | -1.06% |
| 5 yr T-note Yld | 1.36% | 0.19% | ||
| 5 yr TIPS - 'Real' Yld | -0.33% | 0.10% | ||
| Implied 5 yr Inflation % | 1.69% | 0.09% | ||
| 2 yr T-note Yld | 1.14% | 0.50% | 0.16% | -0.64% |
| 2-10 Yr Slope | 2.70% | 2.29% | 0.03% | -0.41% |
| 90 day T-bill Yld | 0.12% | 0.01% | ||
| Gold ($/oz) | $1,096.95 | $1,365.50 | 0.58% | 24.48% |
| WTI Oil ($/brl) | $79.36 | $84.88 | 4.24% | 6.96% |
| VIX "Worry Index" | 21.68 | 20.61 | -2.78% | -4.94% |
| Credit Spreads | 11/12 Close | Week Change | ||
| Inv Grade Credit Idx | 4.52% | 0.15% | ||
| Low Grade Credit Idx | 8.06% | 0.21% | ||
| Markit CDX Inv Grd Idx | 90 | -4.26% | ||
| Markit CDX Mid Grd Idx | 140 | -7.89% |
Tuesday, November 9, 2010
Monday, November 8, 2010
Market Data: Week Ending November 5, 2010
| Market Index | 2009 Close | 11/05 Close | Week Change | Simple YTD % |
| Dow Industrials Avg | 10428.05 | 11,444.10 | 2.93% | 9.74% |
| S&P 500 | 1115.1 | 1,225.85 | 3.60% | 9.03% |
| Fed Funds Rate | 0.25% | 0.20% | -0.02% | 0% |
| 10 yr T-note Yld | 3.85% | 2.53% | -0.07% | -1.32% |
| 5 yr T-note Yld | 1.09% | -0.08% | ||
| 5 yr TIPS - 'Real' Yld | -0.60% | -0.17% | ||
| Implied 5 yr Inflation % | 1.69% | 0.09% | ||
| 2 yr T-note Yld | 1.14% | 0.37% | 0.03% | -0.77% |
| 2-10 Yr Slope | 2.70% | 2.16% | -0.10% | -0.54% |
| 90 day T-bill Yld | 0.11% | 0.00% | ||
| Gold ($/oz) | $1,096.95 | $1,397.70 | 2.87% | 27.42% |
| WTI Oil ($/brl) | $79.36 | $86.85 | 6.66% | 9.44% |
| VIX "Worry Index" | 21.68 | 18.26 | -13.87% | -15.77% |
| Credit Spreads | 11/05 Close | Week Change | ||
| Inv Grade Credit Idx | 4.35% | -0.02% | ||
| Low Grade Credit Idx | 7.82% | -0.03% | ||
| Markit CDX Inv Grd Idx | 86 | -8.51% | ||
| Markit CDX Mid Grd Idx | 142 | -6.58% |
Saturday, November 6, 2010
Sitting on a Signal: What Happened
The FOMC meeting held earlier this week resulted in the QE2 announcement. They will use the Fed's balance sheet to enable the additional purchase of $600 billion of Treasury securities using a monthly purchase plan until the end of 2Q2011. This is in addition to the reinvestment of principal payments on their MBS portfolio, estimated to average $35 billion per month, that they announced at their meeting in August.
The following comments on the plan from foreign government official's are from Bloomberg News articles found on November 5. Obviously concern about the plan is global because the US$ is a reserve currency and also the denomination of trade of many commodities.
Bernanke came under fire today from officials in Germany, China, and Brazil, who said his plan to pump cash into the banking system may jar other economies and fail to fuel U.S. growth. Critics including Michael Burry, the former hedge-fund manager who predicted the housing market’s plunge, have said Fed policy is encouraging investors to take on too much risk and threatens to undermine the dollar.
The following comments on the plan from foreign government official's are from Bloomberg News articles found on November 5. Obviously concern about the plan is global because the US$ is a reserve currency and also the denomination of trade of many commodities.
Bernanke came under fire today from officials in Germany, China, and Brazil, who said his plan to pump cash into the banking system may jar other economies and fail to fuel U.S. growth. Critics including Michael Burry, the former hedge-fund manager who predicted the housing market’s plunge, have said Fed policy is encouraging investors to take on too much risk and threatens to undermine the dollar.
“It’s our problem as well if the U.S. is no longer certain
that the old recipes don’t work anymore,” German Finance
Minister Wolfgang Schaeuble said today in Berlin. The Fed’s
injection of $600 billion was “clueless” and won’t revive
growth, he said.
Brazil’s central bank president, Henrique Meirelles, said “excess liquidity” in the U.S. economy is creating “risks for everyone.” In China, Vice Foreign Minister Cui Tiankai said “many countries are worried about the impact of the policy on their economies.” He also said the U.S. “owes us some explanation on their decision on quantitative easing.”
Brazil’s central bank president, Henrique Meirelles, said “excess liquidity” in the U.S. economy is creating “risks for everyone.” In China, Vice Foreign Minister Cui Tiankai said “many countries are worried about the impact of the policy on their economies.” He also said the U.S. “owes us some explanation on their decision on quantitative easing.”
Asked by a student if “skyrocketing” commodities prices
may threaten his inflation outlook, Bernanke said rising
commodities prices are “the one exception” to a broad
reduction in inflationary pressures. Overall, excess slack in
the economy will make it difficult for producers to push through
higher prices to consumers, he said.
“Emerging markets are growing quite quickly,” Bernanke
said. “Demand for those commodities is pretty strong. That is
going to be a contributor to inflation in the U.S. because it
will affect gas prices, for example, and so on.”Monday, November 1, 2010
Market Data: Week Ending October 29, 2010
| Market Index | 2009 Close | 10/29 Close | Week Change | Simple YTD % |
| Dow Industrials Avg | 10428.05 | 11,118.50 | -0.13% | 6.62% |
| S&P 500 | 1115.1 | 1,183.26 | 0.02% | 5.76% |
| Fed Funds Rate | 0.25% | 0.22% | 0.02% | 0% |
| 10 yr T-note Yld | 3.85% | 2.60% | 0.05% | -1.25% |
| 5 yr T-note Yld | 1.17% | 0.02% | ||
| 5 yr TIPS - 'Real' Yld | -0.43% | 0.09% | ||
| Implied 5 yr Inflation % | 1.60% | -0.07% | ||
| 2 yr T-note Yld | 1.14% | 0.34% | -0.01% | -0.80% |
| 2-10 Yr Slope | 2.70% | 2.26% | 0.06% | -0.44% |
| 90 day T-bill Yld | 0.11% | -0.01% | ||
| Gold ($/oz) | $1,096.95 | $1,357.60 | 2.39% | 23.76% |
| WTI Oil ($/brl) | $79.36 | $81.43 | -0.32% | 2.61% |
| VIX "Worry Index" | 21.68 | 21.2 | 12.89% | -2.21% |
| Credit Spreads | 10/29 Close | Week Change | ||
| Inv Grade Credit Idx | 4.37% | 0.07% | ||
| Low Grade Credit Idx | 7.85% | -0.10% | ||
| Markit CDX Inv Grd Idx | 94 | -3.09% | ||
| Markit CDX Mid Grd Idx | 152 | -3.18% |
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