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Fuzzy Numbers and Central Bank Follies

Monday, July 26, 2010, 12:19 PM

One of the great things about government data is the entertainment value it provides.  Among the fuzziest of numbers are new home sales, which are subject to both sampling bias and opaque seasonal adjustment factors.

Perhaps a few other weaknesses are among them as well, such as counting contracts signed but never accounting for failed closings (which happens regularly).

With that said, let's turn our attention to the government new homes sales announcement, as faithfully reproduced by the mainstream media, which sent the stock markets higher.

» Read more

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Why I Follow The Markets

Friday, July 23, 2010, 11:55 AM

Recently, member dbworld posted this statement to the comments section of an Insider report:

I'm not happy when Chris's blog becomes a daily market speculation site. I prefer the plan and prepare topics or to be made aware of alert conditions.  ... stay on course .. keep focused on the important things/data. I know the news is spun in different directions and come here to get away from it!

I always appreciate feedback and thought I'd use this opportunity to revisit the reasons why I focus on the things I do.  Instead of re-writing these ideas, I will share a piece that I wrote on October 5, 2008 that does the trick and is worth revisiting. 

There's not much in here that I would substantially change, so I'll just re-post it "as is" so that you can assess my consistency and accuracy. » Read more

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Unusually Uncertain

Thursday, July 22, 2010, 9:56 AM

Stock futures took off last night a bit later the usual appointed hour, occurring, for the most part, at 4:30 a.m. instead of 3:00 a.m.

The S&P futures are now up 13.75 at 9:09 a.m.

As usual, the financial press is searching to make fundamental sense of this mess but failing at the task.

NEW YORK (MarketWatch) -- Treasury prices stayed down and the dollar remained under heavy pressure against the euro on Thursday after the Labor Department said weekly jobless claims rose 37,000 to 464,000, higher than analysts expected.

Unexpected strength in the unemployment claims *should* have caused stock futures to go down, but they didn't even wiggle at the news.  Further, the notion that Treasuries "stayed down" is a vast overstatement, as the ten-year yield is only 7 ticks off for the day and remains precisely where it was before, during, and after the release of the unemployment claims.  » Read more

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Under Control or Out of Control?

Wednesday, July 21, 2010, 3:12 PM

Today I want to connect a few dots that I feel indicate that the US is perilously off course and slipping behind.

We begin with an interesting article In Minyanville (found by user Rickets) that I will be turning into a full report soon.  It makes the case that US debt service payments are negligible on the basis of GDP and that therefore we are not near any sort of funding crisis or limit. » Read more

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Week in Review: It's Looking Dicey Again

Saturday, July 17, 2010, 4:24 PM

Let's quickly review the past week in the markets.  There is so much data flooding in right now, much of it conflicting, that it's worth putting it into a single spot so that we can keep track of it better.

Market Data

Friday gave an especially poor finish to the week, with the S&P losing a hefty 2.9% (-31.60 points) and revisiting the old 'flash crash' lows.  I thought those were supposed to be a mistake?  Maybe not. » Read more

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About that recovery…

Friday, July 16, 2010, 9:30 AM

The recently-released Federal Reserve minutes of the June 22/23 meeting revealed that the Fed is confused and concerned about the economic recovery.

Yes, there are glimmers of light in the reams of data, but there are also plenty of warning signs in equal, if not greater, measure.

 

As an aside, I happen to think it is a very good idea to read the entire Fed minutes from time to time, and not just the shorter press releases.  The longer minutes provide the important insight that Fed meetings consist of about 65 people, sitting around in a conference room listening to report after report about economic trends for two whole days.  By the end of it, they must be exhausted and a bit numb. » Read more

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About those bank profits…

Thursday, July 15, 2010, 11:17 AM

It’s earning season again, and ‘investors’ are going to be fueled by reports of strong earnings and earnings growth in the banking industry, especially among the giants.

Some of these gains will be real, and some will be due to accounting gimmicks that are quite difficult to assess by any but fully-dedicated analysts.  For example, massive swings in provisions for loan losses are now a normal part of the bank-earnings management cycle, which makes accurate comparisons between periods quite difficult.

JPMorgan Profit Rises, Beating Estimates

JPMorgan Chase & Co., the second- biggest U.S. bank by assets, said profit rose 76 percent, more than analysts estimated, as a reduction in provisions for soured mortgages and credit-card loans buoyed results.



Second-quarter net income climbed to $4.8 billion, or $1.09 a share, from $2.72 billion, or 28 cents, in the same period a year earlier and from $3.33 billion in the first quarter, the New York-based company said today in a statement.

Of course, left out of the first few paragraphs is the fact that JPM also reduced their provisions for future losses in their retail division by more than $2 billion. » Read more

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Growth and the Upcoming Iranian War

Monday, July 12, 2010, 11:29 AM

Growth and the Upcoming Iranian War

Monday, July 12, 2010

Executive Summary


  • A war with Iran seems likely before the US elections in November.

The US has committed an act of war in deciding to embargo Iranian fuel shipments and international financial activities.

The "urgency for dealing with Iran" is driven more by oil competition than military crisis.

The US militarily occupies or diplomatically controls every strategically-located oil producer in the Middle East except for Iran.

The most probable explanation for the sudden concern about Iran is likely centered over energy and the 'requirement' of growth that our economic and financial systems demand.

Seeking militarily-secured access to oil halfway around the world is a weak strategy.

An Iranian war has the potential to severely disrupt developed economies due to another wild oil-price spike.

I am troubled by the renewed beating of the Iranian war drums by the West and Israel.  Troubled, in part, because the world economy needs a war with Iran right now like it needs a hole in the head.  Or perhaps I should say a hole in the barrel, because the most likely immediate outcome of an Iranian war would be a diminution of oil traversing out of the Persian Gulf and a gigantic leap in the price of oil.

Both would add terrible stresses to the global financial system at this particular moment.

The last time I wrote about the urgent beating of the Iranian war drums was in December of 2009.  Then, too, we saw a near-perfect coordination of the media in breathlessly "reporting" whatever the US and Israeli military elements wanted communicated.  Basically it boiled down to something like this:  "THE US MUST IMMEDIATELY DEAL WITH THIS URGENT THREAT RIGHT NOW - NO WAITING - IT IS THAT SERIOUS!!!"  Sorry for shouting there, but that's how it came across to me before it all, oddly and quietly, slipped off of the headlines and out of our collective consciousness, until just recently.

Insider

Debt-Based Money Is The Problem

Saturday, July 10, 2010, 5:21 PM

Note:  I am thinking this may be a good post for the front of the site, but am looking for your feedback here in the enrolled area before 'going live' with it.  Can you spot any weaknesses in it?  Have I made my case?  Is anything unclear? 


Recently there has been a very engaging discussion going on over in the forums [LINK] that puts forth the argument that there is no logical reason why a system founded on debt-based money must grow exponentially.

Clearly such a claim cuts right to the very heart of the Crash Course and all of its implications, so I decided to, once again, wade into these messy waters before too much more confusion is sown.

Poster Darbikrash said, "the material and thesis proposed by poster “diarmidiw” clearly show major holes in the debt based currency construct as outlined in the Crash Course," while member Farmer Brown said in response, "It is a logical and mathematical fact that money/debt growth is NOT required for debt-based money to work."

So I need to address this before it goes much further. » Read more

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Hedge Funds Leave Table, Go to Bar

Thursday, July 8, 2010, 12:12 PM

As we watch the market gyrate wildly back and forth seeking direction, it seems that hedge funds, the hired guns of the Wild West, are finding the action too exciting for their taste.

When hedge funds are backing slowly away from the table, mumbling about needing to go do something somewhere else for awhile, it means that the situation has become unpredictable and potentially dangerous. » Read more