One exercise that Brian Pretti from ContraryInvestor.com employs that is both insightful and fun in his writings is to ask readers if they would buy or sell a chart with the description removed; two such charts are provided below.
Barack Obama's campaign is running on the slogan, "Change we can believe in," which aptly describes the likely future state of the U.S. consumer. This is not an article on how the U.S. consumer is dead, but looks at the likely decline of consumption's importance in GDP using Japan as a historical guide with the focus centered on demographics and interest rates.
Since the rally out of the January lows began, I have heard it said on numerous occasions that the strength of the Transports somehow has bullish undertones and implies that the decline is over. The overall spirit of the comments I have been hearing has to do with the fact that the Transports have recovered more than the Industrials.
The markets initially rallied off the retail sales report that came out last Wednesday as sales for January rose 0.3%, which was in stark contrast to the consensus expectations of a 0.3% decline.
Folks should understand that all fiat money is loaned into existence. Thus, when fiat money is ‘created,’ explicitly, the principal sum [loan] is created out of thin-air, but the interest to be repaid is not.
Just as the equity markets were pushing into their anticipated turn point in late January, the Fed makes a 75 basis point cut of the Discount rate. This was the most aggressive rate cut since August of 1982. The very next week at the regularly scheduled Fed meeting they cut yet another 50 basis points.
The ISM Non-Manufacturing Index plummeted in January to 41.9, a sharp drop from December’s 54.4 reading. Numbers below 50 indicate a contracting economy and January’s reading was the lowest reading since October 2001.
Economic growth decelerated sharply from the 4.91% annualized growth rate seen in the Q3 2007 to 0.64% in Q4, nearly coming in at only half of the 1.2% consensus growth rate reported by Thomson Financial.
Last week global capital markets gyrated in a fashion I’ve never seen before. Intra-day business-cycle-in-a-day movements in equity markets included disparaging collapses as well as stunning “flagpole” rallies.
As I have watched many of the mainstream financial shows over the last week or so it is obvious that confusion reigns at even the highest levels in regard to the state of the financial markets. Yet, the answer is very clear and I have been warning about this for some time.