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« Santa Rally Retail Update: Late Shoppers Save Christmas | Main | First Look at 2010 Stocks »

Monday, December 28, 2009

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jbr

From: http://economicedge.blogspot.com/2009/12/asset-classes-and-capital-flow-wheels.html

Well, according to a poster on Ticker Forum who tracks this information by the quarter and charts it, during the third quarter one dollar of debt only produced 85 cents worth of goods and services. He gets his data straight from the Treasury and BEA, plugs it into his spreadsheet and viola, out comes a product that is of utmost importance, one that your government fails to track or report:

http://3.bp.blogspot.com/_pCDyiFUv9XU/SzmWUzCspPI/AAAAAAAAH1E/hQWfuUyPAaw/s1600-h/DiminishingReturns12102009.jpg

Michael

I strongly suggest that people take a look at the LIQUIDITY article in this week's Barron's in which a number of economists at our hallowed academic institutions have researched the fact that the Economy will not come back until the SECURITIZATION market comes back.

Currently, 90% of key financing instruments that are important to driving our Economy have dried up. This is why the Economy is struggling.

Michael

Here's the Barron's Online version of the article that I have highlighted regarding "securitization" and liquidity:

http://online.barrons.com/article/SB126170480773404971.html

Mike McQuaid

There are boom and bust cycles because deep pockets want it that way. Volatility is the one word description. Ask a profitable trader what he wants , he'll answer, volatility. Volatility is the means by which the "rich get richer and the poor get poorer." If the boom and bust cycle is to change it would have already done it. It won't change.

Anon

Nice write up Yelnick but...

Question: if a 5th wave is solely inflation based and inflation is (partly) supported by leverage, how can you get a 5th wave without leverage?

Answer: You can't.

mannfm11

The Fed cannot engineer inflation. The Nobel Prize in Economics, as Michael Hudson wrote almost 40 years ago is a farce to promote banker agendas. Krugman is too mal educated to realize this. The Fed can engineer a collapse. People have to own money to spend it or lend it. The Fed can only owe it to a group that owes it. Todays Consumer Confidence number was actually the worst in 26 years on a present basis. The public has been expecting some kind of recovery for a good year, thinking the government can fix this. Japan has been using the same tactics for 20 years to no avail. China is overbuilt to the tune of about 15 years and what they call growth is nothing but brush in a forest. It will catch fire and burn everything down. Bankers create inflation by creating debt. Once inflation reaches maximum potential, it naturally deflates.

Edwardo

Hitting the wall on the marginal productivity of debt is something a number of commentators, including myself, have been talking about -as being absolutely critical-for quite some time.

In the meantime, I think what is being featured at Shenandoah is a warning of the shape of things to come.

http://johngaltfla.com/blog3/2009/12/29/one-charts-says-it-all-gdp-reports-were-a-mirage/

joe

There is no velocity to the monies poured in via the stimulus - and until there is some velocity it is like pouring the monies into a black hole. That is the problem.

What is going on now is incredibly deflationary - hard asset prices - particularly real estate - have a long way to fall. In commercial it is really just begining to plunge. Loans will continue to be more and more difficult to get.

If the fed pulls back QE as it says it will do in Q1 2010 - it will be disasterous.

A very good post Yelnik.

Joe

joe

Yelnik - are you expecting a big drop in equities in Q1 2010?

Joe

Michael

Chicago ISM Index surges to levels (60 vs 56.1) not seen since January of 2006. The manufacturing sector is doing much better!

http://www.bloomberg.com/apps/news?pid=20601087&sid=aeQpfOOYOB9Q&pos=1

Rantly McTirade

ISM is a diffusion index that indicates month over month change and does not take magnitude of change into account(if a survey participant has one new order or 1,000 new orders, the positive contribution is the same-firm had an increase in orders). Nor does it indicate any sort of absolute level- the '60' level just reported may be the highest month over month gain in three years, but in no way does it indicate that activity is at the same level of three, or two, years ago.
And, Mr. Yelnick, I enjoy the commentaries you place here and appreciate your efforts.

Michael

http://www.schaeffersresearch.com/streetools/market_tools/investors_intelligence.aspx

New lows in bearish newsletter sentiment as reported by Investors Intelligence. 15.6%

TC

I hear that Neely says that we are reaching the maximum allowed time for Wave E. The S&P must either sell-off dramatically sometime very soon, or he's goiing to change his count and where he placed Wave (A) which is currently not placed at the March low.

Perhaps DG can care to illuminate this call.

da bear

January 2010 will mark the 10 year anniversary of the DOW 11,700ish primary orthodox Roaring Nineties top.
Could mark a good time to get out before the next wave down begins.


da bear

Carl

January 2010 might be a great time to jump in before the next wave up begins. Hard to say. These things are notoriously hard to predict. Good luck to all.

joe

I cannot imagine anybody with half a brain trying to jump in here long for anything more than a short trade in this mess. There are NO signals - the damn thing is like in suspended animation - and if you thought, as I did - that the break of that trend portended some kind of rally - then where is the rally??

This thing is on its last legs - it has to make some kind of correction here -

Joe

joe

I forgot to say Merry Christmas to everyone on the 24th - I will not make the same mistake.

Happy New Years to all.

Joe

JT

Joe,

Do yourself a favor and stop looking at just the market indexes.
There are plenty of individual stocks and sectors to TRADE from the long side.

If the Dollar starts to retrace this Wave 1 rally and gets weak again, are you trying to tell me that stocks like ACI, BTU, CNX, CLF, JOYX, FCX, NUE, X and a whole host of other energy and commodity names won't be surging to the upside?

Think again.

joe

JT - I know the energy business really well - my father ran an oil company - and I am warning you - stay the hell away from it.

I have and it kept me sane.

Play with it and you will get burned.

Joe

joe

Yelnik - please comment.

I have run this many ways - different counts and they all come out the same. There should be some significant low in Q1 and it will be taken out at end Q3 - and the low will be lower than the Mar 09 low - maybe significantly lower.

Do you get the same?

Joe

yelnick

Joe, here are three alternatives to your count from other pundits:

(1) your count is down in Q1, then a summer rally, then down lower in Q3
(2) the Prechter P3 down and down and down
(3) the Neely 'we have already seen the low' down a bit, then up to higher highs, then down again - a large range before we take off in a new bull
(4) the Oracle count of a B wave down (but not to new lows) followed by a C wave up to the 61% retrace, which might unfold over 3 years (now to 2012).

If you like analogies, there is the 2004 scenario: we bottomed in Mar03 then ran up in a similar fashion to a peak in Jan04, followed by a slow slide down and really a three year trading range until the final rally in late 2006 into 2007.

All that said, I like your scenario best

yelnick

Michael, thanks for sharing the Chicago ISM report. As I have been saying, a W starts as a V, and we seem to be in a V. Question is whether the market runs up with it (as I think your are suggesting) or peaks in Q1 while the V peaks in Q2 or maybe Q3.

Michael

Yep, that is the $64,000 question my friend.

The lack of "securitization" ( as highlighted in the Barron's article this week ) is truly troubling from a fundamental growth point of view.
:)

JT

Joe-

With all due respect, you sound like an INVESTOR and not a TRADER. I have no problem trading coal, mining, and drilling stocks especially given their strong correlation to the weaker dollar. I have been trading these sectors since 1998. Have you traded any ACI, BTU, CNX, FCX, PTEN or JOYG this year?

I have, and the results have been impressive.
Sorry you don't feel the same way.

Guy who trades 1 more time per day than JT

With all due respect, you sound like an INVESTOR and not a TRADER.

That's funny. I was thinking the same thing about you.

Diamond Jim

Looks like the established pattern is prevailing. The full moon today will be the low. So off to the races in January!

Michael

Yelnick,

The train is just leaving the station in EXAS.

:)

Lester the Lexidopterist

Selling begins in earnest after the new year. Few wanted to get hit with capital gains taxes for '09. If you sell quick in '10 you keep the float for another year. Crash part 2 comin' up.

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