In spite of all the headwinds for gold, one factor remains puzzling. US real rates have collapsed recently. The 5-year treasury real (inflation-adjusted) yield is now deep in the negative territory and the 7-year real yield is approaching zero.
So the second estimate on first quarter GDP was released today – down 1 percent instead of up 0.1 percent. This was the first decline since 2011. Does that mean we’re headed for recession? The financial press has defined a recession as two negative quarters in real GDP. Is 0.1 percent really a decline worth noting? I think not.
There is a sea of economic green spread out across the country as 48 out of 50 states are projected to continue economic expansion over the next six months. Confirming the health of the stock market is the new high in the cumulative AD line for the S&P 1500, which typically peaks well before the market.
Signs of a market bottom have been building over the last week with today serving as no exception. Today, we received the Markit Economics flash composite purchasing managers’ index for May, which hit a 4-year high of 58.6, up from 55.6 in April and up from last May’s 54.5 reading.
Recent improvements with the NASDAQ reclaiming its 50-day moving average, a decline in credit default swaps on junk bonds, and new highs in the S&P 500 suggest risk appetites may be growing again.
There seems to be a prevailing consensus in the market analysis I’ve been reading, that head and shoulders patterns are always reversal patterns and their completion is inevitable. Not True. Often, they can form, what we call, continuation patterns – i.e. consolidations.
We recently interviewed the esteemed economist and financial strategist Michael Pettis out of Beijing regarding the ongoing debate of whether China will see a massive credit crunch or growth collapse.
The U.S. shale oil “miracle” has about as much believability left as Jimmy Swaggart. Just today, we learned that the EIA has placed a hefty downward revision on its estimate of the amount of recoverable oil in the #1 shale reserve in the US, the Monterey in California.
Corporate profits are now higher than they’ve ever been before! At first glance, this might seem like a good thing; except, here’s the problem: whenever profit margins reach a high, they often peak and then dramatically crash before the stock market and economy follow in like manner.
How do these metropolitan area real estate costs stack up against each other and the US median household income? Here is a column chart to which I've added the latest Sentier Research data for the US median household income as of March 2014.