A Long, Slow Disinflationary Week

90
Fri, Nov 13, 2015 - 10:23am

Jeez, you can only imagine what next week will bring. For now, let's take a look at the damage and watch to see what the rest of today brings.

Here are four headlines from ZH from just this morning:

Yep, sure looks like the booming "Green Shoots" recovery of 2010 continues, doesn't it? High GDP growth. Jobs everywhere. Wages rising. Bliss, sunshine and lollipops.

And into this economic nirvana, The Fed is poised to raise the Fed Funds rate by a few basis points next month. Uh-huh...

But the "market" sure believes this nonsense and, as such, is bidding up the U.S. Pig against all other fiat junk. This spike in the POSX is leading to massive disinflationary pressures again, not just in the US but in the emerging markets and around the globe.

It feels like a bit of a breather so far today but it's not. Things just aren't down as much as they were yesterday...yet. Take a look at the commodity sector and be sure to notice the predominant color:

And, as we've been anticipating, stocks and bonds are following along, too. The nascent rally in bonds will really get going as we move deeper in November but rates are still down 2-3 bps as I type. And the stock market...whoa, nellie. This is getting really interesting and, again, just as we expected earlier this week.

The S&P fell through and closed below its 200-day MA yesterday and the fact that it has NOT recovered today...so far...it NOT a good sign for all the stockroaches. As I type, it's closing in on its 100-day and, if this continues, it will soon make a run at the 50-day, too. Uh-oh.

From a "traditional" TA standpoint, the key levels appears to be 2020 and 1995 (last 2037). A break down and close back below those levels would invalidate this latest breakout and you could then file it away as perhaps one last failed attempt at getting through stout resistance at 2120. Personally, I'm very much looking forward to seeing what next week brings...

And I'm also very interested to see what the next week brings for Glencore and DoucheBank. GLEN has managed a small bounce today while DB is down again and at new multi-year lows. I'm reading more and more about how the fortunes of these two seem to be tied at the hip. IF THAT'S THE CASE, then all of this commodity deflation stuff is NOT just some isolated, non-event. Instead, this will have SERIOUS IMPLICATIONS for the entire financial system. So, again, recognizing this...How can Mother Fellen even dream of raising rates, sending the POSX through 100 and crashing copper toward $2 and lower?

Oh, and in case you're wondering, here are those two pieces of crap plotted together with GLEN in candles and DB in bars:

Again, the best commodity examples I can give you of this are copper and crude...and they're UGLY:

Alright, then. I see that, as opposed to the conditions when I started typing, I see that things are starting to move pretty fast. The Dow is now down 150 and the S&P is below the 100-day and now at 2029. Crude is now under $41 and falling fast. I think I'd better get this posted and, since as you know I'm currently not coming anywhere near the paper PMs, we'll just save the analysis of them for the podcast later today.

Have a great day but don't stray too far from your computer. There might be some trades to consider before the end of the day.

TF

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  90 Comments

Clarki Stomias · Nov 13, 2015 - 12:54pm

@ Dr. Jerome - too quiet

I agree wholeheartedly with your assessment. I was just thinking through those exact thoughts and strategizing for the rest of the day. The upside-capping, invisible hand has actually been quite visible this week. Even with the market downturn, the miners and metals bounce today feels muted. I think we see some serious ESF/Central bank will being imposed over the weekend and on Monday: both a market pump and a metals smash. If not, I will be questioning if they actually are trying to allow a market crash (playing chicken with a semi-truck, if you will) just so that they can justify not raising rates in December. 

edit: Of course, all of the above depends on if markets simply end down today or in complete carnage into the close. If it's complete carnage, they will just be trying to stop the bleeding on another 1000 pt down day on Monday. wink 

Going4it · Nov 13, 2015 - 12:55pm
realitybiter · Nov 13, 2015 - 12:57pm

College and expense

I have two degrees. Easily paid for both in early 80's. My first job out of college paid nearly twice what my entire education cost. I ask folks all the time, "how much is too much for a BS degree?" No one can give me an answer because they are afraid of the answer. But it is a number. I think any debt which takes longer than one year to repay is too much. ESPECIALLY since today, thanks to free market competition, I can put an entire library of books in my pocket on flash memory!!! It is insane to pay these corrupt institutions the amounts they are given. The students need to protest the expense, not WHO pays! If it were priced right, there would be no conversation. It is the same discussion as the expensive drug conversation and the blocking of free markets which Big Pharma does quite successfully via K street.

CPE · Nov 13, 2015 - 1:09pm

I'm confused

RealityBiter seems to be advocating real Capitalism... man oh man this blog really has gone lunatic fringe.

Also, I couldn't believe my eyes finding a gold article on Drudge, written by CNN, and the article isn't actually half bad. What a World! I just wish they had used a picture of actual gold instead of what looks like a Fisher Price mock-up plastic edition, but it's not surprising being CNN.

Americans are buying tons of gold

By Matt Egan

gold bars coins

This summer's market mayhem caused Americans to buy gold bars and coins at levels unseen since the financial crisis.

When people are scared about the economy and financial markets, they rush to gold. Boy, were they worried in recent months.

U.S. demand for gold bars and coins surged 207% during the third quarter, the World Gold Council said on Thursday.

The skyrocketing demand signaled a level of interest in gold investment "not seen since the global financial crisis," the group said.

The U.S. Mint backs up that assessment. It said gold Eagle coin sales surged to nearly 400,000 ounces last quarter, the highest level in more than five years.

'Bargain shopping' for gold

Gold watchers chalk up Americans' newfound love for gold to two major factors: prices looked relatively cheap and financial markets were in turmoil.

In July gold prices fell below $1,100 an ounce for the first time in five years. Apparently many people decided it was too good an opportunity to pass up.

"People were bargain shopping. There's no question about it," said Bob Alderman, head of global wealth management at Gold Bullion International.

Market chaos lured gold bugs

And then the Dow plummeted by an unprecedented 1,000 points on August 24, signaling how jittery investors were. It resulted in the first correction since 2011 for the key stock market index, the S&P 500.

"It's directly linked to the turmoil we had in August. When the markets are in a really bad mood, gold is in favor," said Axel Merk, founder of Merk Investments, a firm that specializes in currencies and gold.

The disarray on Wall Street was sparked by China's economic struggles and fears that the Federal Reserve was trapped at zero percent interest rates.

"Investors were getting spooked and gold is the play there," said Tim Courtney, chief investment officer at Exencial Wealth Advisors.

The rest of the world didn't match Americans' enthusiasm for gold. Global demand was up 33%, while demand in Canada and Mexico was up about 42%.

Gold rally proves elusive

No matter where they live, people who rushed into gold weren't helped by prices.

The fear trade has receded in recent weeks. CNNMoney's Fear & Greed Index is now firmly in "greed" territory. Back in August and September it was flashing "extreme fear."

The S&P 500 is up 10% from the lows of August 24. By comparison, gold is down 6% over that span. Gold is actually back below $1,100 an ounce.

The problem for gold bugs is that the U.S. economy looks like it's been able to mostly weather the global storm. September was a blockbuster month for job growth, with 271,000 jobs being added.

Rate hike looms over gold market

Now the Fed looks poised to raise interest rates in December for the first time in nearly a decade.

That's not good for gold because it likely means a stronger U.S. dollar. Gold tends to rise when people are worried about the dollar's value falling and runaway inflation, neither of which is happening now.

"For gold demand to keep rising, we're going to need to have pretty violent markets," Courtney said.

Libero realitybiter · Nov 13, 2015 - 1:14pm

Right on reality

Maybe the demand to go to college wouldn't be so great if there were good paying manufacturing jobs waiting to be filled A high school grad faces a minimum wage job so why not go to college I think all this productivity crap and low wages are the real reason college is expected and not really a choice like when I graduated in 1971 and a GE job could support a middle class family

boomer sooner · Nov 13, 2015 - 1:18pm

Market

Still setting on puts, DIA Nov 171.5, bought 2 weeks ago. Value is green, but going to hold over the weekend hoping for a dump on Monday. Also bought puts on Dust last week, Dec 12, down a little, but the roll must have started because not acting right. HUI down, Dust down: HUI up, Dust down. I may have a new hobby playing the monthly roll, find out end of next week.

Libero · Nov 13, 2015 - 1:20pm

Yep

All symptoms of the same disease.

The Financial-Political Complex, eagerly funded by the Federal Reserve System.

tyberious · Nov 13, 2015 - 1:32pm

Shanghai Gold Exchange

Shanghai Gold Exchange Withdrawals Week Ended November 6, 2015

https://smaulgld.com/shanghai-gold-exchange-withdrawals-week-ended-novem...

infometron · Nov 13, 2015 - 1:33pm

'Higher' Education

It appears to me that 'higher' education has become a business. And the first rule of business is to 'keep the customer satisfied.' Hence, 'grade inflation' and pandering to students that shouldn't have made into university in the first place... "Everyone's opinion has equal value." Ha!

Millennia of knowledge just scattered about like straw in a barn yard.

Disciplined critical thought is fast becoming a rarity...

Still alive and well in turdville!

tyberious · Nov 13, 2015 - 1:33pm
· Nov 13, 2015 - 1:42pm

College costs

Not a metals post ...

You guys are making me go on a rant...

Another component of college costs are textbooks. Their prices have skyrocketed by at least 10X in the past 20 years. 

All of this when an e-book will work on your phone or computer.

Administrator salaries have also zoomed skyward, attracting psychopaths into upper levels where salaries approach a million per year. In 2000 they used to make about 2x what a professor earned. Today a chancellor of a small branch state campus will make 250K and up. At the main branch of that same campus, the salaries start at a cool million.

A scandalous story: My last chancellor in the Mid-west exhibited all the classic symptoms of a psychopath. He lied to my face when I was chair of hte faculty budget oversight committee. He played childish games with the budget when I challenged him on how money was allocated. One day I was chatting in the hall with an Art professor (they know all the gossip) and a woman passed by. My friend said "Hey, how is that thing going?" She stopped, sighed and replied. "It's almost over, thank God. We have one more meeting." After she walked away, my friend confided to me that she was a student assistant in that chancellors office. He had propositioned her--an expense paid trip to accompany him to a conference." She sued. This University, with 100K students statewide, settled out of court. That chancellor was not fired, but he was promoted to an even higher position at the largest campus, his salary tripled, just two years later.

Schools have also created a thick layer of educational experts who help us design better classes AND help us formulate methods to assess how much students are learning. This is not a bad thing, but ... I have yet to find one of these folks who could show me more than just an occasional teaching tip.

All of this teaching oversight came about due to the scandalous practice of floating student athletes through classes. Back when I was a teaching assistant at Syracuse, Donovan McNabb was in our large lecture class. One of my jobs was to take attendance. He never attended. He was a major in my department for two years and I only saw him in the hallway once.

These kids that are protesting are unreasonable and do not understand the economics of education. America is too big to be socialist. Sanders is employing an argument fallacy to compare Denmark to the US--5 million vs 350 million citizens, hard working Danes vs over 40% of US citizens on welfare. Sorry Bernie, it just will not work. Do some math. (But I hope you beat Hitlery in the primaries). I recall a foreign student who once gave a persuasive presentation arguing that America should offer free college--like the do in her country. She was from Greece.

Turd is right--most of the problem can be traced to all those available loan funds and PELL grant funds. Take that pig-trough away and costs will come down. But don't take it away until my daughter has graduated.

(Jerome--you hypocrite!)

lakedweller2 · Nov 13, 2015 - 1:44pm

@Libero

Times have changed and the job opportunities are no longer there...either college grad or manufacturing. The difficult issue with minimum wage is with 100 mil unemployed or underemployed, who is able to buy anything anymore. Those with kids in college? Those on fixed income with false CPI? Those producing commodities? Those laid off in the oil industry? Those in retail sales laid off due to lower xmas sales projections? On and on...this is not the same world that existed when a lot of us got out of college (except we had the draft to contend with).

infometron · Nov 13, 2015 - 1:44pm

Slamming the VIX

Looks to me like the VIX has been periodically slammed on a regular basis this morning, with significant downward spikes occurring about every 15 minutes or so, and now with greater frequency, apparently in a desperate attempt to not lose the S&P500 100 day SMA!

Can anyone here verify and/or explain how this is being done?

infometron · Nov 13, 2015 - 1:48pm

Spot on

Manipulate the VIX...manipulate the market. As simple as that. Just like moving the USDJPY around.

How do you do it? VIX futures "market".

https://cfe.cboe.com/products/spec_vix.aspx

boomer sooner · Nov 13, 2015 - 1:55pm

Santiago vid

What is the format? My android doesn't recognize. Ideas?

infometron · Nov 13, 2015 - 1:55pm

@Dr Jerome

Nice rant! Great conversation...

Quick question, just wondering, when was the last time you failed a student?

No worries if you choose to invoke the 5th (amendment and/or liquor ;^))

If less money was being wasted on military adventurism, 'health care', welfare, domestic spying, etc., etc., then higher education could be more readily subsidized, and much higher standards maintained... But perhaps I'm just dreaming...

· Nov 13, 2015 - 1:58pm

Here's what the Fed/PPT is

Here's what the Fed/PPT is hoping to avoid with all of their VIX-dumping and USDJPY-pumping:

infometron · Nov 13, 2015 - 2:06pm

FOMC minutes next Wednesday

I just noticed that the minutes for the FED FOMC meeting last month will come into play next week. Most of us here no longer believe these to be totally accurate, but modified to whatever extent to suit the FED's purpose at the moment.

So, what might that be? What might we expect them to do? Take some wind out of the sails of the dollar? I agree we likely have a slam down coming on Sunday evening to flush out as many of the remaining spec longs as possible on Monday and Tuesday. Could a slightly 'dovish' Wednesday mark the beginning of the next wash and rinse cycle?

Manipulation Analysis Rules!! :^)

Lintltj5 · Nov 13, 2015 - 2:09pm

Keeley Et Al....

Education starts in the home. Instead of complaining about the 1%, how about asking mommy and daddy why they didnt instill responsibility, self control, and a spirit of sacrifice in you while in the home, or looking in the mirror and asking yourself why you didnt listen to mom and dad when they tried to instill it in you. 

Im so sick of this blame game. It's always somebody else's fault. 

I ask the same questions to the bleeding hearts up here in NY when they gush about all of their programs. Who is going to pay? Its always the same, the rich. What happens when the rich leave? What happens when people cant afford the taxes, etc, anymore and just leave the state? They say it wont happen. 

The complete denial of reality by most people is so incredibly unreal that I dont have the words to describe it. Im so sick and tired of working my butt off just to scrape by and provide necessary things for life for my wife and children and all the while have to shoulder the load of these disgraces of humanity. 

Sorry for the rant, but charity can only go so far. A very good priest told me once, that sometimes charity is a good, swift kick in the ass.

infometron TF · Nov 13, 2015 - 2:10pm

Re: Spot on

Thanks Craig!

Edit: Excellent chart below! Great context!!

kenmasters675 · Nov 13, 2015 - 2:11pm

I am half long USLV and

I am half long USLV and NUGT..and be down a little bit..but i might sell my NUGT and just hedge..it seems weird there is no silver bounce. maybe a crash sunday? gonna hedge..even tough everything is extremely oversold.

JackPutter · Nov 13, 2015 - 2:13pm

I seem to remember tuitions doubled

right after the banksters gave themselves "bonuses" as a result of bailout. Someone somewhere just decided and said; "We want that kind of money."

Lintltj5 · Nov 13, 2015 - 2:16pm

Dr. J

I wish you were still here in the 'Cuse. Id buy you a beer. Then again, this city is in the crapper and is almost to the full flush. Im glad you were able to get out. Such a shame. 

infometron · Nov 13, 2015 - 2:29pm

Slamming the VIX

Here is the chart, note the downward spikes

Edit: Looks to me like they are desperately trying to keep the VIX below 20 as well...

LostMind · Nov 13, 2015 - 2:33pm

Doing some math -I know you guys already know this

From 1976-1990 Average Annual "non farm" employment went up 1.04%/year

(Carter avg. 1.42%/year)/(Reagan avg. 0.83%/year)

1990-2000 Average Annual "non-farm" employment went up 0.873%/year (Mainly Clinton years)

2000-2008 Average Annual "non-farm" employment went up 0.164%/year (Jr. Bush years)

2009-2014 Average Annual "non-farm" employment went up 0.30%/year (Obama)

Population in 1976 218,000,000

Population in 2014 319,000,000

Based on average, we are employing significantly less people per year than during one of the worst financial times of our lives (1976-1980) and "we" are at "full employment 5% unemployment"....

SilverX3 · Nov 13, 2015 - 2:41pm

Can't believe no one has

Can't believe no one has asked this: Exactly what trades should we consider, Turd, as we are 80 minutes away from the market closing?

· Nov 13, 2015 - 2:42pm

education

Infometron, I just failed a few students a couple of weeks ago in our 8 week session. I usually have 2-3 per class who finish everything but the essay assignments. They just cannot seem to write an essay. They want all the grading to be done by multiple choice exams, instead good old-fashioned writing. Actually, I am a reasonable teacher. I assign a lot of work, but grade it generously ... if a person shows me they understand the material.

Lilntltj5, I haven't been back for a visit to syracuse ever. Left in 1997 and was already seeing many empty factories then, many run-down neighborhoods. We liked living there, except for the part about no sun from October til May. I sure learned what May Day was all about when the leaves would burst out and the land would come alive again for hte summer.

My favorite class was in the religion department. They occupied the left side of this building. The philosophy department was on the right side. Our professor said that the faculty rarely crossed over and talked to each other. My class was a graduate seminar with 8 of us meeting in the little room at the top of that left-hand tower with the tall window. I loved sitting up there, looking around the city while we talked about high and lofty ideas. --A genuine ivory tower.

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Key Economic Events week of 12/10

12/11 8:30 ET Producer Price Index
12/12 8:30 ET Consumer Price Index
12/13 8:30 ET Import Price Index
12/14 8:30 ET Retail Sales
12/14 9:15 ET Industrial Prod. and Cap. Utilization
12/14 10:00 ET Business Inventories

Key Economic Events week of 11/26

11/27 9:00 ET Case-Schiller home prices
11/27 10:00 ET Consumer Confidence
11/28 8:30 ET Q3 GDP 2nd guess
11/28 10:00 ET New home sales
11/29 8:30 ET Personal Income and Spending
11/29 10:00 ET Pending home sales
11/29 2:00 ET November FOMC minutes

Key Economic Events week of 11/19

11/20 8:30 ET Housing Starts
11/21 8:30 ET Durable Goods
11/21 10:00 ET UMich Sentiment
11/21 10:00 ET LEIII
11/21 10:00 ET Existing Home Sales

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