This morning’s headline could just as easily have read “Bear George Sells All Shorts!“ since that’s exactly what I did at midsession Monday. And with good reason.
If we look at a three-month chart of the S&P 500 – like this one here – we can see that the decline from 1,363 and change in April to the Friday/Monday lows might actually be complete. The first move down to 1,316 would have been about 47 S&P points, which under Elliott Wave counts might lead us to expect there to be a further move down of 1.5 times 47 and change, or about 71 S&P points from the wave 2 retracement which went up to around 1,345 in late May. So 1,275 would have been a perfect third move.
At yesterday’s lows we were down around 1,266 and it was there I figured “Screw it…take the gains off and wait for a rally.”
If things work out anywhere near what’s in Clif’s predictive linguistics model (where language on the internet precedes actual news headlines by sometimes up to a year in advance), we should see the eclipses tee off a major decline in Euro next week.
Paradoxically, that could be good for the USA in the very short term: The dollar could rally significantly as ‘hot money’ looks at the ‘safety’ of parking in the US for a while, but then – linguistically – things propagate into the US in the week to four following. Then our markets tank. I expect to be ‘back in’ for that one.
THIS IS NOT INVESTMENT ADVICE. I’ve just stepped out of playing on the freeway for a while. I don’t need to be worried about markets when the whole purpose of going to the www.columnists.com convention in Detroit is to think about writing and (worst case) getting enough guilt about sloppy punctuation and lack of proofreading here to actually piece together coherent columns more often.
Practical Matters
Even in the Great Depression of the 1929 – 1933 decline were times when the market advanced. So it shouldn’t come as any surprise that Europe is putting on a rally today.
How the US does in comparison will be driven by data released before today’s open – like retail sales which were down from last month, but up compared with last year:
“The U.S. Census Bureau announced today that advance estimates of U.S. retail and food services sales for May, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $387.1 billion, a decrease of 0.2 percent (±0.5%)* from the previous month, but 7.7 percent (±0.7%) above May 2010. Total sales for the March through May 2011 period were up 7.5 percent (±0.5%) from the same period a year ago. The March to April 2011 percent change was revised from +0.5 percent (±0.5%)* to +0.3 percent (±0.3%)*.
Retail trade sales were down 0.3 percent (±0.5%)* from April 2011, but 8.0 percent (±0.7%) above last year. Gasoline stations sales were up 22.3 percent (±1.7%) from May 2010 and nonstore retailers sales were up 15.9 percent (±3.1%) from last year.
Unless consumers can be coerced into spending more – and pretty damn quick – it sets the stage for the double dip scenario.
But, even more important than retail sales is this morning’s Producer Price Index. This is one of those numbers that’s arguable either way it goes. If producer prices (looking back up the supply chain) are going up in price rapidly then it’s assumed that there will be inflation pressures when producer prices get rolled out up at the retail level.
On the other hand, if the producer prices are stable to down (relative to the Fed’s money-printing rate - which up 11.8% annualized (one year of data) at the M1 (cash & equivalents) level, or 4.9% (annualized, one year of data, at the broader M-2 level,) – then a much tamer future is seen. Except if prices really start dropping, then it makes the case for incipient deflation which would kick the precious metals in the teeth and portend more layoffs.
Enough of this foreplay! On to the PPI:
“The Producer Price Index for finished goods rose 0.2 percent in May, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. This advance followed increases of 0.8 percent in April and 0.7 percent in March. At the earlier stages of processing, prices received by manufacturers of intermediate goods climbed 0.9 percent in May, and the crude goods index declined 4.1 percent. On an unadjusted basis, prices for finished goods moved up 7.3 percent for the 12 months ended May 2011, the largest year-over-year gain since an 8.8-percent advance in September 2008.”
This is bound to be hard on the price of precious metals, since the modest PPI sort of banishes the bogeyman of hyperinflation. Not at all like China where inflation is up to a 34-month high and, says Reuters here, they’re upping the bank reserve ratio to cool things down.
Financial matters are slowly rotating out of public focus. Not so much necessarily as a conscious decision: It’s just that fewer people have jobs, which means people have less money, which means they start looking around at other areas of life.
Biggest Robbery in History?
The L.A. Times coverage of the congressional hearings on the Pentagon’s Missing $6.6 billion dollars from 20-some Iraqi airlifts of money from the Federal Reserve of New York is the stuff of which Pulitzers might be made.
A lot of time has passed though, and the finger pointing could drag on a long time. It may even dog republicorp efforts to regain the WH next year.
Another Hat In the Ring
I don’t know if that’s the right trite phrase, but Michele Bachmann is now running for the WH. Famous for occasional misstatements, at least with Bachmann the gap between what Americans vote for, and what they get, might be less. Besides, what do facts have to do with running the country anymore?
Move Over Zimbabwe?
Greece now holds the world lowest credit ranking issued by S&P. Question is whether Germany and the Nordic countries of the EU will want to pay for what to Teutonic thinking might be ‘those lazy people’.
I have no faith in the EU getting through this. Way I figure it, countries will start pulling out of the EU as soon as they start getting stuck with the tab for this Fabian nightmare.
Wallowing in Smoke
Reader report on the fires in Arizona/NM border area:
Hello, George- Do appreciate the attention on the AZ fire situation-although the greater SW is in the worst way with fires. We are a solid 5 hour drive east of the Wallow fire, and have been experiencing smoke like we have never seen before. Several times last week, visibility closed down to less than a mile-this is absolutely unheard of for a fire hundreds of miles away! The smoke is definitely impacting people’s lives around here-and since the fire started gifting us with the smoke plume, we have never seen a full day with clear skies. The haze is ever present-and we often have to contend with the stinging odor as well. Best estimates are that the fire will continue to burn until extinguished by the summer monsoon-but its anyone’s bet if the bone dry weather pattern will let up at all, even over monsoon season. National weather service was claiming that the dry pattern was easing up a month ago-but no one has noticed any easing around here. Actually, considering how shy the forest service is to use their power to enforce closures, its pretty amazing that the idiots haven’t burned up more acreage! Well, we’re all hanging on here, trying to remember exactly what snow and rain look like.
You may want to hold that thought a while longer: The U.S. drought monitor looks positively ghastly. And likely worse when it’s updated if it’s showing last week’s report when you click into it.
Social Media: Going the Way of CB Radio?
We’ve speculated previously that there might come a time when social media (like Facebook) might lose participation because in the real-world, people have more to do than post trivia about themselves online.
Now, that time may be here as there’s a report that although now near 700-million users worldwide, the service lost users in the USA and Canada last month.
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Brings up an interest marketing phenomena which has always fascinated me: What do markets do when they become super-saturated? The shrink and whether or not the shrinkage is just by a bit, or whether it becomes widespread and disastrous is something marketing theory tries to explain.
Ultimately, growth in the economy depends on new consumption and the problem with many social media is that people only have so much free time each day and if there’s not a long-term benefit (beyond novelty) where’s the incentive to participate?
As you know, I haven’t put a lot of effort into my UrbanSurvival Facebook page, nor do I spend much time tweeting. None, actually.
Which makes me something of a rebel in marketing terms; no doubt there’s something to be gained from investing marketing efforts in such endeavors, but marketing decisions have to be made broadly at the executive level.
I look at the number of products on Amazon with only three or four star rankings by user/reviewers and I ask myself “Why are some of these companies spending money on social network marketing, rather than simply addressing the one-star review complaints and simply making a better product?
What’s missing in a lot of marketing departments is common sense. Lexus didn’t build their brand by social media. They got there by being the absolute best they could be in their vertical market.
My point being that clever marketing that harnesses narcissism may generate fortunes, but then again, so did CB radios.
For a while. But eventually people drift back to the basics of WIIFM – what’s in it for me and when novelty wears off, reality creeps back in.
Facebook isn’t the only product in the marketplace which may be at super-saturation. The sport of golf is there too: Play was down 2.2% in 2010 and the people playing keep getting older and the new players are not taking it up.
Solid thinking on how to change things from Jack Nicklaus who’s come out open to the idea of now playing 12-holes of golf. People don’t have as much time as they once did and besides, 12-hole courses would be cheaper.
But here again, we’re back to WIIFM: What’s in it for me? Compare a round of golf to watching two BluRay’s….and having enough time left over to…er…post a movie review on Facebook?
(more after this…)
