Market Talk

[Quips]

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You got that right ....

looks like a good beginning for a good week to come.

The Vermont Guardian article is very interesting. I would hope that the cowboy in the White House will handle the situation with some tact ... something he must delegate to get any positive results.

Tact can be used constructively or destructively, but so long as it is tactful, well, atleast there is hope the other side will see the light. Better to play with their heads than to send them reeling with a ham-fisted punch to the nose.

 

[The_Technician]

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For your viewing...

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Inflation less ominous than headlines
[font="Arial, Helvetica, sans-serif"]Econoday Simply Economics 8/19/05

By Evelina M. Tainer, Chief Economist[/font][/align]
[align=justify]Recap of US Markets
STOCKS
Given the sharp drop in stock prices on Tuesday, one would think the sky had fallen. Yes, the CPI did jump 0.5 percent, but it was all energy. The core CPI inflation rate of 0.1 percent was as mild as the past several months. Greenspan did not speak, nor did key economic indicators point to a recession. It turns out that the nation's biggest retailer - at least many market players act as though Wal-Mart is the nation's place to shop - admitted that high gas prices are crimping retail sales by working class customers. Of course, economists have been saying that high pump prices would eventually hurt retail sales. But it appears that equity investors took the Wal-Mart news to heart. The problem is any news can roil the markets in August because thin markets jump more erratically than markets with heavy volumes. Just a few more weeks and the thin summer markets will be behind us. (Although, the Wall Street Journal is already warning its readers that September is the cruelest month in the stock market.)
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[align=justify]BONDS
The bond market is following the typical pattern of allowing yields to dip after an FOMC meeting. Yields were higher the week before the FOMC raised its fed funds target by 25 basis points to 3.5 percent. The friendly inflation news along with sluggish industrial production sparked a rally on Tuesday, but then a stronger-than-expected PPI figure helped to lift yields on Wednesday. Yields dipped again on Thursday and Friday, but the week generally saw movement only within a tight range.
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[align=justify]Markets at a Glance

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Weekly percent change column reflects percent changes for all components except interest rates. Interest rate changes are reflected in simple differences.
The Economy

[align=justify]Energy spikes July inflation measures
The producer price index jumped 1 percent in July while the consumer price index increased 0.5 percent for the month. Rising energy prices were behind the gains. PPI energy prices spiked 4.4 percent, while CPI energy prices jumped 3.8 percent. The PPI hike in energy follows a 2 percent jump in June, while energy prices had decreased 0.5 percent in the CPI in the previous month. Food prices, in the PPI, posted the fourth straight monthly drop in July. CPI food and beverage prices rose 0.2 percent in July after remaining unchanged in June.
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[align=justify]Excluding food and energy prices, the CPI posted a mild 0.1 percent gain for the month, helped by a 0.9 percent drop in apparel prices and moderate gains in other categories. This was the third straight month for the core CPI to post a 0.1 percent hike. In contrast, the core PPI jumped 0.4 percent in July due to odd increases in car and light truck prices. Everyone knows that domestic manufacturers were offering employee discounts to anyone who wanted them. Granted, the discounts were not on all models, and this may have played a role in the unexpected increase in the index. Drug prices also jumped 1.3 percent during the month, and this also helped to lift the core PPI for consumer goods. Capital equipment prices rose 0.5 percent. Though some of this gain could be attributable to motor vehicles, civilian aircraft and ships also rose 1 percent for the month. The aircraft business is booming in the U.S., so some of the rise in aircraft prices may stick. However, the motor vehicle price hikes could be temporary.
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On the whole, the inflation news was not bad - at least from the perspective of the CPI. Market players appeared to discount the PPI hike because of motor vehicle prices, but one should be more cautious in light of the gains in other goods. On Friday, in an interview with Market News International, Richmond Fed President Jeffrey Lacker noted that he was somewhat less comfortable with the inflation outlook than a few months ago in light of the upward revisions to the PCE deflator when the NIPA issued their annual three-year revisions last month. (Indeed, the upward revisions in the PCE deflator were significant, bringing the PCE inflation rate much closer to the CPI inflation rate than it had been previously.)
Production growth moderates again
The index of industrial production inched up 0.1 percent in July after growing a solid 0.8 percent in June. A 4.5 percent hike in utilities production helped spur production in June, but this was followed by a 0.8 percent gain in July. Also, mining production dropped 1.4 percent for the month. Manufacturing production also was modest with a 0.2 percent gain in July following a stronger 0.5 percent gain in June. On a year-over-year basis, industrial production has been on a moderating trend over the past year.
[align=justify]The capacity utilization rate has continued to increase at a fairly steady rate, although it did dip to 79.7 in July after reaching 79.8 percent in June. Historically, inflationary pressures were considered worrisome once the utilization rate surpassed the 80 percent mark and started heading towards 85 percent. Since global capacity is much more important today than it was 20 years ago, the current capacity utilization rate is not necessarily signaling a danger zone. Nonetheless, one does need to be vigilant in monitoring inflation pressures.
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[align=justify]Notice that growth in the high tech sector remains quite stable - running at about a 20 percent pace from the previous year. Outside high tech, manufacturing production has moderated dramatically since reaching a peak about 12 months ago.
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Fed surveys suggest slightly better manufacturing activity for August
The Empire State manufacturing survey, which covers the New York region, dipped a tad in August to 23 from an index level of 23.9 in July. This follows weaker activity from April through June. Thus, even though August data are not up significantly, the pace looks decent in terms of manufacturing activity in the region in July and August.
[align=justify]The Philadelphia Fed's business outlook survey jumped to 17.5 in August from a level of 9.6 in July. It also was much weaker in May and June. Since both surveys improved in July and August, it suggests that manufacturing activity may be on the mend and August production could be stronger than the July pace.
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[align=justify]July housing construction unchanged
Total housing starts were roughly unchanged at a 2.042 million unit rate in July from the revised May and June pace. According to the Census Bureau, it takes five months of housing data to establish a trend. As such, housing starts are now showing a modest drop from the peak levels posted earlier this year.
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[align=justify]Conventional wisdom says that housing permits are a good leading indicator for housing starts. Sometimes that is true. Most of the time, permits and starts move in tandem in any given month, so permits may not really give us a leading indication of the housing market. Historically, the level of housing permits is smaller than the level of housing starts since not all houses require a permit. The chart below depicts average trends over the past thirty years. The shaded areas represent recessions. Notice that housing permits were significantly lower than housing starts in the late 1970s. Even in the 80s and 90s, the number of permits issued was usually less than new housing starts. Note the change in this pattern began in the late 1990s. And now housing permits outnumber starts by a fairly wide margin. Either more permits are now required than in the past (and it is true that the number of permits-issuing places has increased) or the housing boom of the past five years has caused construction time to slow. Perhaps permits are now more useful in predicting housing construction. Although a correlation coefficient between housing permits and housing starts is strongest (largest) in a contemporaneous period - that is, when one charts the two series together rather than having permits with a one or two month lead. I'm not sure we can conclude anything with this new trend in the relationship between starts and permits, but it could be interesting to monitor. It is possible that when the housing bustle starts to moderate again, that housing starts will not trail permits by such a wide margin.
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The Bottom Line
Apart from surging energy prices, inflation news was relatively good for the month of July. However, there is no question that the environment needs to be closely monitored for accelerating pressures and inflationary expectations. Indeed, some Fed officials have suggested that long-term interest rates are currently low because inflationary expectations are subdued. Should bond investors start to believe that inflationary pressures will worsen, the long bond yield will go up very quickly.
Industrial production was soggy in July, but Fed surveys suggest that manufacturing activity may have strengthened in August. Housing activity remains strong, but is no longer accelerating.
Looking Ahead: Week of August 22 to August 26

Tuesday
Existing home sales jumped 2.7 percent in June to a 7.33 million-unit rate. Sales had risen across the board among the various regions of the country. Mortgage rates have generally picked up in tandem with the long end of the Treasury market, but rates are still low by historical standards.
Existing home sales Consensus Forecast for July 05: 7.25 million-unit rate
Range: 7.15 to 7.50 million-unit rate
Wednesday
New orders for durable goods increased 2.8 percent in June, recording the third straight monthly gain - helped by a strong aircraft sector. Boeing orders were down in July and this could put downward pressure on total durable goods orders.
Durable goods orders Consensus Forecast for July 05: -1.4 percent
Range: -4.0 to +1 percent
New single-family home sales increased 2.1 percent in May to a 1,298,000-unit rate. Sales surged in the Midwest but fell in the Northeast and South. Low mortgage rates should continue to support a strong housing market.
New home sales Consensus Forecast for July 05: 1,340,000
Range: 1,290,000 to 1,375,000-unit rate
Thursday
New jobless claims rose 6,000 in the week ended August 136 to 316,000. The 4-week moving average increased to 312,750 - this still compares favorably with a four-week average of 316,500 at the end of July.
Jobless Claims Consensus Forecast for 8/20/05: 315,000 (-1,000)
Range: 310,000 to 328,000
Friday
At mid-month, the University of Michigan's consumer sentiment index dropped nearly 4 percentage points to reach 92.7, its lowest level since May. No doubt, consumers are feeling the gas pump pinch!
[align=justify]Consumer sentiment Consensus Forecast for Aug 05: 92.5
Range: 91.5 to 93 [/align]

 

[The_Technician]

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Labor tidbit....

M3 money supply has risen 223% since third quarter of 1995.....that means everything you buy should be 223% higher since then....of course your income hasn't kepted up so we have lost buying power.....but corporations have increased their profits from cheaper labor....

maybe we will all go broke and then the corps can sell us their stock like the dotcoms did.....

:^

 

[teknobucks]

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QQQQ's bouncing off resistance.

wonder if anything will follow???....entry point or wait...that's the big Q

tekno

100%g

 

[The_Technician]

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Maybe this is it .....:end: a little parody is in the mood perhaps.....

Starship Enterprise is on a mission, to boldly go where no man has gone before......we enter the world of the Klingon's.....currently Spock has gotten the ship in dire circumstances due to his imbevalence.......and the ship is sinking.....

Scotty, you have to give me all you got....

Aye aye Captain, she's given all she has Captain...

Scotty do you have any more.....we're sinking at the rate greater than we can climb....

Sorry Captain, I guess the old girl is going down....she justdoesn't have it Captain.....

Bones, get me a pill....any pill just get me something. Spock, you got us into this, get us outta here!!!!

Jim, I told you that your heart will not handle this type of stress again......not counting out the old girl herself.....to tell you the truthJim, and I'll say it again, I'll never trust anyone with pointed ears again!!!

:l

Of course they live to live another day.....Spock needing outside assistance, blows up a local planet to get the added boost just to make it another day.....:h I wonder if we will find another boost in todays market.....or do we visit the 1130's???

:dude:

 

[teknobucks]

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The Technician wrote:

Maybe this is it .....:end: a little parody is in the mood perhaps.....

Starship Enterprise is on a mission, to boldly go where no man has gone before......we enter the world of the Klingon's.....currently Spock has gotten the ship in dire circumstances due to his imbevalence.......and the ship is sinking.....

Scotty, you have to give me all you got....

Aye aye Captain, she's given all she has Captain...

Scotty do you have any more.....we're sinking at the rate greater than we can climb....

Sorry Captain, I guess the old girl is going down....she justdoesn't have it Captain.....

Bones, get me a pill....any pill just get me something. Spock, you got us into this, get us outta here!!!!

Jim, I told you that your heart will not handle this type of stress again......not counting out the old girl herself.....to tell you the truthJim, and I'll say it again, I'll never trust anyone with pointed ears again!!!

:l

Of course they live to live another day.....Spock needing outside assistance, blows up a local planet to get the added boost just to make it another day.....:h I wonder if we will find another boost in todays market.....or do we visit the 1130's???

:dude:

DAMNIT JIM!

 

[The_Technician]

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This tells all....

http://money.cnn.com/2005/08/22/markets/markets_newyork/index.htm

 

[Spaf]

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USA Today At the moment, there are "just too many uncertainties to expect these prices to back off by much," Kerr said, and it all may be setting crude up to head toward the key $70 mark "very shortly."

Dis ain't very good news! Spaf

 

[JOVARN]

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A fill up is fast approaching $3.00 /Gallon. My conspiracy best guess theory is that when the energy bill passes the price of gas will settle back to $50.00/barrel. At $50 they win we still loose but we are better off at $50 then $90/barrel.

When gas prices were $1.20/gallon we SUV driving gas eating/sucking fat cats by the world standard were willing to go along with no new drilling and no new nuclear power plants; we will even go along with no drilling in Alaska because of Santa Clause and the penguins. At $3.00/gallon, many will say let’s build power plants and let’s drill and [bleep] the penguins and Santa; then Bush and Dick and all the other string holding puppeteers will laugh all the way to the bank; then watch the C fund take off. Until then I am going short whenever possible and wait until this oilplane comes in for a landing.

People are starting to feel the pinch. I work with people who have a combined income of 100K to 140K with a little OT and they are talking about less boating, more parties at home and smaller cars. And for those less than 30K /yr there is a big interest in the new federal car and van pooling agenda that is a being offered.

I myself am in the market for a 22ft boat but I am waiting for the fire sale which will start when the mortgages are adjusted.



Your posts are a riot and I enjoy them very much, this is the best that I can come up with.

Where is DMA?

Jo

 

[JOVARN]

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One more quick note of interest.

I worked the weekend and I helped 5 employees set up their accounts in the L fund. A few were in theG for over 10 years. And two were in C 100%.

A lot of interest in the L fund from what I can see.

I made no recomendations one way or the other.

Think there will be impact if there is a rush to the L fund???

Jo

 

[Spaf]

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Jovarn,
DMA is no longer a member!
If I see a double post. I'll delete it for you in Market Talk or TSP strategies. We all seem to get them now and then. If I miss one give me a PM. I'll normally [bleep] a XX word. I try to help folks stay on the board. Everyone has something to contribute.
Rgds! Spaf

 

[Spaf]

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The Kingdom of TSP

Daily Edition

Market News, Doodles, Tea Leaves & Yak Date August 22, Closing


Market News.

Kingdom Talk: Lube spill diverts rally.

Elsewhere: Atlantic storms spiked lube above $66. Lube a mess with storms, disruptions and violence.
Do we hear $70


Doodles and Tea Leaves - Daily.

Doodles:
S&P 500 (Index)
Closed at 1221.73, up +2.02
CMF (money flow) at -0.105, up
RSI (strength) at 47.3, up
MACD (trend) bearish
S-STO (signal) bullish
ROC (change) at -1.14, bearish

Light Crude (NYM)
Closed at 665.45, up +0.10

Tea Leaves: Caution: oil


Yak.

Remarks: Holding 100/0
S&P Stops: Alert= 1233 [broken], Trail= 1221.

 

[Quips]

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Things are looking up in Japan again today.

Bloomberg reports that the profits of the argest mineral and mining company -- with oil re serves as well -- in Austrailia were up 75% from last year. Most of that increase was due to its China trade.

Tekno, I'm not that concerned about a Venezuelian or Iranian oil embargo. China has a great stake in the world economy now, and would frown on any world-wide economic growth disruption.

But since China is not a democracy, it may use whatever resources are necessary to quell any civil unrest that may pass it the wake of such a disruption. Most democracies don't have that option.

China will keep Chavez in Venezuela on the leash much more than Bush's rhetoric; China and Venezuela are probably cooking up a deal even now to secure more of the latter's oil reserves.

An embargo against Iran by the West would really hurt the short term outlook. But again, it would also hurt China's growth and no doubt it would address that problem much more quickly than the other one in North Korea.

My fingers are crossed: I see no major disruption of oil supplies; the only volitility is a matter of hashing things out between the producing and consuming countries: who gets what and at what cost. But that is just the market.

 

[Birchtree]

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The Technician,

Thanks for the valuable information you posted - personally I like that. I noticed you also gave Randy some prescient advice on dollar cost averaging - good show.

I'm starting to get tempted by the Japanese play in the I fund. However, my wife owns the American Europacific Fund in her retirement plan, so as a family unit we have participation in the international arena. I'm thinking seriously of peeling off a few percentages from the Fidelity Low Priced Fund position and adding to AEPGX. Once I remove money from FLPSX one can't get back because it is closed. It's always a sacrifice of some sort in this investment game.

As they say in my home state - don't give me amplitute, give me altitude.

Dennis

 

[The_Technician]

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Noticed the overseas markets were down.....we should open high and go low as this is the current trend.....

:^

 

[The_Technician]

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Birch....the altitude is dropping as I type.....if we break this level at 1215 then expect a visit to 1197 coming real soon....

Guess you are staying long here eh????

:U

 

[Birchtree]

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Yes sir, already got my fishing pole. Got my sacrificial lamb chop stocks ready to liquidate if necessary, so I can buy some of the beaten down darlings - Merck looks interesting for the long pull. One of my chemical stocks is off over a point today - the dividend comes due 9/15 - wish I didn't have to wait. Just can't be in a hurry with dollar cost averaging. One of my banks is up over 5 points today - but my gut says wait on the 2for1 split later on - nobody really likes banks anyway with a potential yield curve inversion on the horizon. Gotta hold the Marginot Line.

 

[Spaf]

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The Kingdom of TSP

Daily Edition

Market News, Doodles, Tea Leaves & Yak Date August 23, Closing


Market News.

Kingdom Talk: Home sales sink. Oil in turmoil. Lube rains out rallys.


Doodles and Tea Leaves - Daily.

Doodles:
S&P 500 (Index)
Closed at 1217.59, dn -4.14
CMF (money flow) at -0.104. dn
RSI (strength) at 44.6, dn
MACD (trend) bearish
S-STO (signal) bearish
ROC (change) bearish

Light Crude (NYM)
Closed at 65.71, up +0.06

Tea Leaves: Red


Yak.

Remarks: Holding 100/0
S&P Stops: Alert= 1233 [broken], Trail= 1221 [broken].

 

[learning]

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Sorry, that I have not been able to come out and play much. Busy time of the year for us is starting. Errr.

WW. Lincon did a good job. Most of what he set up was needed. It saved a lot in future generations. Go and look at what those spending bills did. Most protected our nation and helped it to grow. What I fear is not one party or the other. I fear one party to have control as is the case now. Here is where they can get things done. Unlike in the past they are in it for them selves and what they can get out of it as a whole. I have little respect for them.

Oil. Is not going to be pretty. However, the market has held on fairly well. If we can have another big fall it will be time to get bullish. Right now, I see G is the best place for me. However, I do have a little toe in the market at this time. I am also watching the L fund. I have some in the I fund. I would like to thank Shara. Hope you can come out and play here some time. Perhaps the people that do not know how to behave have been corrected.

Short on time. Just wanted to post a message to say I am watching when I can. I am intrested and thanks to all for their honest opionions and ideas.

RGDS

 

[Guest]

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learning