Best of the Week
Most Popular
1. Gold vs Cash in a Financial Crisis - Richard_Mills
2.Current Stock Market Rally Similarities To 1999 - Chris_Vermeulen
3.America See You On The Dark Side Of The Moon - Part2 - James_Quinn
4.Stock Market Trend Forecast Outlook for 2020 - Nadeem_Walayat
5.Who Said Stock Market Traders and Investor are Emotional Right Now? - Chris_Vermeulen
6.Gold Upswing and Lessons from Gold Tops - P_Radomski_CFA
7.Economic Tribulation is Coming, and Here is Why - Michael_Pento
8.What to Expect in Our Next Recession/Depression? - Raymond_Matison
9.The Fed Celebrates While Americans Drown in Financial Despair - John_Mauldin
10.Hi-yo Silver Away! - Richard_Mills
Last 7 days
CoronaVirus Pandemic Day 76 Trend Forecast Update - Infected 540k, Minus China 1715, Deaths 4920 - 23rd Feb 20 -
Ways to Find Startup Capital - 23rd Feb 20
Stock Market Deviation from Overall Outlook for 2020 - 22nd Feb 20
The Shanghai Composite and Coronavirus: A Revealing Perspective - 22nd Feb 20
Baltic Dry, Copper, Oil, Tech and China Continue Call for Stock Market Crash Soon - 22nd Feb 20
Gold Warning – This is Not a Buying Opportunity - 22nd Feb 20
Is The Technology Sector FANG Stocks Setting Up For A Market Crash? - 22nd Feb 20
Coronavirus China Infection Statistics Analysis, Probability Forecasts 1/2 Million Infected - 21st Feb 20
Is Crude Oil Firmly on the Upswing Now? - 20th Feb 20
What Can Stop the Stocks Bull – Or At Least, Make It Pause? - 20th Feb 20
Trump and Economic News That Drive Gold, Not Just Coronavirus - 20th Feb 20
Coronavirus COVID19 UK Infection Prevention, Boosting Immune Systems, Birmingham, Sheffield - 20th Feb 20
Silver’s Valuable Insights Into the Upcoming PMs Rally - 20th Feb 20
Coronavirus Coming Storm Act Now to Protect Yourselves and Family to Survive COVID-19 Pandemic - 19th Feb 20
Future Silver Prices Will Shock People, and They’ll Kick Themselves for Not Buying Under $20… - 19th Feb 20
What Alexis Kennedy Learned from Launching Cultist Simulator - 19th Feb 20
Stock Market Potential Short-term top - 18th Feb 20
Coronavirus Fourth Turning - No One Gets Out Of Here Alive! - 18th Feb 20
The Stocks Hit Worst From the Coronavirus - 18th Feb 20
Tips on Pest Control: How to Prevent Pests and Rodents - 18th Feb 20
Buying a Custom Built Gaming PC From Overclockers.co.uk - 1. Delivery and Unboxing - 17th Feb 20
BAIDU (BIDU) Illustrates Why You Should NOT Invest in Chinese Stocks - 17th Feb 20
Financial Markets News Report: February 17, 2020 - February 21, 2020 - 17th Feb 20
NVIDIA (NVDA) GPU King For AI Mega-trend Tech Stocks Investing 2020 - 17th Feb 20
Stock Market Bubble - No One Gets Out Of Here Alive! - 17th Feb 20
British Pound GBP Trend Forecast 2020 - 16th Feb 20
SAMSUNG AI Mega-trend Tech Stocks Investing 2020 - 16th Feb 20
Ignore the Polls, the Markets Have Already Told You Who Wins in 2020 - 16th Feb 20
UK Coronavirus COVID-19 Pandemic WARNING! Sheffield, Manchester, Birmingham Outbreaks Probable - 16th Feb 20
iShares Nasdaq Biotechnology ETF IBB AI Mega-trend Tech Stocks Investing 2020 - 15th Feb 20
Gold Stocks Still Stalled - 15th Feb 20
Is The Technology Stocks Sector Setting Up For A Crash? - 15th Feb 20
UK Calm Before Corona Virus Storm - Infections Forecast into End March 2020 - 15th Feb 20
The Growing Weaponization of Space - 14th Feb 20
Will the 2020s Be Good or Bad for the Gold Market? - 14th Feb 20
Predictive Modeling Suggests Gold Price Will Break Above $1650 Within 15~30 Days - 14th Feb 20
UK Coronavirus COVID-19 Infections and Deaths Trend Forecast 2020 - 14th Feb 20
Coronavirus, Powell and Gold - 14th Feb 20
How the Corona Virus is Affecting Global Stock Markets - 14th Feb 20
British Pound GBP Trend and Elliott Wave Analysis - 13th Feb 20
Owning and Driving a Land Rover Discovery Sport in 2020 - 2 YEAR Review - 13th Feb 20
Shipping Rates Plunge, Commodities and Stocks May Follow - 13th Feb 20
Powell says Fed will aggressively use QE to fight next recession - 13th Feb 20
PALLADIUM - THIS Is What a Run on the Bank for Precious Metals Looks Like… - 13th Feb 20
Bitcoin: "Is it too late to get in?" Get Answers Now - 13th Feb 20
China Coronavirus Infections Soar by 1/3rd to 60,000, Deaths Jump to 1,367 - 13th Feb 20
Crude Oil Price Action – Like a Coiled Spring Already? - 13th Feb 20

Market Oracle FREE Newsletter

Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

U.S. Economy Faces Domestic Economic Headwinds

Economics / US Economy May 03, 2011 - 04:25 AM GMT

By: Tony_Pallotta

Economics

Best Financial Markets Analysis ArticleIf you watched the move Inside Job then you realized as it ended that we were in fact living the sequel. The movie is far from over. The problems are far from being addressed. The solutions may be close but the leadership needed is no where near.

Week after week I may sound like a broken record. Like someone who has missed the bull run and trying to defend lost opportunity. At some point this market will turn. Those who said they will get out at or near the top will again be proven wrong. Their paper profits will turn into paper losses and they will argue they "cannot afford to sell." What has frustrated the bears will one day frustrate the bulls.


Patience and waiting for the right opportunity to present itself is the key to a successful investing career. If you missed the 2008 market crash I truly believe you will be given an even greater opportunity in the near future. If you missed the 2009 100% equity bounce, well you may need to wait years for another. I believe that when this market truly turns the bounce will not occur for there are serious structural problems within the US economy that have yet to be addressed.

Each day US equity prices push to multi year highs all while the US economy is flashing major headwinds and at an increasingly alarming rate.

Gasoline prices have risen 44% since August 2010 and now average $3.88 across the US.

Over the past month four regional Fed manufacturing surveys have shown a severe reduction in growth rates Philly (43.4 down to 18.5), Kansas City (27 down to 14), Dallas (24 down to 8 ) and Richmond (20 down to 10).

Bill Dudley NY Fed President had the following to say on April 1, 2011. "The recovery looks to be better than six months ago but not as good as a month ago."

Housing has not only double dipped but price deflation has accelerated.

Weekly jobless claims have averaged 406k the last four weeks up from 390k the previous four weeks. The most recent 429k was the third report above 400k. Clearly a disturbing change in trend and one that does not bode well for Friday's NFP report.

The banking sector already struggling with reduced profitability has now lost their ability to earn 10-15 bp risk free through the Federal Reserve interest on reserve arbitrage trade due to the new FDIC fee assessment. As a result the Federal Funds effective rate continues to stay at depressed levels now 9bp.

GDP for Q1 was an anaemic 1.8% down from 3.1% in Q4. With a reduction in government spending, end of the inventory build cycle and a deteriorating trade deficit the economy is quite possibly headed for contraction as early as Q2. What truly makes this scary is the already depressed labor market, consumer and inability for future government stimulus.

The 2012 political campaign for the White House has begun in earnest and the debt ceiling discussions will be the first real battle ground. In reality the debt ceiling will be raised (again) but the damage to the bond market may cause higher rates across the yield curve.

Consumer income has shown growth regularly but behind the numbers it is 80% funded by government aid. In other words since the recession ended there has been only 20% organic income growth.

Inflation expectations as measured through the TIPS market have increased from 1.7% in August 2010 to currently 2.6% and showing no signs of slowing.

The Federal Reserve downgraded the US economy, increased (albeit still low) concerns over inflation and signaled an unclear future to additional QE "tradeoffs for QE3 are less attractive."

The above are purely domestic headwinds and they don't include issues like municipal debt, state pension deficiencies, falling real estate tax revenues and more. Add in the foreign headwinds such as the pending Greek debt default and/or restructuring, run on Irish bank deposits, deteriorating Japanese economy, war in the Middle East and the story becomes almost that of fiction.

Inside Job will be a family movie when the harsh reality of the sequel is revealed.

"Ignoring a fact never fades away its reality."

By Tony Pallotta

http://macrostory.com/

Bio: A Boston native, I now live in Denver, Colorado with my wife and two little girls. I trade for a living and primarily focus on options. I love selling theta and vega and taking the other side of a trade. I have a solid technical analysis background but much prefer the macro trade. Being able to combine both skills and an understanding of my "emotional capital" has helped me in my career.

© 2011 Copyright  Tony Pallotta - Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules