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Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

Stock Market Rally Getting Ridiculous, Gold Potential Double Top

Stock-Markets / Financial Markets 2010 Sep 11, 2010 - 10:47 AM GMT

By: Anthony_Cherniawski

Stock-Markets

Best Financial Markets Analysis ArticleElevated unemployment is here to stay. - (Bloomberg)  The U.S. economy will slow more than previously estimated through next year as elevated unemployment tempers consumer spending and companies trim investment plans, economists surveyed by Bloomberg News said.

Economists’ dimmer outlook is at odds with that of Federal Reserve Chairman Ben S. Bernanke, who said conditions are in place for a pickup in growth next year. Survey participants also pushed back the timing of the Fed’s first rate increase to the fourth quarter of 2011 from the prior three months.


“Lights Out” In the US

(Washington Post)  The last major GE factory making ordinary incandescent light bulbs in the United States is closing this month, marking a small, sad exit for a product and company that can trace their roots to Thomas Alva Edison's innovations in the 1870s. 

The remaining 200 workers at the plant here will lose their jobs.

During the recession, political and business leaders have held out the promise that American advances, particularly in green technology, might stem the decades-long decline in U.S. manufacturing jobs. But as the lighting industry shows, even when the government pushes companies toward environmental innovations and Americans come up with them, the manufacture of the next generation technology can still end up overseas.

This is getting ridiculous!   

--Investment Company Institute reported that domestic equity (stock) funds reported their 18th and largest sequential outflow last week as $7.596 billion was withdrawn from domestic stock mutual funds.  A recent report from ICI shows, stocks have experienced the biggest short-term equity return upswing in history on the smallest net amount of positive inflows also in history.   Can you believe that the most recent rally came as total fund flows were negative?  Are we missing something here?

Treasury bonds take a dive.

-- It appears that the US Treasury Bond Index may have declined to its trendline today.  From there it has bounced today based on speculation that the Fed may keep borrowing rates low.  Treasuries have handed investors a return of 7.4 percent this year, after losing 3.7 percent in 2009, according to indexes compiled by Bank of America Corp’s Merrill Lynch unit.  However, the last three weeks have eroded an even larger gain as talk of a bubble gained traction.

Gold forms a potential double top.

--Gold futures fell for the third straight day as a rebound in equities cut demand for the precious metal as a haven.

The MSCI World of Index of stocks headed for a second straight weekly advance as reports signaled the global economy is improving. Gold approached the record high this week before retreating.

The Nikkei bounces in a bear market.

--Japanese stocks rose, sending benchmark gauges to their second straight weekly gain, as fewer people than estimated applied for jobless benefits in the U.S. and after the yen weakened.  The Nikkei 225 Stock Average rose 1.6 percent to 9,239.17 at the 3 p.m. close in Tokyo. The broader Topix index gained 0.8 percent to 833.72 with more than twice as many stocks advancing as falling.  For the week, the Nikkei has increased 1.4 percent.

Will the Chinese become just like us?

-- China will overtake the U.S. as the largest market for credit cards by 2020 with about 900 million cards in circulation, according to MasterCard Inc., the world’s second-biggest payment network.

Chinese credit cards will probably increase by an annual 11 percent in number and 14 percent in transaction value until 2025, MasterCard said in a statement in Shanghai today. Issuers’ revenue will jump 20 times by 2025 and profit may grow 30 times.

 The dollar may beat gold in a double-dip recession.


--(Bloomberg)  New York University Professor Nouriel Roubini said the dollar… may be a better investment than gold if the world economy slips back into recession.   “If there was a double-dip recession, increasing risk aversion, some assets are going to be preferred, and gold will be one of them,” Roubini said today in an interview on Bloomberg Television’s ‘On The Move’ with Francine Lacqua.  “But in that situation, things like the dollar, the yen, the Swiss franc have more upside in a situation of rising risk aversion because they are much more liquid than the gold market.”

Falling Rates Aid Debtors, but Hamper Savers

-- Households and corporations alike are refinancing their loans in droves to take advantage of interest rates that seem impossibly cheap. But those same low rates come with a flip side, driving down the income of retirees and others who live off their savings. It is a side effect of a government policy meant to push down interest rates to a point that businesses and consumers are compelled to borrow and spend again, and yet it is hurting anyone with a savings account.

Hurricane season is starting to peak.

--The Energy Information Agency weekly report observes, “Although crude oil production outages resulting from tropical storms and hurricanes have been relatively minor so far this year, this week marks the beginning of the peak of the hurricane season in the Gulf of Mexico. While Hurricane Earl did not enter the Gulf of Mexico, about one third of the named Atlantic storms eventually pass through the Gulf.”

Natural gas prices remain very low.


-- The U.S. Energy Information Administration reports, “Declines in natural gas demand also likely put downward pressure on prices and possibly tempered price increases. Demand remained low on Monday, as a result of the Labor Day weekend, before rebounding somewhat on Tuesday, according to estimates by BENTEK Energy. During the report week ending Wednesday, September 8, total demand was down 8 percent from the previous week, a result of the mild weather and the Labor Day holiday.”

Charting The Great Bear Market Fund Flow Vacuum

(ZeroHedge)  Many skeptics enjoy pointing out that the fear and loathing toward stocks as exhibited by the seemingly endless mutual funds outflows, now in the 18th consecutive week, is nothing but a contrarian play, and when the masses are stepping out is when the smart money should invest. Under other circumstances we would totally agree. However, in this case, we make the argument that it is in fact these "contrarians" (with the assistance of the Fed, the Primary Dealers, and the HFT scalpers) who have ramped the market in advance of this move for many months now, anticipating an inflow which never comes. In other words, the true contrarian move is to fade the market here. Why? Because as the below chart from ICI shows, stocks have experienced the biggest short-term equity return upswing in history on the smallest net amount of positive inflows also in history (which incidentally has now turned negative).

Schumer Is Shocked, Shocked, There Is Quote Stuffing Going On In Here... Asks SEC To Look Into it

(ZeroHedge)  And another one wakes up. Better late than never. We wish to remind the Senator that perhaps he should first follow up on why after the SEC "banning" Flash trading, DirectEdge and other exchanges still frontrun orders on a daily basis, and why flash trading continues to lead to, ahem, flash crashes.

From Dow Jones Newswires

U.S. Sen. Charles Schumer urged federal securities regulators to explore ways to slow some high-speed trading at times of market stress and to investigate strategies that have raised concerns of stock manipulation, including one known as “quote stuffing.”

America’s public servants are now its masters

(Financial Times)  There really are two Americas, but they are not captured by the standard class warfare speeches that dramatise the gulf between the rich and the poor. Of the new divisions, one is the gap between employed and unemployed that President Barack Obama seeks to close with yet another $50bn stimulus programme. Another is between workers in the private and public sectors. No guesses which are the more protected. A recent study by the Mayo Research Institute found that “private-sector workers were nearly three times more likely to be jobless than public-sector workers”.

Political tension is bound to grow when jobs disappear faster in the private than the public sector, just as compensation in the former is squeezed more. There was a time when government work offered lower salaries than comparable jobs in the private sector, a difference for which the public sector compensated by providing more security and better benefits. No longer. These days, government employees are better off in almost every area: pay, benefits, time off and security, on top of working fewer hours. Public workers have become a privileged class – an elite who live better than their private-sector counterparts. Public servants have become the public’s masters.

Nine years later, there are still unanswered questions about 9/11.

(ZeroHedge) …the Senior Counsel to the 9/11 Commission (John Farmer) - who led the 9/11 staff's inquiry - recently said "At some level of the government, at some point in time...there was an agreement not to tell the truth about what happened". He also said "I was shocked at how different the truth was from the way it was described .... The tapes told a radically different story from what had been told to us and the public for two years.... This is not spin. This is not true." And he said: "It's almost a culture of concealment, for lack of a better word. There were interviews made at the FAA's New York center the night of 9/11 and those tapes were destroyed. The CIA tapes of the interrogations were destroyed. The story of 9/11 itself, to put it mildly, was distorted and was completely different from the way things happened"

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Anthony M. Cherniawski, President and CIO http://www.thepracticalinvestor.com

As a State Registered Investment Advisor, The Practical Investor (TPI) manages private client investment portfolios using a proprietary investment strategy created by Chief Investment Officer Tony Cherniawski. Throughout 2000-01, when many investors felt the pain of double digit market losses, TPI successfully navigated the choppy investment waters, creating a profit for our private investment clients. With a focus on preserving assets and capitalizing on opportunities, TPI clients benefited greatly from the TPI strategies, allowing them to stay on track with their life goals

Disclaimer: The content in this article is written for educational and informational purposes only.  There is no offer or recommendation to buy or sell any security and no information contained here should be interpreted or construed as investment advice. Do you own due diligence as the information in this article is the opinion of Anthony M. Cherniawski and subject to change without notice.

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