Best of the Week
Most Popular
1. Market Decline Will Lead To Pension Collapse, USD Devaluation, And NWO - Raymond_Matison
2.Uber’s Nightmare Has Just Started - Stephen_McBride
3.Stock Market Crash Black Swan Event Set Up Sept 12th? - Brad_Gudgeon
4.GDow Stock Market Trend Forecast Update - Nadeem_Walayat
5.Gold Significant Correction Has Started - Clive_Maund
6.British Pound GBP vs Brexit Chaos Timeline - Nadeem_Walayat
7.Cameco Crash, Uranium Sector Won’t Catch a break - Richard_Mills
8.Recession 2020 Forecast : The New Risks & New Profits Of A Grand Experiment - Dan_Amerman
9.Gold When Global Insanity Prevails - Michael Ballanger
10.UK General Election Forecast 2019 - Betting Market Odds - Nadeem_Walayat
Last 7 days
Dow Stock Market Short-term Trend Analysis - 15th Oct 19
The Many Aligning Signals in Gold - 15th Oct 19
Market Action Suggests Downside in Precious Metals - 15th Oct 19
US Major Stock Market Indexes Retest Critical Price Channel Resistance - 15th Oct 19
“Baghad Jerome” Powell Denies the Fed Is Using Financial Crisis Tools - 15th Oct 19
British Pound GBP Trend Analysis - 14th Oct 19
A Guide to Financing Your Next Car - 14th Oct 19
America's Ruling Class - Underestimating Them & Overestimating Us - 14th Oct 19
Stock Market Range Bound - 14th Oct 19
Gold, Silver Bonds - Inflation in the Offing? - 14th Oct 19
East-West Trade War: Never Take a Knife to a Gunfight - 14th Oct 19
Consider Precious Metals for Insurance First, Profit Second... - 14th Oct 19
Stock Market Dow Elliott Wave Analysis Forecast - 13th Oct 19
The Most Successful IPOs Have This One Thing in Common - 13th Oct 19
Precious Metals & Stock Market VIX Are Set To Launch Dramatically Higher - 13th Oct 19
Discovery Sport EGR Valve Gasket Problems - Land Rover Dealer Fix - 13th Oct 19
Stock Market US Presidential Cycle - Video - 12th Oct 19
Social Security Is Screwing Millennials - 12th Oct 19
Gold Gifts Traders With Another Rotation Below $1500 - 12th Oct 19
US Dollar Index Trend Analysis - 11th Oct 19
China Golden Week Sales Exceed Expectations - 11th Oct 19
Stock Market Short-term Consolidation Does Not change Secular Bullish Trend - 11th Oct 19
The Allure of Upswings in Silver Mining Stocks - 11th Oct 19
US Housing Market 2018-2019 and 2006-2007: Similarities & Differences - 11th Oct 19
Now Is the Time to Load Up on 5G Stocks - 11th Oct 19
Why the Law Can’t Protect Your Money - 11th Oct 19
Will Miami be the First U.S. Real Estate Bubble to Burst? - 11th Oct 19
How Online Casinos Maximise Profits - 11th Oct 19
3 Tips for Picking Junior Gold Stocks - 10th Oct 19
How Does Inflation Affect Exchange Rates? - 10th Oct 19
This Is the Best Time to Load Up on These 3 Value Stocks - 10th Oct 19
What Makes this Gold Market Rally Different From All Others - 10th Oct 19
Stock Market US Presidential Cycle - 9th Oct 19
The IPO Market Is Nowhere Near a Bubble - 9th Oct 19
US Stock Markets Trade Sideways – Waiting on News/Guidance  - 9th Oct 19
Amazon Selling Fake Hard Drives - 4tb WD Blue - How to Check Your Drive is Genuine  - 9th Oct 19
Whatever Happened to Philippines Debt Slavery?  - 9th Oct 19
Gold in the Negative Real Interest Rates Environment - 9th Oct 19
The Later United States Empire - 9th Oct 19
Gold It’s All About Real Interest Rates Not the US Dollar - 8th Oct 19
A Trump Impeachment Would Cause The Stock Market To Rally - 8th Oct 19
The Benefits of Applying for Online Loans - 8th Oct 19
Is There Life Left In Cannabis - 8th Oct 19
Yield Curve Inversion Current State - 7th Oct 19

Market Oracle FREE Newsletter

Stock Market Trend Forecast Oct - Dec 2019 by Nadeem Walayat

U.S. Economic Snapshot - Strong Dollar Eating into corporate Profits

Economics / US Economy Oct 28, 2014 - 02:47 PM GMT

By: Gary_Tanashian

Economics

Our view has been that a stronger US dollar would eventually start to eat away at corporate results, especially in the manufacturing sector and at US based companies with a global customer base. The decline in revenues thus far is something to be watched because where revenues go, earnings eventually follow.

[edit: the segment previous to this one reviewed a contrast between strong earnings and sagging revenues with companies that have reported earnings thus far]


An article by Doug Short published at Business Insider on Friday illustrates how the Economic Cycle Research Institute (ECRI) called for a recession in 2011 and was promptly made to eat that call first by Operation Twist and then by balls out QE3. All the while as ZIRP has quietly whirred along in the background for 6 years.

ECRI's weekly Leading Index is flashing warnings again...

US Weekly Leading Index

...while the St. Louis Fed's Leading Index (incl. ISM data, Treasury spreads and State level housing permits and unemployment data) continues to slog around its 30 year average after the big recovery out of 2009.

Leading Index for the US

Reference again the '*' note at the end of page 1 [this is in reference to.. *Orthodoxy and mechanical thinking are everywhere in the markets. That is why herds are herds. Just one example: "The Fed will not let markets go down."]

The Fed may not let the market go down as long as policy and probably 1000 other moving parts throughout the interconnected global financial network are in sync for the desired outcome, but still we should avoid the automatic thinking like "the Fed will not dare alter ZIRP and is even making sounds about extending QE, therefore everything will remain 'as is', and bullish."

What we should do is watch the data and watch the currency. Of course all it took was a noisy PR out of the Semiconductor industry and a couple days of impulsive looking market decline to jerk supposed Fed Hawk James Bullard out in front of a microphone to talk about extending QE. Now the market is acting once again like it is safe in Mommy's arms, with nothing to fear but fear itself.

Well, that remains to be seen as the technicals we track will tell the story in real time. The Fed had multiple jawbones working against the strong dollar story because they know that their ability to keep the economy inflated is dependent upon the USD remaining under wraps. Policy makers will not remain beyond reproach forever. By 2005 Greenspan had become known (to those who were paying attention) as the instigator of a massive commercial credit bubble, in 2011 Bernanke was reviled (with gold bugs, inflationists and even Bill Gross out front bull horning) as 'Helicopter Ben'.

Today, Janet Yellen's Fed seems to very much want the inflation to take because they know that if a lack of inflation expectations morphs into increasing deflation expectations, the asset pumping game - the macro game in play since 2008 - is up.

Thus far the post-2008 inflation has worked to desired effects, per the US Coincident Economic Activity Index, which is composed of Non-Farm Payrolls, Unemployment Rate, Average Hours Worked in Manufacturing and Wages/Salaries.

Graphs like this one show the reason that people who claim the economy is weak simply because they think or want it to be so should be disregarded. The inflation has worked so far, with the questions being how long will it continue to work?

Coincident Economic Activity Index for the US

QE along with ZIRP has completely underpinned a non-organic economic recovery. Here are the two faces of QE to this point, US Treasury and MBS securities held by the Fed. Through QE's 1, 2 and now 3 the Fed's balance sheet has become bloated with securities that if not sucked up, would have imploded the economy long ago.

Not even considering the toxic nature of many MBS that were taken off the open (and free) market, the effects on interest rates would have been market moving had not policy makers taken active meddling in financial markets to new heights.

US Treasury securities held by the Federal Reserve

Mortgage-backed securities held by the Federal Reserve

Along with our theme that the economy is strong goes our theme that it is built on a foundation dependent upon policy makers' will and/or ability to keep the racket (i.e. the accumulation and/or manipulation of debt) going.

ECRI tries to make its bones by forecasting the economy. It has thus far been foiled by the Fed's machinations. So too have many notable and respected asset managers and economists been thrown for a loop during the current inflation operation that does not even show any signs of inflation's effects other than in the stock market.

It's all the more reason we should proceed with eyes on incoming data, especially with regard to US dollar strength, deflationary forces and corporate signals like the sagging top line revenue performance noted in the previous segment.

Subscribe to NFTRH Premium for your 25-35 page weekly report, interim updates (including Key ETF charts) and NFTRH+ chart/trade ideas!

By Gary Tanashian

http://biiwii.com

© 2014 Copyright  Gary Tanashian - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules