Friday, May 27, 2011

Weekly Recap

So we ended our week and what were the news?
Some more worse-than-expected news:
United States
All Housing numbers were very bad. The one better than expected (New Home Sales) is in catastrophe-2009-like levels still.
Real Spending and Income sort of flat for the year.
Durable goods revised+new data, added together, better than expected, but in a negative trend. Very volatile, though.
Initial Jobless claims again above 400k... @ 424. The 4wk-ma around 440k for the 4th week in a row. Next week the great +478k number disappears and if a new 420k comes this 4wk average will be @ 420k, still not enough to reduce the unemployment rate from what most economists say out there. THIS IS BAD in my opinion. To be looked at.
Trade Balance posting very bad results... exports plunged and the 12m rolling numbers also.
National CPI numbers, core, were positive 0.60% YoY
And the outlook on Japan was downgraded by Fitch.
Large Retailer numbers down YoY. Again.

What else?
The Greek drama not doing well with the IMF now likely to step out of the funding program since Greece didn't meet its austerity charges (greatly due to sky-rocketing interest costs!).


Fears of inflation in the US have disappeared and the short-end of the USD-rates curve pluged making new lows for the year. Rate hikes for 2011... nah.

Let's see how next weeks numbers play out.

My reading of the market moves haven't changed (here) and that means the slow down continues to play out. Social-security tax stimulus from early 1Q dissipates, consumed by higher gas prices and the Japanese-quake after-effects.

Economic numbers coming in worse than expected mean momentum is lost, job growth will falter and more easing will be priced in: risky assets get a new go, bonds rise, volatility is reduced again.


People realize liquidity won't be enough to support corporate earnings because those are generated by human beings consuming things. Not eating bond coupons or pieces of copper futures. Then risky-markets lose momentum and take a beating.
And more monetary and fiscal easing comes to the rescue.

Two charts.
Citi Economic Surprise Index on Bloomberg:
G10 Countries @ worst level since early 2009.
And still commodities are healthy, equity markets are healthy, cyclical currencies are doing remarkably well still.

US: Compared to last year's low when the Ben Bernanke was hinting about QE2 and 10yr USTs were around 2.50%, before making a low of 2.37% 6 weeks later.

Some other indicators that people don't really care about:

US For-Hire Truck Tonnage
Electricity Output
Railway Carloads
ECRI Leading Indicator

*Disclaimer: charts and data are presented as I receive/see them. Sources are usually not checked for validation and my own calculations are of 'back of the envelope'-type. I am aware that some math that I do myself might be wrong and/or misleading to some extent. In financial markets the rate of change of economic data is often more important than the actual level and the perception of 'what is priced in' is more important than 'what is actually going to happen'. This is actually the way people pick entry and exit points. So... yes, sometimes you might say 'This guy is an idiot, this is way wrong!' with a high conviction, being right. Not to worry. Markets are made of expectations and the clash of conviction between its participants. Portfolio managers know that being an idiot is sometimes profitable and being smart is often a bad choice. It is all reality, sometimes good, sometimes bad. By the way: corrections to my analysis and intelligent debate is welcome. theintriguedtrader AT gmail do com

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