Market preview: Stock futures edge higher following better than expected economic data from China and Germany, and the U.S. trade deficit sinks to its narrowest in nearly three years. S&P benchmark +0.2%. Volume is expected to be thin as a massive blizzard is forecast to bear down on the Northeast. Still ahead: wholesale inventories. [View news story]
Tack,
jhooper posted this link. Good visual on import growth.
"The trade gap fell to a nearly two-year low in December. Good news? Well, in part — the U.S. is making strides in exporting more oil and gas, and importing less, helped by the fracking boom. In December alone, oil and gas exports surged 8.5% while petroleum imports tumbled 10.5%. But there’s also a disturbing picture of slowing growth in demand."
Dec. International Trade: The U.S. international trade deficit in goods and services -$38.5B vs. consensus of -$46.0B, $48.6B (revised) in Nov. [View news story]
bbro,
The improvement was mainly due to fall in imports, is that a good thing?
Doesn't that suggest a slowing of end user demand?
Market preview: Stock futures edge higher following better than expected economic data from China and Germany, and the U.S. trade deficit sinks to its narrowest in nearly three years. S&P benchmark +0.2%. Volume is expected to be thin as a massive blizzard is forecast to bear down on the Northeast. Still ahead: wholesale inventories. [View news story]
Tack,
The number improved a lot due to a fall in imports. I am not exactly sure that is as positive a development as the headline would suggest. Might be because end-user demand has fallen a bit.
Weighing The Week Ahead: Market Correction? [View article]
Jeff,
Thanks for the reply. I am actually quite familiar with the NBER criteria which is why this somewhat paradoxical.
Generally the rule of thumb for calling a recession before NBER dating, which usually happens a year or later after the event, is 2 consecutive, negative quarters of growth. That seems to have worked most of the time in the past.
Have we ever had a period in the past where we had 2 negative quarters and it wasn't called a recession?
If it wasn't for the deflator being so low, as discussed by Doug Short last week, this number would have been a lot worse.
I don't know the answer to the question, perhaps you do.
Weighing The Week Ahead: Market Correction? [View article]
Jeff,
Just curious, how do you reconcile the negative GDP print with the virtually zero forecast of recession based upon the various models cited above?
Are you expecting upward revisions in the future?
If we get a negative quarter in Q1 due to the drag from tax increases and potentially sequester would that be a "recession"?
I admit I was pretty bamboozled by that negative number but it seems like it was written off as an anomaly. There were some positives in the internals as described by Calculated Risk:
"The slight decline in GDP was related to changes in private inventories (subtracted 1.27 percentage points), less Federal Government spending (subtracted 1.25 percentage points), and a negative contribution from trade (subtracted 0.25 percentage points).
Overall this was a weak report, but with some underlying positives (the increase in PCE and private fixed investment). I expect the payroll tax increase to slow PCE growth in the first half of 2013 - and for additional government austerity - but I think the economy will continue to grow this year."
But bottomline it was still a negative print and that suggests that the probability of recession has to be higher than 5.7% doesn't it?
Clearly the market is not forecasting a recession based upon the recent movement so I guess if you have confidence in its forecasting there is absolutely nothing to worry about.
Your scenario in your prior articles has really gained a lot more credibility after yesterday's GDP report. Doug Short pointed out that the deflator used in Q4 suggested virtually no inflation in that quarter which was a rapid deceleration from Q3's inflator. If true that is ominous. If the inflator was higher the reported number would have been even worse. To me this is a far worse report then the headline suggested based upon the deflationary forces in play.
http://bit.ly/oj2FmX "With this in mind, consider: The BEA puts the latest compounded annual percentage change in the GDP deflator (i.e., the inflation rate) at 0.60%. That is far below the Q3 2.7% (2.72%) to two decimals, which gives us a higher GDP number. If I make the same calculation using the compounded annual percentage change for seasonally adjusted quarterly CPI, I get an inflation rate of 2.05%, 1.45% percent higher, which thus would produce a lower real GDP, as illustrated in the CPI chart below."
Despite a negative number - how often does that happen? - investors shrugged it off and bullishness remains incredibly elevated which suggests that many are fully invested and long.
Who will do the buying if in fact the recent taxes and potential sequestration cause Q1 to print negative?
Dec. Personal Income and Outlays: Income +2.6% m/m vs. +0.7% expected, +1.0% prior (revised). Personal spending +0.2% m/m vs. 0.3% expected, +0.4% prior. PCE core price index flat% vs. 0.1% expected, flat prior. [View news story]
Year end bonuses pulled forward due to fiscal cliff in order to save taxes. It appears that they weren't spent.
Same thing happened in 1982 the last time we had this type of big tax increase on the table.
It will be interesting to see whether after tax wages fall this quarter once the taxes start to bite.
Very helpful in understanding why you see wide differences between adjusted and unadjusted data.
Surprisingly given the more aggressive seasonal factor used this week, I was expecting a higher number than this so to me "it was better than expected" :)
More on Fusion-io: The company expects FQ3 revenue $80M and an operating loss of $10M-$15, much worse than a consensus for sales of $137.2M and EPS of $0.09. Gross margin is expected to drop to 58%-60% from FQ2's 61.9%. FY13 revenue is expected to total $420M-$460M, below a $530.1M consensus. FY13 op. margin now pegged at 6%-8% vs. prior guidance of 12%. CFO Dennis Wolf says there has been a "two-quarter shift" in the timing of purchases from Facebook and Apple. FIO -19.4% AH. CC at 5PM ET (webcast). (PR) [View news story]
All I can say is holy crap. These kinds of gyrations are mind numbing.
" that are very important to follow in relation to GDP....they have improved..."
Calculated Risk has a very good overview of that here:
"Personal consumption expenditures (PCE) increased at a 2.2% annualized rate, and residential investment increased 15.3%, equipment and software increased 12.4%. That is a solid increase in fixed investment." Read more at http://bit.ly/XipEN4
I get that. All I am saying is that we had a negative GDP number before the impact of the recently passed taxes has taken effect.
So in theory this could be a negative quarter which would make two consecutive negative quarters, isn't that a recession?
I must admit, I am bamboozled by this development and having followed you for years, I suspect you are as well.
4 Black Swans That Could Jolt The Market In 2013 [View article]
FYI It's a not a "Black Swan" if it can be forseen. The unforseen both positive and negative is what causes disproportionate/seismic reactions in the greater world.
It Feels Like The Dotcom Craze All Over Again [View article]
Paulo,
I don't own AMZN and never will. I love the company as a place to buy from but like you I think this valuation is insane by any standard.
I don't think of Amazon as a tech company - I think of them as a retailer that owns some tech businesses so to me Walmart is a more appropriate comparison.
The PSR on WMT - one of the world's greatest companies - is 0.508. That means AMZN to me to is at least 4 times overvalued.
No rocket science here: Nothing drops to the bottom line of consumer confidence numbers like smaller paychecks, and that's what Americans are seeing in 2013 thanks to higher payroll and income taxes. Today's 58.6 read missed expectations by a mile and the outlook for employment fell as well, with those anticipating more jobs declining to 14.3% from 17.9%. The XLY slides 0.8%, the XRT -0.7%. [View news story]
wyo,
That's actually quite funny. You assume the average American actually has a clue when it comes to an obscure detail like this - this isn't Snooki's latest boyfriend we are discussing here.
The Average Joe/Jane just woke up to the fact that we had a tax increase despite the fact that they were told endlessly that the "middle-class" tax cuts have been protected and taxes won't rise on them.
Apparently the "middleclass" now refers to that group of people that don't work for a living :)
Market preview: Stock futures edge higher following better than expected economic data from China and Germany, and the U.S. trade deficit sinks to its narrowest in nearly three years. S&P benchmark +0.2%. Volume is expected to be thin as a massive blizzard is forecast to bear down on the Northeast. Still ahead: wholesale inventories. [View news story]
jhooper posted this link. Good visual on import growth.
http://on.mktw.net/VLdQY2
"The trade gap fell to a nearly two-year low in December. Good news? Well, in part — the U.S. is making strides in exporting more oil and gas, and importing less, helped by the fracking boom. In December alone, oil and gas exports surged 8.5% while petroleum imports tumbled 10.5%. But there’s also a disturbing picture of slowing growth in demand."
Dec. International Trade: The U.S. international trade deficit in goods and services -$38.5B vs. consensus of -$46.0B, $48.6B (revised) in Nov. [View news story]
The improvement was mainly due to fall in imports, is that a good thing?
Doesn't that suggest a slowing of end user demand?
http://1.usa.gov/V3Jgq0
The export numbers did look solid.
Thank you.
Market preview: Stock futures edge higher following better than expected economic data from China and Germany, and the U.S. trade deficit sinks to its narrowest in nearly three years. S&P benchmark +0.2%. Volume is expected to be thin as a massive blizzard is forecast to bear down on the Northeast. Still ahead: wholesale inventories. [View news story]
The number improved a lot due to a fall in imports. I am not exactly sure that is as positive a development as the headline would suggest. Might be because end-user demand has fallen a bit.
The export improvement was very promising.
http://1.usa.gov/V3Jgq0
Something to think about.
Weighing The Week Ahead: Market Correction? [View article]
Thanks for the reply. I am actually quite familiar with the NBER criteria which is why this somewhat paradoxical.
Generally the rule of thumb for calling a recession before NBER dating, which usually happens a year or later after the event, is 2 consecutive, negative quarters of growth. That seems to have worked most of the time in the past.
Have we ever had a period in the past where we had 2 negative quarters and it wasn't called a recession?
If it wasn't for the deflator being so low, as discussed by Doug Short last week, this number would have been a lot worse.
I don't know the answer to the question, perhaps you do.
Thank you!
Weighing The Week Ahead: Market Correction? [View article]
Just curious, how do you reconcile the negative GDP print with the virtually zero forecast of recession based upon the various models cited above?
Are you expecting upward revisions in the future?
If we get a negative quarter in Q1 due to the drag from tax increases and potentially sequester would that be a "recession"?
I admit I was pretty bamboozled by that negative number but it seems like it was written off as an anomaly. There were some positives in the internals as described by Calculated Risk:
http://bit.ly/XQBkoU
"The slight decline in GDP was related to changes in private inventories (subtracted 1.27 percentage points), less Federal Government spending (subtracted 1.25 percentage points), and a negative contribution from trade (subtracted 0.25 percentage points).
Overall this was a weak report, but with some underlying positives (the increase in PCE and private fixed investment). I expect the payroll tax increase to slow PCE growth in the first half of 2013 - and for additional government austerity - but I think the economy will continue to grow this year."
But bottomline it was still a negative print and that suggests that the probability of recession has to be higher than 5.7% doesn't it?
Clearly the market is not forecasting a recession based upon the recent movement so I guess if you have confidence in its forecasting there is absolutely nothing to worry about.
Thanks once again for the interesting article.
Stocks Cruisin' For A Bruisin' [View article]
Your scenario in your prior articles has really gained a lot more credibility after yesterday's GDP report. Doug Short pointed out that the deflator used in Q4 suggested virtually no inflation in that quarter which was a rapid deceleration from Q3's inflator. If true that is ominous. If the inflator was higher the reported number would have been even worse. To me this is a far worse report then the headline suggested based upon the deflationary forces in play.
http://bit.ly/oj2FmX
"With this in mind, consider: The BEA puts the latest compounded annual percentage change in the GDP deflator (i.e., the inflation rate) at 0.60%. That is far below the Q3 2.7% (2.72%) to two decimals, which gives us a higher GDP number. If I make the same calculation using the compounded annual percentage change for seasonally adjusted quarterly CPI, I get an inflation rate of 2.05%, 1.45% percent higher, which thus would produce a lower real GDP, as illustrated in the CPI chart below."
Despite a negative number - how often does that happen? - investors shrugged it off and bullishness remains incredibly elevated which suggests that many are fully invested and long.
Who will do the buying if in fact the recent taxes and potential sequestration cause Q1 to print negative?
Dec. Personal Income and Outlays: Income +2.6% m/m vs. +0.7% expected, +1.0% prior (revised). Personal spending +0.2% m/m vs. 0.3% expected, +0.4% prior. PCE core price index flat% vs. 0.1% expected, flat prior. [View news story]
Same thing happened in 1982 the last time we had this type of big tax increase on the table.
It will be interesting to see whether after tax wages fall this quarter once the taxes start to bite.
Initial Jobless Claims: +38K to 368K vs. 350K consensus, 330K prior (revised). Continuing claims +22K to 3.17M. [View news story]
http://1.usa.gov/WAh66x
Very helpful in understanding why you see wide differences between adjusted and unadjusted data.
Surprisingly given the more aggressive seasonal factor used this week, I was expecting a higher number than this so to me "it was better than expected" :)
More on Fusion-io: The company expects FQ3 revenue $80M and an operating loss of $10M-$15, much worse than a consensus for sales of $137.2M and EPS of $0.09. Gross margin is expected to drop to 58%-60% from FQ2's 61.9%. FY13 revenue is expected to total $420M-$460M, below a $530.1M consensus. FY13 op. margin now pegged at 6%-8% vs. prior guidance of 12%. CFO Dennis Wolf says there has been a "two-quarter shift" in the timing of purchases from Facebook and Apple. FIO -19.4% AH. CC at 5PM ET (webcast). (PR) [View news story]
GDP Q4 : -0.1% vs. +1.0% consensus, +3.1% prior. [View news story]
"Tax increases will have no meaningful impact on growth"
How do you know that? What theory is that based upon?
GDP Q4 : -0.1% vs. +1.0% consensus, +3.1% prior. [View news story]
" that are very important to follow in relation to GDP....they have improved..."
Calculated Risk has a very good overview of that here:
"Personal consumption expenditures (PCE) increased at a 2.2% annualized rate, and residential investment increased 15.3%, equipment and software increased 12.4%. That is a solid increase in fixed investment."
Read more at http://bit.ly/XipEN4
I get that. All I am saying is that we had a negative GDP number before the impact of the recently passed taxes has taken effect.
So in theory this could be a negative quarter which would make two consecutive negative quarters, isn't that a recession?
I must admit, I am bamboozled by this development and having followed you for years, I suspect you are as well.
GDP Q4 : -0.1% vs. +1.0% consensus, +3.1% prior. [View news story]
While it's important to look for the positive, it is indeed a negative number so sometimes a cigar is just a cigar after-all.
This is of course before the onset of the recent tax increases so in theory this quarter should be worse which means ....????
4 Black Swans That Could Jolt The Market In 2013 [View article]
Think something like this:
Modern History Sourcebook:
The Tonkin Bay Resolution, 1964
http://bit.ly/VubCvS
It Feels Like The Dotcom Craze All Over Again [View article]
I don't own AMZN and never will. I love the company as a place to buy from but like you I think this valuation is insane by any standard.
I don't think of Amazon as a tech company - I think of them as a retailer that owns some tech businesses so to me Walmart is a more appropriate comparison.
The PSR on WMT - one of the world's greatest companies - is 0.508. That means AMZN to me to is at least 4 times overvalued.
No rocket science here: Nothing drops to the bottom line of consumer confidence numbers like smaller paychecks, and that's what Americans are seeing in 2013 thanks to higher payroll and income taxes. Today's 58.6 read missed expectations by a mile and the outlook for employment fell as well, with those anticipating more jobs declining to 14.3% from 17.9%. The XLY slides 0.8%, the XRT -0.7%. [View news story]
That's actually quite funny. You assume the average American actually has a clue when it comes to an obscure detail like this - this isn't Snooki's latest boyfriend we are discussing here.
The Average Joe/Jane just woke up to the fact that we had a tax increase despite the fact that they were told endlessly that the "middle-class" tax cuts have been protected and taxes won't rise on them.
Apparently the "middleclass" now refers to that group of people that don't work for a living :)