Best of the Week
Most Popular
1. Market Decline Will Lead To Pension Collapse, USD Devaluation, And NWO - Raymond_Matison
2.Uber’s Nightmare Has Just Started - Stephen_McBride
3.Stock Market Crash Black Swan Event Set Up Sept 12th? - Brad_Gudgeon
4.GDow Stock Market Trend Forecast Update - Nadeem_Walayat
5.Gold Significant Correction Has Started - Clive_Maund
6.British Pound GBP vs Brexit Chaos Timeline - Nadeem_Walayat
7.Cameco Crash, Uranium Sector Won’t Catch a break - Richard_Mills
8.Recession 2020 Forecast : The New Risks & New Profits Of A Grand Experiment - Dan_Amerman
9.Gold When Global Insanity Prevails - Michael Ballanger
10.UK General Election Forecast 2019 - Betting Market Odds - Nadeem_Walayat
Last 7 days
Venezuela’s Hyperinflation Drags On For A Near Record—36 Months - 18th Nov 19
Intellectual Property as the New Guild System - 18th Nov 19
Gold Mining Stocks Q3’ 2019 Fundamentals - 18th Nov 19
The Best Way To Play The Coming Gold Boom - 18th Nov 19
What ECB’s Tiering Means for Gold - 17th Nov 19
DOJ Asked to Examine New Systemic Risk in Gold & Silver Markets - 17th Nov 19
Dow Jones Stock Market Cycle Update and are we there yet? - 17th Nov 19
When the Crude Oil Price Collapses Below $40 What Happens? PART III - 17th Nov 19
If History Repeats, Gold is Headed to $8,000 - 17th Nov 19
All You Need To Know About Cryptocurrency - 17th Nov 19
What happens To The Global Economy If Oil Collapses Below $40 – Part II - 15th Nov 19
America’s Exceptionalism’s Non-intervention Slide to Conquest, Empire - and Socialism - 15th Nov 19
Five Gold Charts to Contemplate as We Prepare for the New Year - 15th Nov 19
Best Gaming CPU Nov 2019 - Budget, Mid and High End PC System Processors - 15th Nov 19
Lend Money Without A Credit Check — Is That Possible? - 15th Nov 19
Gold and Silver Capitulation Time - 14th Nov 19
The Case for a Silver Price Rally - 14th Nov 19
What Happens To The Global Economy If the Oil Price Collapses Below $40 - 14th Nov 19
7 days of Free FX + Crypto Forecasts -- Join in - 14th Nov 19
How to Use Price Cycles and Profit as a Swing Trader – SPX, Bonds, Gold, Nat Gas - 13th Nov 19
Morrisons Throwing Thousands of Bonus More Points at Big Spend Shoppers - JACKPOT! - 13th Nov 19
What to Do NOW in Case of a Future Banking System Breakdown - 13th Nov 19
Why China is likely to remain the ‘world’s factory’ for some time to come - 13th Nov 19
Gold Price Breaks Down, Waving Good-bye to the 2019 Rally - 12th Nov 19
Fed Can't See the Bubbles Through the Lather - 12th Nov 19
Double 11 Record Sales Signal Strength of Chinese Consumption - 12th Nov 19
Welcome to the Zombie-land Of Oil, Gold and Stocks Investing – Part II - 12th Nov 19
Gold Retest Coming - 12th Nov 19
New Evidence Futures Markets Are Built for Manipulation - 12th Nov 19
Next 5 Year Future Proof Gaming PC Build Spec November 2019 - Ryzen 9 3900x, RTX 2080Ti... - 12th Nov 19
Gold and Silver - The Two Horsemen - 11th Nov 19
Towards a Diverging BRIC Future - 11th Nov 19
Welcome to the Zombie-land Of Stock Market Investing - 11th Nov 19
Illiquidity & Gold And Silver In The End Game - 11th Nov 19
Key Things You Need to Know When Starting a Business - 11th Nov 19
Stock Market Cycles Peaking - 11th Nov 19
Avoid Emotional Investing in Cryptocurrency - 11th Nov 19
Australian Lithium Mines NOT Viable at Current Prices - 10th Nov 19
The 10 Highest Paying Jobs In Oil & Gas - 10th Nov 19
World's Major Gold Miners Target Copper Porphyries - 10th Nov 19
AMAZON NOVEMBER 2019 BARGAIN PRICES - WD My Book 8TB External Drive for £126 - 10th Nov 19
Gold & Silver to Head Dramatically Higher, Mirroring Palladium - 9th Nov 19
How Do YOU Know the Direction of a Market's Larger Trend? - 9th Nov 19
BEST Amazon SMART Scale To Aid Weight Loss for Christmas 2019 - 9th Nov 19
Why Every Investor Should Invest in Water - 8th Nov 19
Wait… Was That a Bullish Silver Reversal? - 8th Nov 19
Gold, Silver and Copper The 3 Metallic Amigos and the Macro Message - 8th Nov 19
Is China locking up Indonesian Nickel? - 8th Nov 19

Market Oracle FREE Newsletter

$4 Billion Golden Oppoerunity

Manipulated Stock Market Discounting a Recovery?

Stock-Markets / Recession 2008 - 2010 Dec 07, 2008 - 10:16 AM GMT

By: Mick_Phoenix

Stock-Markets Diamond Rated - Best Financial Markets Analysis ArticleWelcome to the Weekly Report. This week some fool decided the US had been in recession for a year. I hope they don't get paid too much. What I find amusing is that straight away all sorts of bull side writers and shills started talking about the US stock market being a discounting system, looking 6 months ahead, look for signs of recovery etc blah.


The stock markets are heavily manipulated right now, bans on short selling alone distort the real conditions of the stocks, government bailouts allow dead businesses to keep walking and the expectation of centralist bail outs for conglomerates considered too big to fail keep prices higher on mis-placed optimism. Attempting to use stock markets as a leading indicator with so much interference in place is not a wise move. Maybe one day in the future it will be worth monitoring stocks but right now they are a sideshow.

Anyway, back to our 12 month recession, was there anything that we could have monitored over the past 12 months that would have indicated what was coming?

Here is the ISM report for manufacturing:


    "The only positive thing of late is that the U.S. dollar has strengthened significantly against other currencies. We import the majority of our materials so this will have the effect of lowering our COGS." (Transportation Equipment)

    "Steel industry is our main customer, and they have had a real slowdown." (Computer & Electronic Products)

    "Criteria for projects is significantly higher with very short ROI periods." (Food, Beverage & Tobacco Products)

    "We have revised downward our top-line sales estimates for CY2009 by 8 percent due to the continued softness we see in the housing sector." (Machinery)

    "Suppliers are trying to hold onto pricing, but petrochemical and commodity prices are dropping like a rock." (Plastics & Rubber Products)

No sign of a bottom here then. Indeed it looks as if the trends are continuing and at a faster pace. Notice new orders and imports? If I had to use the ISM report as an indicator, it would be these 2 series I would watch for signs that the current trends in manufacturing may be changing.

How about non-manufacturing ISM?

* Non-Manufacturing ISM Report On Business® data is seasonally adjusted for Business Activity, New Orders, Prices and Employment. Manufacturing ISM Report On Business® data is seasonally adjusted for New Orders, Production, Employment, Supplier Deliveries and Inventories.

** Number of months moving in current direction.


    "General slowdown and cost-cutting actions." (Other Services)

    "Business remains strong despite the general economy." (Health Care & Social Assistance)

    "Although funding for our core goals has not changed, new programs will be curtailed." (Educational Services)

    "Store closures with associated employee layoffs, the continued downturn in the construction sector and the curtailment of local government spending have combined to hammer the local economy." (Public Administration)

    "One unusual aspect of the current environment is that suppliers are getting very selective about who they conduct business with. We are spending more and more time ensuring that our key [suppliers] continue to see us as a key customer." (Retail Trade)

    "General concerns about the economy continue to impact consumer confidence and our sales." (Accommodation & Food Services)

Here the trends are not as pronounced as manufacturing but as we can see the trend is one of falling activity that is accelerating. Interestingly employment, often accused of being a lagging indicator, was the first series to show slowdown and the November reading should have made Fridays unemployment figures unsurprising. I would recommend that you keep an eye on the ISM report over the next year, especially those series that gave an early warning of the current situation. Right now I see absolutely nothing that would want me to buy stocks based on a macro-economic viewpoint.

So if stock markets are not telling us the whole story, what is?

Courtesy of

Yields have plunged across the board since July but a noticeable acceleration of the trend kicked in during late October. This follows on from last weeks report were subscribers read about the move of the US into a Quantitative Easing policy (QE) which involves Ben Bernanke's favoured method of controlling the yield curve across all bond asset classes:

  • "A more direct method, which I personally prefer, would be for the Fed to begin announcing explicit ceilings for yields on longer-maturity Treasury debt (say, bonds maturing within the next two years). The Fed could enforce these interest-rate ceilings by committing to make unlimited purchases of securities up to two years from maturity at prices consistent with the targeted yields. If this program were successful, not only would yields on medium-term Treasury securities fall, but (because of links operating through expectations of future interest rates) yields on longer-term public and private debt (such as mortgages) would likely fall as well."

Such support for all bond classes tells us 2 things. The first is that treasury bonds may be expensive and low yielding now but that does not mean they have hit a peak. Beware of shorting bonds just yet. Secondly, the measures mentioned in Bernanke's remarks were from his speech in 2002 titled Deflation, making sure "it" doesn't happen here, however the remarks were in the section titled "Curing deflation". Ben thinks we are already in a deflationary environment; he is not trying to prevent "it" but cure "it".

Quantitative Easing is another way of acknowledging moral hazard and increasing it exponentially. Once started, as Bernanke is beginning to discover, QE cannot be suddenly dropped from the game plan as its very existence becomes the only bulwark of confidence for all markets. The inevitable outcome of QE, on the scale envisaged by Bernanke, when taken to its conclusion is that no asset can be left outside of the guarantee, regardless of the solvency of the underlying corporation. This was the lesson Japan learned when it underwrote its banking sector. Bernanke has a much greater struggle to contend with, he has to underwrite practically the whole economy.

Many economic writers are currently looking at the rise of M1& M2 and shouting about the inflation that will occur in the near future, however they are looking at the new situation through the wrong lens:

Is the rise in M1&M2 unexpected? Clearly, those that have studied QE in Japan would say no:

The comparison to the M1/M2 Fed chart is no coincidence. The outcome of the US adopting a QE policy will have wide ranging consequences but today I want to flag up a comparison that can be used by investors.

The rest of the article is subscriber only. To visit An Occasional Letter click here

By Mick Phoenix

An Occasional Letter in association with

To contact Michael or discuss the letters topic E Mail .

Copyright © 2008 by Mick Phoenix - All rights reserved.

Disclaimer: The above is a matter of opinion and is not intended as investment advice. Information and analysis above are derived from sources and utilizing methods believed reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Do your own due diligence.

Mick Phoenix  Archive

© 2005-2019 - 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