Saturday, August 3, 2013

Chart of the Day: 13-Year Dow Cycles

As you guys know, I take a look at a lot of charts every day. I mean, I literally look at thousands of charts daily. But this one from Chris Kimble takes the cake as the best chart I’ve seen all week. And by best I mean the most interesting, not necessarily the most bullish.
The first thing you notice is the 13 year cycle of major tops and bottoms that have been put in for the Dow Jones Industrial Average going back to 1974. Currently we’re in the 13th year after a major top was put in during the year 2000. So cyclically, the market is vulnerable according to this chart:
Click chart to embiggen
7-30-13 dow chris kimble

But the two trendlines that go back to the 1987 and 2000 tops are just fascinating.
Make what you will of this chart. Call it a coincidence if you want. But tell me this isn’t the chart of the day?
Please share this article

Bollinger Bandwidth: Rare Volatility Indicator Helps Spot Price Breakouts

Bollinger Bandwidth is one of the few technical indicators that measures volatility.

Most indicators use price and attempt to identify trend changes. Bollinger Bandwidth measures how strong the recent trend is. It does not offer any information about whether prices will go up or down in the future. Instead the indicator highlights periods of high or low volatility. Traders generally prefer high volatility because fast price moves can result in fast profits.

This technical indicator measures the distance between the upper and lower Bollinger Bands. The Bands contract and expand with volatility. Bollinger Bandwidth quantifies the volatility and can be added to the chart to help spot when big price moves are likely to occur. Volatility tends to move in a cyclical pattern, and big price moves often follow periods of low volatility.

Bollinger Bandwidth is calculated by taking the difference between the upper Band and the lower Band and dividing that difference by the moving average of the closing prices (i.e., the middle Band). The indicator will always be between 0 and 100, with low values corresponding to low volatility and high values corresponding to high volatility. It can be used in any time frame.  (more)

Please share this article

Beef Supply at 21-Year Low: Get Ready to Pay Up

U.S. beef production is plunging to a 21-year low after surging feed costs spurred ranchers to cut herds, signaling record prices for consumers and higher costs for buyers from McDonald’s Corp. (MCD) to Ruth’s Chris Steak House.

Production in the U.S. will decline 4.9 percent to 10.93 million metric tons in 2014, retreating for a fourth year, the government says. The herd on July 1 was the smallest for that date since at least 1973, according to the average of four analyst estimates compiled by Bloomberg. The most-active cattle futures will rise 6.8 percent to $1.33 a pound next year, a level last seen in February, the median of nine forecasts shows.

Ranchers still haven’t recovered from last year’s drought that sent grain costs to a record and spurred them to slaughter more cattle. While feed costs are now slumping as U.S. farms prepare to reap the biggest corn crop ever, it takes more than two years to raise enough animals to expand supply. Retail ground-beef prices in June were up 13 percent from a year earlier and near a record set in January. (more)

Please share this article

Line up and prepare for the next bailout in student debt

Student loan debt crosses the $1.2 trillion mark. $248,000 for an undergraduate degree?
The nation is fully engulfed in a student debt bubble.  The problems with student debt are numerous yet this unrelenting bubble is allowed to grow like weeds in a garden.  Going back to 2000 total student debt outstanding rested around $200 billion.  Today it is over $1.2 trillion.  Keep in mind that during this time household incomes have retreated back to what they were in the mid-1990s.  So college costs more but you earn less.  Sounds like a winning recipe!  Compounding this debt bubble is the reality that half of college graduates are working in jobs that don’t employ their undergraduate degrees.  I continuously see that college graduates have a lower unemployment rate compared to others but in many cases this means a Starbucks job was given to someone with a college degree versus one without a degree.  I’m not sure that will be a big help when paying back $50,000 or $100,000 in student debt.

The delinquencies only get worse
Even though the problems are festering student debt is becoming a problematic liability class:
Read More @
Please share this article

It Is Happening Again: 18 Similarities Between The Last Financial Crisis And Today

If our leaders could have recognized the signs ahead of time, do you think that they could have prevented the financial crisis of 2008? That is a very timely question, because so many of the warning signs that we saw just before and during the last financial crisis are popping up again. Many of the things that are happening right now in the stock market, the bond market, the real estate market and in the overall economic data are eerily similar to what we witnessed back in 2008 and 2009. It is almost as if we are being forced to watch some kind of a perverse replay of previous events, only this time our economy and our financial system are much weaker than they were the last time around. So will we be able to handle a financial crash as bad as we experienced back in 2008? What if it is even worse this time? Considering the fact that we have been through this kind of thing before, you would think that our leaders would be feverishly trying to keep it from happening again and the American people would be rapidly preparing to weather the coming storm. Sadly, none of that is happening. It is almost as if they cannot even see the disaster that is staring them right in the face. But without a doubt, disaster is coming. The following are 18 similarities between the last financial crisis and today...

#1 According to the Bank of America Merrill Lynch equity strategy team, their big institutional clients are selling stock at a rate not seen "since 2008".
#2 In 2008, stock prices had wildly diverged from where the economic fundamentals said that they should be. Now it has happened again.

#3 In early 2008, the average price of a gallon of gasoline rose substantially. It is starting to happen again. And remember, whenever the average price of a gallon of gasoline in the U.S. has risen above $3.80 during the past three years, a stock market decline has always followed.

#4 New home prices just experienced their largest two month drop since Lehman Brothers collapsed.

#5 During the last financial crisis, the mortgage delinquency rate rose dramatically. It is starting to happen again.

#6 Prior to the financial crisis of 2008, there was a spike in the number of adjustable rate mortgages. It is happening again.

#7 Just before the last financial crisis, unemployment claims started skyrocketing. Well, initial claims for unemployment benefits are rising again. Once we hit the 400,000 level, we will officially be in the danger zone.

#8 Continuing claims for unemployment benefits just spiked to the highest level since early 2009.

#9 The yield on 10 year Treasuries is now up to 2.60 percent. We also saw the yield on 10 year U.S. Treasuries rise significantly during the first half of 2008.

#10 According to Zero Hedge, "whenever the annual change in core capex, also known as Non-Defense Capital Goods excluding Aircraft shipments goes negative, the US has traditionally entered a recession". Guess what? It is rapidly heading toward negative territory again.

#11 Average hourly compensation in the United States experienced its largest drop since 2009 during the first quarter of 2013.

#12 In the month of June, spending at restaurants fell by the most that we have seen since February 2008.

#13 Just before the last financial crisis, corporate earnings were very disappointing. Now it is happening again.

#14 Margin debt spiked just before the bubble burst, it spiked just before the financial crash of 2008, and now it is spiking again.

#15 During 2008, the price of gold fell substantially. Now it is happening again.

#16 Global business confidence is now the lowest that it has been since the last recession.

#17 Back in 2008, the U.S. national debt was rapidly rising to unsustainable levels. We are in much, much worse shape today.

#18 Prior to the last financial crisis, Federal Reserve Chairman Ben Bernanke assured the American people that home prices would not decline and that there would not be a recession. We all know what happened. Now he is once again promising that everything is going to be just fine.

Are the American people going to fall for it again?
It doesn't take a genius to see how vulnerable the global economy is right now. Much of Europe is already experiencing an economic depression, debt levels in Asia are higher than ever before, and the U.S. economy has been steadily declining for most of the past decade. If you doubt that the U.S. economy has been declining, please see my previous article entitled "40 Stats That Prove The U.S. Economy Has Already Been Collapsing Over The Past Decade".
And the truth is that most Americans already know that we are in deep trouble. Today, 61 percent of all Americans believe that the country is on the wrong track.
It isn't that so many people are choosing to be pessimistic. It is just that an increasing number of Americans are waking up to the cold, hard reality that we are facing.
Decades of incredibly foolish decisions have brought us to this point. We allowed our economic infrastructure to be gutted, we consumed far more wealth than we produced, our politicians kept doing incredibly stupid things but we kept voting the same jokers back into office again and again, and over the past 40 years we have blown up the biggest debt bubble in all of human history.
We have been living so far above our means for so long that most of us actually think that our current economic situation is "normal".
But no, there is nothing normal about what we are experiencing. We are entering the terminal phase of a colossal debt spiral, and when it flames out the economic devastation is going to be absolutely spectacular.
When the next major wave of the economic collapse comes and unemployment soars well up into the double digits, millions of businesses close and millions of American families lose their homes, I hope that those that are assuring all of us that there will not be an economic collapse will come back and apologize.
There are tens of millions of people out there right now that are not making any preparations at all because they have been promised that everything is going to be okay. When the next financial crash happens, most of them will be absolutely blindsided by it and many of them will totally give in to despair.
Don't let that happen to you.Please share this article

Citi: “Be Careful Of The Big Con”

Despite rising gas prices, rising mortgage rates, slowing income growth and the rise of ‘low-quality’ part-time jobs, ‘con’sumer ’con’fidence ’con’tinues to rise to post-recession highs. However, as Citi’s FX Technicals group notes, for the 3rd time in the last 17 year period we may be looking at a 4-year-4-month rise in consumer confidence before a turn lower again; and in spite of the Fed’s rosy forecasts (and the market’s expectations), we should be careful being too quick to believe that the sluggish economic dynamic that has ‘dogged us’ for the last 6 years is yet fully behind us.
Via Citi FX Technicals,
In our chart of the week we start with what we think is one of the most forward looking and influential Techamental charts we look at – CONsumer CONfidence.
– It has been pivotal in the last 17 years or so in giving a guide to the overall backdrop when it comes to the US economy and financial markets. In addition it has been a leading guide for equity markets (In 2000 and 20007 in particular.)
– In addition we will look at some of our other favored Techamental indicators and market charts
– Our conclusion: Be careful about being too quick to believe that the sluggish economic dynamic that has “dogged us” for the last 6 years is yet fully behind us. If we are correct then the Fed is likely going to have to agonize in the 4th quarter whether to stick with its implicit guidance and taper and even if they go ahead with that decision they may find themselves having to reverse it later.
Please share this article

Billionaires Dumping Stocks, Economist Knows Why

Despite the 6.5% stock market rally over the last three months, a handful of billionaires are quietly dumping their American stocks . . . And fast.

Warren Buffett, who has been a cheerleader for U.S. Stocks for quite some time, is dumping shares at an alarming rate. He recently complained of “disappointing performance” in dyed-in-the-wool American companies like Johnson & Johnson, Procter & Gamble, and Kraft Foods.

In the latest filing for Buffett’s holding company Berkshire Hathaway, Buffett has been drastically reducing his exposure to stocks that depend on consumer purchasing habits. Berkshire sold roughly 19 million shares of Johnson & Johnson, and reduced his overall stake in “consumer product stocks” by 21%. Berkshire Hathaway also sold its entire stake in California-based computer parts supplier Intel.

With 70% of the U.S. Economy dependent on consumer spending, Buffett’s apparent lack of faith in these companies’ future prospects is worrisome.  (more)

Please share this article