Tag Archives: On Economy

Extracting Meaning from PPP “An alternative exchange rate – the purchasing power parity (PPP) conversion factor – is preferred because it reflects differences in price levels for both tradable and non-tradable goods and services and therefore provides a more meaningful comparison of real output.” – the World Bank Headquarters of the World Bank in Washington. - Click to enlarge We have it on good authority that the...

A Finite Life Span We have been promising to get back to the topic of capital destruction, which we put on hiatus for the last several weeks to make our case that the interest rate remains in a falling trend. Today, we have a different way of looking at capital destruction. Socialism is the system of seeking out and destroying capital. Redistribution means taking someone’s capital and handing it over as income to...

Whipsawed Frank Roellinger has updated us with respect to the signals given by his Modified Ned Davis Method (MDM) in the course of the recent market correction. The MDM is a purely technical trading system designed for position-trading the Russell 2000 index, both long and short (for details and additional color see The Modified Davis Method and Reader Question on the Modified Ned Davis Method). The Nasdaq pillar…...

Peculiar Behavior As I have shown in previous issues of Seasonal Insights, various financial instruments are demonstrating peculiar behavior in the course of the week: the S&P 500 Index is typically strong on Tuesdays, Gold on Fridays and Bitcoin on Tuesdays (similar to the S&P 500 Index). Several readers have inquired whether currencies exhibit such patterns as well. Are these extremely large markets also home...

Economic Activity Seems Brisk, But… Contrary to the situation in 2014-2015, economic indicators are currently far from signaling an imminent recession. We frequently discussed growing weakness in the manufacturing sector in 2015 (which is the largest sector of the economy in terms of gross output) – but even then, we always stressed that no clear recession signal was in sight yet. US gross output (GO) growth...

Actions and Reactions Down markets, like up markets, are both dazzling and delightful. The shock and awe of near back-to-back 1,000 point Dow Jones Industrial Average (DJIA) free-falls is indeed spectacular. There are many reasons to revel in it.  Today we shall share a few. To begin, losing money in a multi-day stock market dump is no fun at all.  We’d rather get our teeth drilled by a dentist.  Still, a rapid...

Something for Nothing The world is full of bad ideas.  Just look around.  One can hardly blink without a multitude of bad ideas coming into view.  What’s more, the worse an idea is, the more popular it becomes. Take Mickey’s Fine Malt Liquor.  It’s nearly as destructive as prescription pain killers.  Yet people chug it down with reckless abandon. Looking at the expression of this Mickey’s Malt Liquor tester one might...

FOMC Strategy Revisited As readers know, investment and trading decisions can be optimized with the help of statistics. One way of doing so is offered by the FOMC meeting strategy. The rate hikes are actually leading somewhere – after the Wile E. Coyote moment, the FOMC meeting strategy is especially useful - Click to enlarge A study published by the Federal Reserve Bank of New York in 2011 examined the effect of...

Trade Deficit with China Widens on Trump’s Watch  Most things come easier said than done.  Take President Trump’s posture on trade with China. Trump doesn’t want a bigger trade deficit with China.  He wants a smaller trade deficit with China.  In fact, reducing the trade deficit with China is one of Trump’s promises to Make America Great Again. Photo credit: Jonathan Ernst / Reuters - Click to enlarge We are often...

Controlled Inflation American consumers are not only feeling good.  They are feeling great. They are borrowing money – and spending it – like tomorrow will never come. After an extended period of indulging in excessive moderation (left), the US consumer makes his innermost wishes known (right). - Click to enlarge On Monday the Federal Reserve released its latest report of consumer credit outstanding.  According to...