Archives of “Economy” tag

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Upcoming Week : Cutting to the Quick

  
  Analysis
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Central banks are prepared to take fresh measures to strengthen and extend the business cycle primarily because price pressures are below what their predecessors thought would be acceptable levels. Draghi, speaking for the ECB, the Federal Reserve, and the Bank of Japan ratcheted up their concerns, which, even without new initiatives, were sufficient to drive interest rates lower.
There is no real definition of many terms economists throw around like recession or depression.  The “two negative quarters of declining GDP” is not a technical definition but a rule of thumb.  Ironically there weren’t recessions before the Great Depression.  The end of business or credit cycles were called panics and crises.  The use of “recession” appears to have been applied to economies to distinguish the end of the business cycle from the Great Depression.  Neither the US nor Europe seems to be on the verge of an economic contraction.  Given a shrinking population, the Japanese economy can contract, and per capita GDP can still rise.
The Bundesbank warned last week that the German economy may have contracted in Q2, but the eurozone flash composite PMI suggests the region expanded.  Although the composite PMI averaged 51.8 in Q2, following a 51.5 average in Q1, GDP growth maybe half of the 0.4% in recorded in the first three months of the year.
The most important data point for the eurozone next week is the flash CPI reading.  Some may see it as a non-story as headline inflation is expected to remain at 1.2% and the core rate at 0.8%.  Unchanged data is the story.  Draghi was clear: if conditions do not improve, the ECB needs to provide more stimulus.

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Markets Pause Ahead of the Weekend

  
  Analysis
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Overview: The global capital markets are trading quietly ahead of the weekend.  Equity markets are mostly narrowly mixed.  Chinese shares extended their run, and the major benchmarks were up 4%+ on the week. Japan, Australia, South Korea, and India saw gains pared.  European equities were edging higher, and the Dow Jones Stoxx 600 is holding on to around a 2% gain for the week.  After closing at record highs yesterday, the S&P 500 is trading a little heavier in the electronic activity.  News that the US was ready to strike Iranian radar and missile batteries but called it off at the last moment rattled investors.  Japanese, Europe, and US 10-year benchmark yields firmed slightly, while Australia and New Zealand 10-year yields eased to new record lows.  The dollar itself is also mixed, though the Dollar Index is trading a little below its 200-day moving average (~96.65) in the European morning.  The Turkish lira and South African rand are leading most of the emerging market currencies lower.  Gold briefly extended its gains above $1400 for the first time since 2013 before pulling back in Europe.  It is poised for its largest weekly gain (~3.5%) in three years.
Asia Pacific
 
Japan reported softer price pressures and a June flash manufacturing PMI that remained below the 50 boom/bust level.  Headline CPI slipped to 0.7% in May from 0.9% in April as economists expected.  The core rate, which excludes fresh food, eased to 0.8% from 0.9%.  When fresh food and energy are excluded–more like the US and Europe core measures–prices were up 0.5% from a year ago rather than 0.6% as was the case in April.  The flash manufacturing PMI fell to 49.5 from 49.8 and reported the first drop in new orders since June 2016.  Output remained firm, and the order backlog is being absorbed, setting the stage for a potentially difficult Q3.  A bright spot may be services.  The tertiary index for April jumped 0.9% after a 0.5% decline in March.  This is the largest increase since last October.  There are no policy implications from today’s reports.  The bar to BOJ action appears a bit higher than in the US and Europe.

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Fed’s Bullard and Kashkari make case for rate cut

  
  Analysis
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Slowing growth momentum and the lack of inflationary pressure are fuelling the case among Federal Reserve policymakers that a rate cut may be necessary this year in order to stimulate the economy.

A duo of Fed officials — St Louis Fed president James Bullard and Minneapolis Fed president Neel Kashkari — on Friday cited rising global uncertainty as a reason the US central bank should take immediate action to lower rates.

At its latest policy meeting this week, the Federal Open Market Committee voted 9-1 to hold rates steady but signalled a strong possibility of cutting them this year.

Mr Bullard, one of the most dovish members of the Fed board, was the lone dissenter. He said on Friday he pushed for a quarter-percentage point cut at the meeting in order to safeguard against weaker growth, tepid inflation and an increasingly volatile environment.

“I believe that lowering the target range for the federal funds rate at this time would provide insurance against further declines in expected inflation and a slowing economy subject to elevated downside risks. Even if a sharper-than-expected slowdown does not materialise, a rate cut would help promote a more rapid return of inflation and inflation expectations to target,” he said in a brief statement posted on his bank’s website.

Mr Kashkari, a non-voting member of the FOMC, went even further. In an essay published on Friday, he said he argued at this week’s meeting for a 50 bps cut in order to “re-anchor” inflation expectations. (more…)

Floored

  
Analysis, Education, Video
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A world that’s more riot than profession, the trading floors of Chicago are a place where gambling your family’s mortgage is all in a day’s. At a time when markets are unhinged, FLOORED offers a unique window to this lesser-known world of finance. These men may not have degrees, but they’ve got guts, and penchant for excess that solicits simultaneous feelings of revulsion- and a desire to root them on. But like many aspects of our economy, technology is changing the way these traders do business, and these eccentric pit denizens aren’t the type to take kindly to new tricks. Computerized trading may take the emotion out of the job, but it may also take some of these old-timers out- dinosaurs in a young man’s game.

My Trading Lessons for Traders

  
  Education
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Read….When ever you are Free.

  • Prepare, be confident & be decisive

  • Follow my trading rules without exception

  • Plan every trade with profit exit, stop exit and risk/reward ranking

  • Trade only when you have time AND you have an edge

  • Formulate and write down a trading/investing plan

  • Exit a position at my stops and not “hope” it will recover tomorrow

  • Trade the market I actually see, not the one I think I will see

  • Focus more on what’s actually happening rather than what I wish would happen

  • Learn to prevent my skepticism and opinion over the economy from keeping me from making good trades

  • Have a plan every day to trade the market and to not let my opinions of the market interfere with my trading

  • Concentrate on rule based trade management and not the outcome of the specific trade

  • Follow price action as opposed to listening to the fundamental “experts”

  • Listen to the market signal rather than market noise

  • Don’t be afraid of making mistakes

  • To pay more attention to technical signals to determine purchase/sell points rather than emotion & personal reasoning

  • Have more confidence in my trade ideas and believe in myself more often

  • Do not have a bias but instead let the charts be the guide

  • Have the discipline and fortitude to stick to my trade plans

  • To improve my organization of stock lists and automation of stock alerts

  • Do not over-leverage

  • Select only the most favorable setups

  • Try not to over analyze every potential trade

  • Lose less when I am wrong

  • Spend less time reading words and more time reading charts

  • Stick with winners and sell the losers

  • Allocate 2-3 hours each day & 5 hours every weekend to finding attractive setups

  • Increase position size and be in the market more (more…)

    • Short Skirts and the Stock Market

      
    Education, Video
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    Financial Market Analysts have studied the “hemline indicator” for decades. Yet there’s an even deeper connection between fashion trends and the economy’s financial health that most overlook. This three minute clip from the new socionomics documentary History’s Hidden Engine reveals the real significance of what’s in style.

    China’s malls are empty, but whole cities?

      
    Analysis, Economy, Education
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    The China bears tell us that stimulus spending there is largely being wasted. This report from Al Jazeera offers startlingly strong support for that proposition:

    China’s economy is continuing to grow despite the global recession, helped by a massive government stimulus package of $585bn.
    But doubts remain whether such strong growth can be sustained by public spending alone.

    Al Jazeera’s Melissa Chan reports from Inner Mongolia, where  a whole town built with government money is standing empty.

    German economic optimism on the rise in August

      
    Analysis, Education
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    BNEWSGermans are feeling much better than expected about their economy, with the just-released ZEW sentiment index giving a reading of 42, up from 36.3 in July.

    The Zew Institute’s Current Conditions Index rose even more – to 18.3 from 10.6 in July.

    Analysts expected readings of 40 and 12 respectively for the two indices and sentiment is at its highest since March.

    The institute comments that the “first signs of an end to the recession in important Eurozone countries may have contributed to the indicator’s rise…. furthermore, the economic optimism is supported by the robust domestic demand in Germany”.

    There has also been a strong increase in economic expectations for the Eurozone, the index climbing 11.2 points to 44.

    Eurozone industrial production numbers for June are also out. They show an increase of 0.7 per cent, compared to economist expectations of 0.8 per cent and a decline of 0.3 per cent in May.

    Jim Chanos Is Bearish On China

      
    Analysis, Education
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    Jim Chanos is bearish on China and I think he has a very good point. China suffers from huge overcapacity in every sector and their statistics are made up.

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    “Jim Chanos, head of investment firm Kynikos Associates and famous for his call to short Enron in 2001, has found his next big target.

    Chanos and other China bears say the country has overcapacity in just about every sector of its economy, and the government’s massive stimulus isn’t working. They think China is simply covering things up with faulty statistics.

    For example, they point to the huge reported increases in car sales in contrast to numbers showing little growth in gasoline consumption, which suggests state-run companies are buying huge numbers of cars and putting them in storage.” in The Daily Crux

    THE SUCCESSFUL TRADER … ACCORDING TO MARK DOUGLAS

      
    Analysis, Education
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    douglasquote

    There is a reason why so few traders succeed.  It is not for lack of study or effort or passion.  It is not for lack of education or a Bloomberg platform subscription.  It is not because only a select few have access to technical “secrets” (a.k.a. indicators).  No.  So few succeed at trading for the same reason that so few succeed at living an abundant life.

    The unsuccessful refuse to think differently when faced with difficulties believing that luck has passed them by.  They do not succeed because the want of instant gratification and its fleeting rewards has replaced the need for sustainable, hard fought, earned rewards indicative of a mindset prepared to tackle failure as nothing but a mathematical equation: here is the problem now let’s find the solution.

    The mediocre search for easy answers to difficult problems believing that the right answers to their questions are found somewhere “out there”.   The successful make difficult decisions where there are no easy answers, questioning whether their perception of what is out there is a distorted reflection of what is inside of them.

    The best traders, according to Mark Douglas, think differently than others because they know that what is most important is “how they think about what they do and how they’re thinking when they do it.”

     
     

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