November 13, 2019

As we are seeing in numerous surveys, current economic conditions are good yet respondents are showing more concern for the future. The divergence in many of these surveys now stands at levels seen prior to recessions.

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November 12, 2019

Please see Today’s Daily Commentary for more.

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November 11, 2019

This graph highlights how quickly the Federal Reserve has ramped up their bond holdings over the last few months.

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November 8, 2019

The greed index is running high, typically a sign that a correction of some sort is due.

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November 7, 2019

Please see Today’s Daily Commentary for more on this graph.

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November 6, 2019

Following on yesterday’s theme of extreme overbought conditions in the stock market, we present further evidence.

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November 5, 2019

See Today’s Daily Commentary for more on this graph.

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November 4, 2019

Last week we noted how foreign entities were net sellers of U.S. Treasuries. This chart shows they have instead been buying gold.

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November 1, 2019

Please see Today’s Commentary for more on this graph.

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October 31, 2019

The unsustainable path of debt and GDP in China.

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October 30, 2019

This graph shows how the San Francisco Fed’s unemployment model tends to lead the unemployment rate by a few months. Recently the model has been forecasting an upturn in the unemployment rate.

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October 29, 2019

Consumer confidence remains strong despite widespread weakness in many business confidence surveys. In periods before prior recessions consumers held on to confidence longer than business managers and executives.

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October 28, 2019

Please see Today’s Daily Commentary for more on this chart

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October 25, 2019

As discussed in Thursday’s Daily Commentary, this important chart shows that even though Federal Deficits (blue line) are not nearly at the levels of the last recession, the amount of domestic funding needed (orange line) to fund the deficits is now at the peak of that episode.

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October 24, 2019

Please see today’s Daily Commentary for more on this important chart

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October 23, 2019

Consumer debt has declined on an absolute basis and against income since the financial crisis, however, non-debt financial obligations such as rent payments and leases have increased sharply. In total, debt and financial obligations are higher as a percentage of income than prior to the crisis.

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October 22, 2019

While there are still a lot of different ways that a BREXIT or no BREXIT deal can play out, the odds still favor an orderly BREXIT.

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October 21, 2019

As we showed Friday, inflation expectations have been declining, yet inflation as measured by CPI sits near the highest levels since the financial crisis. For more on this graph, please see our daily commentary.

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October 18, 2019

Inflation expectations are probing the lower end of the range encompassing the post- financial crisis era.

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October 17, 2019

In another harbinger that the economic expansion is nearing an end, profit margins are declining in line with prior economic cycles.

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October 16, 2019

Please see today’s Daily Commentary for more on this graph.

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October 15, 2019

The yield anomaly shown may be technical due to the downgrade of Ford bonds into junk, or it may be an early warning that investors are getting a little more concerned about the pace of economic activity. If the latter we should see B and BB start to underperform BBB, which we hasn’t yet happened in a meaningful way.

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October 14, 2019

The chart shows that despite negative interest rates, which should dis-incentivize saving, savings are rising in Germany. As a result, consumption is reduced which is a marginal drag on economic growth.

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October 11, 2019

 

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October 10, 2019

Based on employment data in the NFIB survey (small business trends) employment growth should deteriorate sharply in the coming months.

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October 9, 2019

This graphic provides context on what goods are most sensitive to trade talks.

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October 8, 2019

Brett Freeze at Global Technical Analysis shows graphs the strong correlation between Manufacturing ISM and CPI. Based on his work, CPI may rise in the coming months, but will likely head lower after that.

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October 7, 2019

Corporate insiders (executives) are selling their holdings in the companies they respectively work for at the fastest pace since the tech crash of 2000.

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October 4, 2019

Please see the Daily Commentary for more on these graphs.

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October 3, 2019

Please see the Daily Commentary for more on this graph.

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October 2, 2019

As discussed in today’s Daily Commentary, the graph by Teddy Vallee below shows a wide divergence in an historically reliable relationship between ISM and the S&P 500.

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October 1, 2019

Unprofitable companies as a percentage of all IPOs coming to market are now at the same levels as the Dotcom bust.

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September 30, 2019

The chart below compares leveraged loans (junk credit) to the sub-prime mortgage market of 2006.

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September 27, 2019

This interesting chart attempts to quantify the degree of uncertainty at the Fed based on the words used in their FOMC statement, speeches and other communications. For further evidence, at the meeting last week two members voted for a 50 bps cut in rates while one abstained from voting for the agreed upon 25 bps cut.

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September 26, 2019

 

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September 25, 2019

From our newest article – Who Could Have Known- What The Repo Fiasco Entails– the graph shows how the Fed provided repo regularly until QE started in 2008. The blue line on the far right shows the recent instance where it started back up again.

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September 24, 2019

Please see the Daily Commentary for more on this graph.

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September 23, 2019

 

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September 20, 2019

Chairman Powell has used “plain English” more so than the language employed by Chairman Yellen.  The difference may be a matter of style or it may be due to the complicated nature of monetary policy during Yellen’s tenure.

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September 19, 2019

This chart shows how various equity factors behave based on the movement of the yield curve. For more on factor analysis please read our Pro series entitled Value Your Wealth.

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September 18, 2019

Earnings per share of the S&P 500 have deviated sharply from total domestic corporate profits. The last time such a divergence occurred was in the late 1990’s. At that time the tech crash normalized the relationship.

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September 17, 2019

 

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September 16, 2019

Please see today’s Daily Commentary for more on this chart.

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September 13, 2019

Led by a slide in the global economy,  Q3 estimated earnings growth is expected to dip 3.6%

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September 12, 2019

Teddy Valle’s employment model points to a coming upturn in the unemployment rate.

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September 11, 2019

Two charts showing the stunning decline of momentum-based indexes over the last few days.

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September 10, 2019

S&P 500 companies continue to plow over 100% of earnings into dividends and stock buybacks.

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September 9, 2019

The rate of change of employment growth continues to slow and now sits at an 8 year low.

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September 6, 2019

We will opine further on this important graph in an upcoming RIA Pro article.

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September 5, 2019

Demographics play a large role in driving economic activity. The graph shows the correlation between fertility rates and GDP per capita.

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September 4, 2019

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September 3, 2019

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August 30, 2019

The consistency of labor market growth since the recession is simply unprecedented.

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August 29, 2019

If the past is the roadmap for the remainder of the year, the S&P should be flat to higher for the remainder of the year.

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August 28, 2019

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August 27, 2019

The consumer makes up about 70% of the economy. We are starting to see some hints that the consumer may be slowing down. Consumer Confidence, released today and Consumer Sentiment on Friday will provide us more clues.

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August 26, 2019

Another interesting graph from Meridian Macro

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August 23, 2019

As we have written in our Value your Wealth series, value stocks have greatly lagged growth stocks over the last decade.

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August 22, 2019

Please see today’s Daily Commentary for more on this graph.

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August 21, 2019

Please see today’s Daily Commentary for more on this graph.

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August 20, 2019

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August 19, 2019

Another interesting divergence using factor analysis. For more on similar types of anomalies please read our Value Your Wealth series.

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August 16, 2019

Interest rates are coming down but personal (not corporate or government) interest payments are now past the highs set in 2007.

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August 15, 2019

 This table shows how leading economic indicators are worsening while current/lagged economic data remain relatively stable. Watch coincident economic data closely over the next few months for indications on whether the leading data is right or not.

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August 14, 2019

 Based on price to EBITDA, Teddy Vallee forecasts an annualized total return for the S&P of -3%.

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August 13, 2019

 

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August 12, 2019

The Chicago Fed National Index (CFNI) has been negative for the entire year (7 consecutive months). As shown, the last two times (2001/2008) the series was negative for 7 consecutive months the stock market was peaking before sharp declines.

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August 9, 2019

See Today’s Daily Commentary for more on this chart.

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August 8, 2019

The duration of the weakness in global manufacturing has surpassed that of the prior two global recessions.

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August 7, 2019

See Today’s Daily Commentary for more on this chart.

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August 6, 2019

New investment in tangible assets has declined on a year over year basis ten times since 1960. In eight of those instances a recession quickly followed. Net investment just went negative for the 11th time.

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August 5, 2019

Fiscal policy is usually the most effective tool to boost economic growth during recessions. Given the sharp divergence of political views and the coming election, the odds of more fiscal policy especially with the intent to stem off a recession are slim.

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August 2, 2019

Per Charlie Bilello @charliebilello-  “With a market cap of .3 billion, Beyond Meat (BYND) is now worth more than the market value of Shake Shack, Wendy’s, Jack in the Box, Red Robin, Habit Burger, Good Times, Ruth’s Chris, Buffalo Wild Wing, Fatburger, Ponderosa, Del Frisco’s, and Nathan’s Famous…. COMBINED”

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August 1, 2019

 A subtle reminder that Federal Reserve rate cuts are not necessarily good for stocks as recent market behaviors would lead us to believe.

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July 31, 2019

 

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July 30, 2019

This stunning chart shows that a majority of short term, investment grade, Euro-corporate bonds now trade with a yield of less than zero.

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July 29, 2019

In aggregate, global spending on capital expenditures (capex) has declined since the financial crisis. Capex feeds productivity which is the engine for stronger and more durable economic growth

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July 26, 2019

Per The National Association of Realtors, Chinese buyers of homes in the US fell by 65% over the last year. Due to lagging real estate data, the graph is only through March. Please read the Daily commentary for more.

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July 25, 2019

After a surge in profit expectations due to the tax cut, profits are falling back to the lowest levels of the past ten years.

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July 24, 2019

Per the Atlanta Fed, wage growth is on the uptick, now growing almost 2% faster than CPI.

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July 23, 2019

Value is out of vogue to say the least. We believe that slowly favoring value stocks over growth stocks will pay big dividends over the coming years as value stocks have reliably paid investors a premium over growth stocks. The last decade is the anomaly not the norm as shown on the July 18th Chart of the Day.

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July 22, 2019

S&P 500 companies are now paying out more in stock buybacks and dividends than they are earning.

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July 19, 2019

The plot shows who holds leveraged loans. Currently banks are holding over 50% of these junk rated, non-securitized bonds.

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July 18, 2019

Please see today’s Daily Commentary for more information on this graph.

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July 17, 2019

Bank of America’s earnings model now expects global earnings to decline. As shown, earnings growth was minimal from 2012 to 2017. It was goosed by the tax cut in 2018, but is now retreating to a rate more consistent rate tied to economic growth.

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July 16, 2019

This is a different CEO Confidence Index than displayed yesterday, but points to the same degree of pessimism. The second chart shows the gap since 2015 between this confidence index and GDP.

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July 15, 2019

Corporate CEO’s are not very optimistic looking out over the remainder of the year. Current levels rival those periods when recessions took hold. That said, there have been false alarms such as in 2015 and 1998.

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July 12, 2019

Over the last 15 years bonds and stock returns have not been well correlated, meaning that portfolios of bonds and stocks tend to hedge each other and provide less volatile returns than was possible in the past. Given the numerous instances of positive readings and a positive average since the late 1880’s, are we overdue for a reversal of the recent pattern? With stocks at highs and bond yields near lows such a reversal would entail a problem for stock and bond investors.

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July 11, 2019

Based on Arbor’s quantification of Fed speeches, yesterday’s testimony by Powell qualified as the most dovish this year.

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July 10, 2019

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July 9, 2019

Please see today’s Latest Commentary for more on this graph.

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July 8, 2019

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July 5, 2019

As we have mentioned on numerous occasions, the combination of high valuations and slowing growth have increased the odds of a double digit equity drawdown.

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July 3, 2019

The chart below points to the predicament that many retirees around the world will be in. As shown, on average most retirees will live a decade longer than their savings.

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July 2, 2019

 

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July 1, 2019

Since the financial crisis, world trade growth as a percentage of economic growth has declined. This is in sharp contrast to the increased globalization over the 20 years leading up to the crisis.

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June 28, 2019

This stunning comparison of Central Bank balance sheets show how much stimulus the Bank of Japan has provided as compared to the Federal Reserve and ECB. The data is shown as a percentage of their respective GDP’s.

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June 27, 2019

To put the troubling surge in China’s corporate debt into perspective we must factor in annual GDP in the US is nearly trillion, while China’s is only trillion.

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June 26, 2019

Please see today’s Daily Commentary for more on this graphic.

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June 25, 2019

Based purely on money flows out of equity funds, we should expect the stock market to continue reaching new highs. Interestingly, unlike today, flows out of equity funds tend to be highest when the market troughs.

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June 24, 2019

Courtesy Doug Short and Advisor Perspectives, the graph below combines four well followed equity valuation indicators. As shown the average of the four point to equities being grossly overvalued.

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June 21, 2019

Since 2018, retail investors are increasingly been hedging using put options. The chart shows similar actions leading into the 2008 financial crisis.

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June 20, 2019

Negative yield debt broken down by country provides a sobering picture of what the world’s central bankers have done.

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June 19, 2019

Since 2013 the FANG (FB, AMZN, NFLX, and GOOGL) stocks have increasingly driven valuations and therefore the markets higher. These are the market leaders, any reversals will likely be led by these stocks.

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June 18, 2019

The theme of today chart is THINK FOR YOURSELF. The “best and brightest” on Wall Street failed miserably to predict what would happen to yields this year thus far.

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June 17, 2019

See Daily Commentary above for comments.

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June 14, 2019

The correlation of the price of oil to inflation expectations are statistically significant. 75 percent of the change in inflation expectations is related to the change in oil prices. The data in the graph goes back to January of 2010. See today’s Daily Commentary for more.

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June 13, 2019

This Indicator from Goldman Sachs using economic, market, and valuation data points to high odds of a coming bear market.

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June 12, 2019

Please see today’s commentary for more on this as well as an RIA Pro article being released later today entitled Quick Take: The Treasury Bill Yield Curve Says A Recession Is Imminent

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June 11, 2019

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June 10, 2019

The graphs below show the correlation between stocks and the Fed Funds rate the last two times the Fed was cutting rates.

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June 7, 2019

Please see Today’s Daily Commentary for more on this scatter plot.

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June 6, 2019

As we showed yesterday the current economic expansion is now the longest going back at least until the Civil War. This graph put historical context to this record run of growth.

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June 5, 2019

The current economic expansion is now the longest going back at least until the Civil War. Compared to post WWII expansions, the current one is the weakest on record.

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June 4, 2019

Tesla Credit Default Swaps (CDS) now sits near 700 basis points. This means that an investor holding Tesla bonds can pay 7% per year for default insurance. In exchange, in the event Tesla defaults, the bond holder will be made whole on his bonds, meaning he or she will receive par instead of some deeply discounted amount.

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June 3, 2019

The 3m/10yr curve as discussed in the Daily Commentary.

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May 31, 2019

The companies graphed pay their CEO the highest amount as compared to their employees. The data source only uses S&P 500 companies.

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May 30, 2019

The Fed has consistently underestimated the decline in the unemployment rate since the recovery from the Financial Crisis. The blue dotted lines represent the Fed’s 3-year projections and the black line is the U3 unemployment rate.

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May 29, 2019

Record rainfalls in the Midwest have severely stunted the planting of Corn. As of May 26th only 58 percent of the crop was planted. That compares to an average of 90 percent for the date. The current rate of planting is below any rate since at least 1980.

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May 28, 2019

This chilling graph from Nautilus compares the S&P 500 leading into the financial crisis of 2008 to the current period. Note that the current period is compressed at a 2:1 rate compared to 2006-2008.

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May 24, 2019

Leading economic indicators has fallen to a level that preceded nine of the last eleven recessions.

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May 23, 2019

Not only have the amount of IPO’s surged in recent years, as we discussed in Quick Take: IPO Surge, but over 80 percent of the companies going public are losing money.

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May 22, 2019

Commercial and Industrial Loans (C&I) has traditionally been a good indicator of economic strength or weakness. The growth of this type of businesses loan has been declining however, it has yet to lead to a recession as has been typical in the past.

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May 21, 2019

Today’s graph compares the performance of SLY (Small Caps) to the S&P 500 (blue line) alongside the S&P 500 (orange line).  Please see today’s Daily Commentary for more on this chart.

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May 20, 2019

Within the monthly employment report from the BLS are two surveys. The popular one that is touted in the media is the establishment survey. The number of new jobs each month comes from this survey. The Household survey is used to compute the unemployment rate. The two indexes are diverging at a rate not seen in the last five years. Prior periods of divergence lasted only one month. This episode is now going on three months.

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May 17, 2019

Interest rates on credit cards have increased in aggregate 4 percent while Fed Funds have risen 2.5 percent. This is one reason for recent weakness in retail sales and personal consumption. Credit card rates are now the highest they have been in at least 25 years, despite interest rates that still remain near the lows of the last 25 years.

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May 16, 2019

Semiconductor sales have proven to be a good leading indicator of global earnings. If the strong correlation of the last 3 months holds up, global corporate earnings should decline by approximately 25%.

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May 15, 2019

As discussed in Today’s commentary, trading action in May has been odd.

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May 14, 2019

As discussed in today’s commentary, the relationship between gold and the Yuan appear to be diverging. The price of gold in the graph is inverted to make the relationship easier to spot.

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May 13, 2019

Productivity drives the natural rate of economic growth. As shown, labor productivity has been in decline for the better part of the last 50 years, and, not surprisingly, the rate of economic growth in developed markets has followed.

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May 10, 2019

The Fed’s survey of “Large Bank” credit card lending standards shows a recent tightening that has reached levels associated with the last two recessions. Consumer spending accounts for almost 70 percent of economic growth.

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May 9, 2019

In yesterday’s commentary we discussed how record short positions in VIX futures was likely one of the main technical drivers of this weeks market swoon. The graph below further highlights this opinion. Futures trading of equities versus more traditional cash trading has reached an excess that has elapsed any experience in the last five years.

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May 8, 2019

We have written extensively about the lack of productivity growth and the importance of productivity growth to durable and sustainable economic growth. Based on the graph below, might part of the reason for poor productivity growth be that we do not value teachers enough, which ends up negatively affecting the education of our youth?

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May 7, 2019

The scatter plot shows the strong correlation (R2=.85) of the ratio of gold (GLD) to bond prices (TLT) versus the Japanese Yen since 2005. A strong yen  versus the dollar (lower USD/JPY level) portends gold strength, versus bond prices and vice versa.

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May 6, 2019

Since 2018, the growth rate of home prices has been declining. Redfin sale prices have now gone negative year over year, possibly portending a decline in the closely followed Case-Shiller Index.

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May 3, 2019

Economists in aggregate still believe the Fed is more likely to raise rates within the next year, while market levels imply a reduction of rates. The gap in expectations will likely mean more market volatility around Fed speeches and Fed meetings until the the market, economists, and the Fed are on the same page.

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May 2, 2019

Short interest in the S&P 500 and the NASDAQ has faded back to the lowest levels of the last four years.

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May 1, 2019

From our most recent Technically Speaking, our composite technical indicator is back to extreme levels suggesting that the current rally is likely due for at least some short-term corrective actions.

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April 30, 2019

As the chart says “Three years of deteriorating budget deficits without a recession. This is a first.”

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April 29, 2019

The scatter plot is another way of showing the recent irregular behavior between bond yields and stocks. Based on data from 2000-2018 we should expect the S&P 500 to be close to flat for the year given the decline in yields. Over the last four months stocks have rallied while yields declined.

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April 26, 2019

Courtesy Teddy Vallee, this chart shows the strong correlation between the U.S. dollar and large cap revenues. Based on the historical relationship and the 8 month lead time we should expect revenues to go flat to negative over the coming two quarters.

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April 25, 2019

China’s economy is over 4x more dependent on U.S. GDP than the U.S. is on China GDP. This helps us understand some of the leverage Trump and team are able to use in the trade negotiations.

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April 24, 2019

Speaking of value stocks being cheap to growth stocks….

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April 23, 2019

The price of gasoline has risen for an astonishing 69 days in a row, well beyond any streak over the last 15 years.

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April 22, 2019

The 7 year annualized return forecast, courtesy of Unison, show that most US equity markets (in blue) are trading at or below the rate of the 7 year risk free Treasury Note yielding 2.50pct.

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April 19, 2019

Value has never been cheaper versus growth. More on this topic in coming articles.

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April 18, 2019

Lyft, Uber and Pinterest, among other IPOs, are setting a record for amount IPO issuance. Keep in mind we are at record levels yet only one quarter into the new year. We must ask why these private owners are willing to sell their companies. As shown we saw similar surges in IPO’s before the 2001 and 2008 recessions.

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April 17, 2019

The tan bars in the chart below highlight periods in which the Fed Funds rate minus the rate of inflation was negative. These periods point to extraordinary monetary policy. We show this graph to provide context to the way Fed has applied policy versus that of the prior 50+ years.

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April 16, 2019

 

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April 15, 2019

Positioning in VIX futures, a measure of volatility in the stock market, has fallen to levels of the last two market peaks. Along with overextended technicals, as discussed in today’s Major Market Summary, this serves as another reason for caution.

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April 12, 2019

Economic data has been weakening since 2018. The two indexes below showing hard and soft data are now at levels last seen in late 2011. It is worth noting that QE2 and Operation Twist were initiated in late 2010 and ran through much of 2011.

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April 11, 2019

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April 10, 2019

We are overdue for a 3 percent drawdown based on averages, but as shown this rally could go on for months without a 3 percent decline.

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April 9, 2019

The amount of debt outstanding for small-cap companies continues to rise at a far faster pace than respective earnings. Higher interest rates and/or spread widening would present a big problem for many of these firms.

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April 8, 2019

Shadow bank assets are loans that are outside of the traditional banking networks. Central banks have less influence over these balance sheets and quite often cannot fully regulate them.

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April 5, 2019

This reliable relationship between the S&P 500 and investor money flows has clearly broken down. This leads us to believe stock buybacks may be a big factor in the recent rally. Over half of S&P 500 companies will not be allowed to buy back shares over the coming few weeks. Let see if our theory holds up.

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April 4, 2019

First quarter GDP is expected to be in the 1.00-1.50 range which makes sense given the graph below. Importantly will the drop in Q1 GDP be followed by a resurgence in the second quarter as is fairly typical?

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April 3, 2019

From a macro perspective the “quad” graph below, courtesy Brett Freeze, is important in differentiating economic environments. As shown, in the latest quarter the economy entered the bottom-left quadrant which is characterized by weak economic growth and lower inflation. If growth and price trends persist in this quad, we should expect high-grade bonds to be one of the few investments that produce a reasonable return.

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April 2, 2019

Within last weeks confidence data was this little nugget. The difference between jobs “hard to get” rose while jobs “plentiful” fell at the greatest rate since 2008. We put little credence into one data point, but it bears watching this weeks employment report for signs that the job market is weakening.

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April 1, 2019

While not a concern when the market grinds higher, this telling graph helps better explain why the drops in the first and fourth quarters of 2018 were so volatile.

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March 29, 2019

Next Monday, the current economic expansion (orange bar) will tie the 1990’s for the longest expansion since at least 1857.

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March 28, 2019

We are now beginning the quarterly period where companies are restricted from buying their stock.

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March 27, 2019

US stocks are more expensive today than at any time since at least 1950 versus stocks of developed markets. This is not a recommendation to sell US and buy other markets, but it bears following closely for such an opportunity.

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March 26, 2019

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March 25, 2019

As shown the unemployment rate is further away from its longer term trend than at any point since the 1950’s. Again, seems like an odd time for the Fed to say that at 2.5pct, Fed Funds are restricting economic growth.

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March 22, 2019

The collective balance sheet of the major central banks have dropped two months in a row following the surge in December that came on the heels of rapid stock markets declines.

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March 21, 2019

It appears the recent surge higher in the market is not based upon fundamentals. Trade hopes and renewed Fed dovishness will only carry the market so far.

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March 20, 2019

The graphic below is the reason we focus on China’s economy to such a large degree. China and the rest of Asia account for about two-thirds of global growth.

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March 19, 2019

Credit creation in China continues to languish. China’s amazing economic growth over the last two decades was built on a lot of different factors but credit (debt) is one of the main ones. As long as credit creation is not boosted, as we saw in previous slowdowns, we should expect China’s economy to slow and given their worldwide presence, the global economy to slow.

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March 18, 2019

Consumer expectations about future economic conditions is much dimmer than their opinion of the current economic environment. As shown divergences of the current magnitude, have been followed by recessions (red bars).

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March 15, 2019

This economic heat map, courtesy DoubleLine, portrays a slowing of economic momentum around the world. Compare the strong momentum of 2017 to late 2018 and 2019. Peru appears to be the only country still with a green marker. The G10, at the top, are all read or or orange.

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March 14, 2019

As shown in our Quick Take article last Friday, the unemployment rate may be at decade lows, but it takes an extra 10-15 weeks for the unemployed to find a job. Quite simply, something doesn’t jibe.

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March 13, 2019

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March 12, 2019

The sharp market correction of the fourth quarter is bound to hurt consumer spending. If this chart is any indication it could get ugly in the coming months.

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March 11, 2019

The strong correlation between Taiwan New Export Orders bears watching. If this indicator proves prescient, ISM will signal economic contraction shortly.

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March 8, 2019

Federal tax receipts are down 1.5% despite relatively strong economic growth. The weak data is in part due to the tax cuts put in place a year ago. That said, other data tells us something more is going on.

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March 7, 2019

The Atlanta Fed released their first estimate of Q1 GDP. At +0.3 percent, it lags the consensus estimate significantly. This prediction will change as more data is released.

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March 6, 2019

The chart below shows the surge in buybacks in 2018 as well as the source of funds, repatriation of foreign dividends.

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March 5, 2019

The series of graphs below help show how a China/US trade might affect the exports other nations. The implications of any deal are immense and will likely trigger trade issues throughout the world. Any deal may be hailed at first, but beware of the knock on effects.

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March 4, 2019

Despite trade negotiations and some temporary tariffs, the trade deficit with China continues to grow.

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March 1, 2019

The charts below, courtesy Brett Freeze, shows the sharp global deterioration of economic data that we have been discussing.

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February 28, 2019

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February 27, 2019

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February 26, 2019

Cash as a percentage of debt held by all but the top 5% of S&P 500 companies is now at the lowest level since the financial crisis. While this may seem like cherry picking, Apple has an enormous cash hoard which can distort the financial health of the large majority of S&P companies. Excluding them and a few others paints a picture that is very different from the aggregate.

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February 25, 2019

The Philadelphia Fed Business Outlook tends to be a good predictor of economic activity. If that holds true we should expect the widely followed ISM survey to fall into contraction (less than 50).

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February 22, 2019

We are increasingly seeing news and data that warns that China’s economy is slumping much more than is widely understood.

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February 21, 2019

Jobless claims are ticking higher and potentially sending a recessionary signal. It is still too early to call higher claims a trend but the weekly data bears watching. Consensus expectations for today’s number is 225k, as compared to 239k last week.

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February 20, 2019

This chart helps explain why Germany’s economy is getting hit worse than other European nations.

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February 19, 2019

This subset of Retail Sales excludes autos, gasoline and construction materials.

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February 15, 2019

As Charlie Bilello claims, and we certainly agree, the “Fed is still extraordinarily easy.” Now once again ask yourself why is the Fed pivoting on monetary policy?

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February 14, 2019

So, what has been driving this surge in the market in 2019? As Bank of America noted:

“Corporate buybacks last week not only offset the selling by all of the bank’s other clients, leading clients to remain aggregate buyers of single stocks overall…”

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February 13, 2019

The chart below is a sub component of the NFIB Small Business Survey. The index showed weakness from small business owners across the swath of survey questions, but the chart below shows a heightened level of fear about the business climate.  The sub-index on “whether or not now is a good time to expand”, dropped to lowest level since the survey’s inception in 1990.

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February 12, 2019

Europe is clearly struggling. On Thursday Germany will report its fourth quarter GDP. A negative print will officially put them in a recession, alongside Italy which entered recession last week.

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February 11, 2019

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February 8, 2019

 

 

 

 

 

 

 

 

 

 

 

 

February 7, 2019

 

 

 

 

 

 

 

 

 

 

 

 

February 6, 2019

Got bonds?  As we have noted on several occasions ten-year equity returns will likely be weak.

 

 

 

 

 

 

 

 

 

 

 

 

February 5, 2019

Despite outstanding growth in new jobs over the past two months the unemployment rate has risen. As this graph shows sharp increases in the change in the unemployment rate preceded the last 3 recessions. Still early but worth tracking going forward.

 

 

 

 

 

 

 

 

 

 

 

February 4, 2019

 

 

 

 

 

 

 

 

 

 

 

February 1, 2019

These are companies that should be followed closely as the progress of China-US trade deals comes to a head. Failure to come to agreement is likely bad for these companies and vice versa if a deal is struck. A second consideration is the pace of economic slowing in China. If it is worse than the market thinks these companies should feel the brunt.

 

 

 

 

 

 

 

 

 

 

 

January 31, 2019

 

 

 

 

 

 

 

 

 

 

 

January 30, 2019

Might gold be coming back in favor?

 

 

 

 

 

 

 

 

 

 

 

January 29, 2019

Please refer back to our article DIY Market Forecast  (https://realinvestmentadvice.com/diy-market-forecast/) to understand why profit margins are so important. Of concern is 2019 which, if it continues to follow the declining trend of years past will fall below 2018.

 

 

 

 

 

 

 

 

 

 

January 28, 2019

The stock market and University of Michigan consumer surveys have been a good leading indicator of personal consumption. As a reminder personal consumption is responsible for almost 70pct of GDP.

 

 

 

 

 

 

 

 

 

 

January 25, 2019

The Citi Surprise Index measures economic data versus expectations for the data. When the index is below zero it means that economists were expecting economic data to be stronger than it was in actuality and vice versa. As shown, weakness in Europe has been and continues to be unexpected.

 

 

 

 

 

 

 

 

 

January 24, 2019

US stocks versus those of developed markets are now almost 2 standard deviations above the norm. This graph along with other relative valuation graphs argues that at some point we should consider foreign stock holdings. Keep in mind the trend can easily continue so timing will be difficult.

 

 

 

 

 

 

 

 

January 23, 2019

 

 

 

 

 

 

 

 

January 22, 2019

As discussed in the daily commentary section, Germany’s ZEW Current Conditions tumbled, foreshadowing a continuation of slowing economic growth in Germany and the Euro region.

 

 

 

 

 

 

 

 

January 18, 2019

 

 

 

 

 

 

 

 

January 17, 2019

 

 

 

 

 

 

 

January 16, 2019

We will have an article coming out over the coming week or two showing that foreigners are not just selling equities (as shown below) but of greater concern are not buying U.S. Treasuries. Given annual borrowing needs of over 1 trillion this is of great concern.

 

 

 

 

 

 

January 15, 2019

The chart below from @oddstats highlights the extreme two way volatility that accompanied the last two bear markets. While not officially in a bear market, we have thus far witnessed a 19% decline from the highs and are currently working on a double digit rally back.

 

 

 

 

 

 

January 14, 2019

 

 

 

 

 

 

January 11, 2019

The outlook from small businesses has declined rapidly in recent months. We reiterate, soft data such as this survey are good precursors but we wait on hard data to confirm the soft data.

 

 

 

 

 

 

January 10, 2019

As highlighted with the dotted line, the current economic expansion is months away from being the longest on record but it has also been weaker than all prior expansions since WWII. 

 

 

 

 

 

 

January 9, 2019

Apple and FedEx recently warned of earnings problems. The market has lowered earnings expectations markedly and will likely continue down this path as more companies announce earnings for the fourth quarter and provide guidance for the year ahead.

 

 

 

 

 

January 8, 2019

 

 

 

 

 

January 7, 2019

 

 

 

 

 

January 4, 2019

The following tweet and graph from Jeoff Hall serve as a strong reminder that higher interest rates are having a significant effect on the construction industry.

 

 

 

 

January 3, 2019

 

 

January 2, 2019

 

 

December 31, 2018

Tax collections point to weakness in the employment despite strong employment numbers as released by the BLS.

 

 

December 28, 2018

 

 

December 27, 2018

Prior to yesterday’s rally, only 5 of the S&P’s 500 stocks were trading above their 50-day moving averages.

 

December 26, 2018

“Currently, the market has started a mean reversion process back to the 200-week (4-year) moving average. As you will notice, with only a couple of exceptions, the 200-week moving average has acted as a long-term support line for the market. When the market has previously confirmed a break below the long-term average, more protracted mean-reverting events were already in process.”  From our most recent RIA Pro article – https://realinvestmentadvice.com/the-market-is-set-for-a-rally-to-sell-into/

 

December 24, 2018

Cash was king in 2018!!

 

December 21, 2018

We suggest reading our recent article DIY Market Forecast  https://realinvestmentadvice.com/diy-market-forecast/ and then looking at the graph below and its implications.

 

December 20, 2018

 

December 19, 2018

The National Association of Home Builders Housing Market Index  now stands at 56, down 4 from last month and 12 from two months ago. This was the worst back-to-back change since 2001 and second worst on record.

 

December 18, 2018

 

December 17, 2018

 

December 14, 2018

 

December 13, 2018

 

December 12, 2018

 

December 11, 2018

 

December 10, 2018

 

December 6, 2018

 

December 5, 2018

December 4, 2018

December 3, 2018

November 30, 2018

2 of the last 3 times the Fed halted rate hikes the economy faltered. The time it didn’t, in 1994, the economy was still considered to be mid-early cycle. Today, like 2000 and 2006, the economy is considered late cycle. In fact this is the second longest economic expansion since WWII.

November 29, 2018

November 28, 2018

Don’t fill up – Gas prices should come down sharply over the next two weeks.

November 27, 2018

November 26, 2018

November 23, 2018

Oil and its strong correlation to inflation tell us that CPI could drop significantly in the coming months.

November 21, 2018

Read: Technically Speaking – It’s A Turkey Market

“What’s a ‘Turkey’ market?  Nassim Taleb summed it up well in his 2007 book ‘The Black Swan.’

‘Consider a turkey that is fed every day. Every single feeding will firm up the bird’s belief that it is the general rule of life to be fed every day by friendly members of the human race ‘looking out for its best interests,’ as a politician would say.

On the afternoon of the Wednesday before Thanksgiving, something unexpected will happen to the turkey.

It will incur a revision of belief.’ 

November 20, 2018

 

November 19, 2018

The graph above shows the spread of LIBOR rates priced in dollars versus euros. As you can see the last two times dollar funding was as expensive economic growth faltered shortly after.

November 16, 2018

November 15, 2018

November 14, 2018

November 13, 2018

November 12, 2018

November 9, 2018

November 8, 2018

 

November 7, 2018

Said differently, stock and bond prices are moving together.

November 6, 2018

Based on prior market/presidential cycles the market should do very well in the coming quarters.

 

November 2, 2018

 

November 1, 2018

Value might finally be coming into vogue.

October 31, 2018

In the words of Doug Kass- “Pajama Traders” are winning.

October 30, 2018

This graph provides further evidence that the Fed’s top concern is that inflation will up tick.

October 29, 2018

Value should outperform growth in a down market as we are seeing.

October 26, 2018

This chart shows the S&P 500 (e-mini futures) with various moving averages. Importantly, to the right, are volume numbers that occurred at each price level. Note the large volume centered around 2700 and 2100. The lack of volume between the levels could result in volatility if we break below January’s lows as there are not as many buyers or sellers that transacted at those levels.

October 25, 2018

While the spread is still far from the European crisis of 2012, the continued widening of the spread should be followed closely. The ECB has less tools today than it did in 2012 to combat a financial crisis.

October 24, 2018

 

October 23, 2018

 


 

10/22/2018

10/19/2018

10/18/2018


 

10/17/2018

 

10/16/2018

 

This scatter plot shows the unprecedented amount of fiscal stimulus being employed despite the unemployment rate sitting at near 50 year lows.

10/15/2018

 

10/12/2018

Total central bank holdings have finally started declining. This decline in liquidity helps partially explain the decline in stocks and run-up in bond yields.

 

10/11/2018

 

Schwab clients have very little cash in their brokerage accounts. This is a classic signal of a toppy market.

10/10/2018

 

10/09/2018

 

10/08/2018

 

10/05/2018

 

10/04/2018

 

10/03/2018

 

Simply put, David Rosenberg thinks the recent trend higher in yields has exhausted itself.

10/02/2018

 

10/01/2018

 

9/28/2018

 

Note that the last two times that Gallup’s poll was at current levels was months before the next recession. Surveys are typically lagging indexes.

9/27/2018

 

9/26/2018

 

 

9/25/2018

 

9/24/2018

 

9/21/2018

 

9/20/2018

 

Sustained inflation is a modern phoneme based on 800 years of global inflation data as shown. If you are wondering, the lines jump in the year 1913, the same year the Federal Reserve was formed. Coincidence?

9/19/2018

 

9/18/2018

 

Implied volatility in the Treasury Futures market is at the lowest levels in about 20 years. This is a sign of complacency and warns of larger moves in yields, up or down, in the coming months.

9/17/2018

 

9/14/2018

 

U.S. Treasury 2s-10s yield curve.

9/13/2018

 

The combination of increasing supply for Treasury Bills and reduced foreign interest is reducing the demand for Treasury Bills at auctions.

9/12/2018

 

Inflation has shifted the way different generations spend money. The millennials are being forced to pay more for necessities than their parents did. This leaves them less for discretionary goods.

9/11/2018

 

In memory of September 11, 2001

 

9/10/2018

 

Cyclically Adjusted P/E looks expensive across all time frames.

9/7/2018

 

Commodities as compared to equities are about as cheap as they have been in the last 50 years.

9/6/2018

 

Consider that when EM currencies decline versus the dollar and they have a lot of USD debt, not only do interest rates tend to rise sharply but the amount they owe on that debt does as well.

9/5/2018

 

9/4/2018

 

8/31/2018

 

8/30/2018

 

8/29/2018

 

Volume (green bars) for the broad NYSE Composite Index has been the lightest of the year with the exception of the shortened July 3rd session and the first day of the year.

8/28/2018

 

8/27/2018

 

House sales in the higher end markets are performing much better than the mid and lower range markets.

8/24/2018

 

When a nation’s debt is denominated in a foreign currency, the nation runs the risk of a currency induced default. Look beyond Turkey to see who else might be at risk.

8/23/2018

 

From 7 Measures of Expected Returns – Linked Below http://realinvestmentadvice.com/technically-speaking-7-measures-of-expected-returns/

8/22/2018

 

Courtesy of Eric Pomboy, professional futures investors are grossly short bonds, gold and volatility (VIX). If the markets are met with a surprise these historic imbalances could result in a surge in gold and bond prices and trouble in the equity markets.

8/21/2018

 

Treasury debt is forecast to increase by well over trillion in each of the next four years. Foreigners have previously accounted for 35-40% of Treasury holdings. We must ask who will replace them and at what cost to yields and other assets?

8/20/2018

 

8/17/2018

 

The Goldman Sachs Industrial Metal Index GYX (blue) and the S&P 500 (orange) tracked each other closely for the last 2.5 years. Recently a large divergence has occurred. Given that the index can be a clue of a slowdown in global growth, you might want to think about how the divergence will resolve itself.

08/16/2018

 

If you thought our expected returns for equities were low (Allocating on Blind Faith), check these out from GMO.

8/15/2018

 

“Currently, traders have never been this short Treasuries which suggests a reversal of that positioning would lead to substantially lower interest rates.” – Technically Speaking https://realinvestmentadvice.com/technically-speaking-it-can-only-go-up-from-here/

8/14/2018

 

Problems with Turkey and other emerging markets is causing investors to begin to discount future Fed rate hikes.

8/13/2018

 

Estimated earnings growth and the ISM survey are at levels where reversals become probable in the coming months. Typically ISM leads earnings. Source @not_jim_cramer

8/10/2018

 

As shown, Tesla is now 1.5x the size of Ford.

8/9/2018

 

Courtesy Top Down Charts – https://www.topdowncharts.com/single-post/2018/08/08/Chart-Credit-Growth-About-to-Surge

8/8/2018

 

Courtesy Brett Freeze – Banks have been adding to their loss reserves since late 2015. This activity is what we should expect when an economic cycle is long in the tooth, as this one is.

08/07/2018

 

This chart shows that CCC rated corporate bonds (junk/high yield) have richened considerably versus BBB investment grade bonds. The difference between the red dot and the dotted line, provide an expectation that CCC bonds needs to increase over 2% in yield versus BBB bonds to get back to fair value.

8/6/2018

 

8/3/2018

 

Based on current levels of Market Cap versus Nominal GDP, 10-year forward returns are likely to be negative. Courtesy: Brett Freeze

8/2/2018

 

Courtesy: Twitter via David Rosenberg (Gluskin Sheff)

8/1/2018

 

The FAANG stocks have led the market higher but NFLX and FB might be sending a warning sign. Read more in our latest – Are the Markets Generals Leading us to War

7/31/2018

 

Graph courtesy: Hedgeye

7/30/2018

 

Per CRFB, Friday’s strong GDP report was boosted by recent tax and budget legislation as well as a one time surge in Chinese soybean purchases. Without these temporary events, GDP is likely running at a sub-3% rate, consistent with the rate of the last 10 years.

7/27/2018

 

This graph, courtesy Dana Lyons of The Lyons Share, is a great way to show how S&P 500 gains have been increasingly coming from the larger, heavier, weighted stocks while the remaining S&P 500 constituents underpeform.

7/26/2018

 

With Facebook’s 20% decline, two of the four FANG stocks have reversed recent gains.

7/25/2018

 

As discussed in today’s commentary, Gold (XAU) and the Chinese Yuan (CNH) have been tied at the hip for the last year.